New Zealand Prime Minister Jacinda Ardern believes that capitalism has failed the nation. So does her deputy, New Zealand First leader Winston Peters. A similar complaint is made in Britain by Labour leader Jeremy Corbyn, who heads the opposition. The capitalism-has-failed refrain is stated increasingly by socialists in Western societies. Meanwhile, millions of non-Westerners want to live in OECD countries to experience a higher standard of living.

The term capitalism, popularised by the German philosopher Karl Marx (1818-83), was used initially in a pejorative sense. In his massive book Das Kapital and elsewhere, Marx saw capitalism as having emerged out of the exploitation of the peasantry and small artisans in the later Middle Ages.

As Allen Wood explains the phenomenon in The Oxford Companion to Philosophy, Marx argued that this exploitation led to “a separation between the bourgeoisie or capitalist class, who privately own the means of production, and the proletariat or working class”. The latter was also called the lumpenproletariat.

According to Marx, devoid of owning the means of production, the proletariat can sell only labour to the capitalists. But this leads to inequality since the owners of the means of production have an unfair advantage when negotiating the wages and conditions of the proletariat.

Marx and his Marxist followers, including members of communist parties in the democracies or leaders of communist dictatorships where they existed, invariably evoked capitalism as a term of abuse. So, today, Ardern and Corbyn.

There are some political conservatives who are prepared to embrace the term, including Daniel Hannan, the former Conservative member of the European Parliament and Institute for Free Trade president. But it is a mistake for the likes of Hannan to embrace the terminology of their opponents.

Both Corbyn and Ardern have backgrounds in socialist movements. So it is understandable why they rail against capitalism. Yet neither Britain nor New Zealand present as capitalist societies in the sense that Marx used the term.

At the end of World War II, both nations embraced “cradle-to-grave” socialism. This led to stagnating economies. So in the early 1980s Britain undertook economic reforms to wind back the welfare state. New Zealand followed soon after. The politicians most identified with the reform process were the Conservative Margaret Thatcher in Britain and Labour’s Roger Douglas in New Zealand.

If Ben Chifley’s Labor government had survived into the 1950s, Australia would have gone down the welfare state road. But Robert Menzies’ Coalition won the December 1949 election. One of Menzies’ great contributions to Australia’s economic development is that he did not implement the nationalisation of industry or cradle-to-grave welfare. He took a middle road between Britain and the US with respect to the extent of the social safety net and regulation.

This meant that when economic reform was needed in Australia in the 80s and 90s, the impact was not as severe as in Britain or New Zealand. Consequently, Labor’s Bob Hawke and Paul Keating, along with the Coalition’s John Howard and Peter Costello, were able to bring about reform without the reaction that occurred in response to the implementation of the policies of Thatcher and Douglas.

In the original sense of the term, neither Britain nor New Zealand is a capitalist nation. Likewise Australia. All three nations provide free health services and free school education along with a welfare safety net for the unemployed and the aged, plus a minimum wage and reasonable conditions of work. Also, a large number of lower-income earners own property. This is not the enslavement of the working class (the sellers of labour) to a dominant bourgeoisie (the owners of the means of production) that Marx envisaged.

After the election, in an interview on TV3’s The Nation, Ardern was asked whether capitalism has failed low-income New Zealanders. The new Prime Minister replied: “If you have hundreds of thousands of children living in homes without enough to survive, that’s a blatant failure. What else could you describe it as?”

Well, such a situation could be a total failure of the state. But this is unlikely in a nation that has a social safety net.

Ardern’s approach suggests that she regards the state as totally responsible for all the ills of society, as if parents and guardians do not also have responsibilities to care for the very young.

In Britain, Corbyn is adopting a similar stance. He told a wildly enthusiastic audience at Labour’s annual conference in Brighton last month that a “modern socialism” entailing nationalisation of industries, dramatically increased government regulation and growing trade union influence was the future of Britain. According to Corbyn, Labour is “the mainstream now”.

And so it may be, for a while at least, in both Britain and New Zealand — and, perhaps, Australia.

There is the born-again socialism of Corbyn and Ardern and their supporters. There is also the right-wing regulatory nationalism of Peters’s New Zealand First and Pauline Hanson’s One Nation Party.

The economies of Australia, Britain and New Zealand are among the strongest in the OECD and have relatively high economic growth and relatively low unemployment. However, flat wages growth and rising property values have put pressure on middle and low-income groups — especially among young voters. Even so, the Conservatives in Britain and the National Party in New Zealand won more votes than their left-of-centre opponents at recent elections.

And then there is social media, which gives an insight into the lives of the rich and famous that was not known to earlier generations. The rich have always been with us — and they are not confined to democratic societies. However, the increasing tendency of the well-off to laud their wealth is leading to an understandable resentment among the less well-off.

Generally, in the West, the poor are not getting poorer. But this could become the case — as occurred in postwar Britain as increased taxation and rising spending and borrowing gradually suppressed living standards across nearly all areas of society. In the West we’ve seen socialism — and it does not work.

Gerard Henderson is executive director of the Sydney Institute. His Media Watch Dog blog can be found at