Sez report

1.2.4.1. Government and the market 
As Jonathon Porritt says, capitalism is the only show in town. No other economic system has been so 
successful at lifting people out of poverty and no other economic system has harnessed so creatively 
the individual aspirations and intellects of so many. Just as the Internet would never have developed in 
the hands of a state planner, so free choice does not exist where state planners decide economic 
choices. That’s why free enterprise has been the harbinger of democracy and continues to be its natural 
partner.
Yet, although Conservatives understand the vital role of markets, they recognise too that markets are 
mechanisms not gods. The market is crucial to our vision, but cannot deliver it alone. The strength of 
the market is its unique ability to meet economic needs. Its weakness is myopia. The market lacks the 
dimension of time. Unrestrained, it will catch till the last fish is landed, drill till there is no more oil, 
and pollute till the planet is destroyed. Its efficiency in creating material wealth is both its strength and 
its weakness. Strength because there is no more efficient way of delivering the goods, weakness 
because it is nothing like so timely and effective in taking account of the human and environmental 
resources upon which that delivery depends. If markets are not to master us then Governments have to 
intervene to ensure that they keep their place and remain our servants. That is a role that Margaret 
Thatcher understood very clearly. ‘Never call me laissez-faire,’ she once insisted. ‘Government must 
be strong to do those things which only government can do.’ 
It is in this spirit that George Osborne has made it clear he intends a future Conservative Treasury to 
shift taxation policy towards the taxation of pollution and environmental damage. That shift from ‘pay 
as you earn’ to ‘pay as you burn’ can happen only when a government understands that it cannot be 
neutral in these matters of wellbeing – societal or environmental. It has to build the framework in 
which the power of the market will more effectively contribute to the wellbeing of the nation and the 
wider world. Margaret Thatcher saw that when, because of market failure, she recognised the need to 
play a leading role in the Montreal Protocol. She thus helped to create the first successful global 
environmental treaty, which led to rapid solutions to the ozone hole problem. The parallel with climate 
change is exact. As Stern realised, it represents the ‘greatest market failure’ – a failure to put a value 

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on natural resources in general, and carbon in particular. Mrs Thatcher was one of the first to 
understand the threat: it will be her lineal successors who must deliver the solutions.