Capitalism is in crisis and everyone knows it. Populist socialism has come close to power because it has exploited the frustration many feel towards the modern economy. From working-class Leavers to millennial Remainers, there is diminishing trust in capitalism as the best means of creating opportunity for the many.
Systems often lose trust when the link between contribution and reward breaks down. People see themselves play by one set of rules while others play by another set of rules. As people struggle to pay their bills or buy a house, they grow resentful of the abuses committed by capitalists at the top.
It is not just the fact that people feel that the "1%" has too much wealth, but that they have not earned it. This has allowed Jeremy Corbyn to attack capitalism as a “rigged system” in which executives award themselves extravagant pay raises and bonuses while real wages fall, and corporations avoid paying taxes while cuts are made to public services.
This is part of a broader lack of trust in politics which has grown over the past couple of decades. The abuse of expenses by MPs, the incentives against work in the benefits system, and the free entry of EU migrants with low skills. All involve a decline in the link between contribution and reward. It is the rocket fuel for twenty-first century populism.
The Conservatives have already gone some way to restore fairness in these areas by reforming welfare, reducing immigration, and increasing government transparency, but they now face the task of restoring people’s trust in capitalism. That is why Theresa May made it her mission to build an “economy which works for everyone” and inject new economic thinking into the party.
After months of steadying the government, May has revived her plans to crack down on executive pay. These reforms include strengthening the voices of employees through an employee advisory panel or an employee board member for companies, and a public register of listed companies which have faced complaints from their shareholders over pay and bonuses. These corporate governance reforms are intended to encourage greater long-term thinking and fairness in the country's top companies.
With no majority and a discredited manifesto, these reforms face an uncertain future. Opposition from the Tory backbenches could easily derail them. But they should resist the temptation. Allowing businesses to get away with unhealthy behaviour is not just bad for shareholders and customers, but also for the public's trust in capitalism. It gives ammunition to Corbyn's anti-capitalist movement.
Capitalism is clearly in need of reform in order to be conserved, but it poses a challenge for Conservatives. As the party of free enterprise which relies on the business vote as a key constituency, the Conservatives cannot and should not indulge in extreme anti-business rhetoric. No matter how far the Conservatives go in that direction, Corbyn can and always will outmatch them.
This does not mean blindly praising the free market or pretending problems do not exist. It means Conservatives should frame the problems with capitalism within the task of restoring the link between contribution and reward. It is this principle of responsibility which can provide a positive, optimistic vision of a popular, reformed capitalism.