Montgomerie argues that capitalism, to work properly, needs "vigorous virtues", public order, "a minimum, guaranteed safety-net", competition, non-market redistribution, "long-term research and investment in infrastructure," regulation of externalities, equality in the democratic sphere, "demerit goods" and "local, regional and national identity"--none of which the market can provide by itself. For Montgomerie, libertarians undermine their case for the free market by overlooking/playing down these aspects. This is not a new argument, of course, but Montgomerie seems determined to give it a new "conservative" interpretation.
Philip Booth and Ryan Bourne of the Institute of Economic Affairs have written an excellent rebuttal. For Booth and Bourne, Montgomerie "in arguing that capitalism does not provide 'non-market redistribution' and other socially useful functions he is defining free-market capitalism too narrowly." They argue persuasively that this is not the case and they show succinctly that "supporters of free-market capitalism have a sophisticated view of the world and of the importance of institutions outside the market." But, they add, what free-marketers do not want is "the state taking over or controlling those non-market institutions."
While the whole piece is worth reading, I would particularly commend the points they make on infrastructure:
Tim's story about infrastructure oscillates between arguing that the private sector would not produce infrastructure if left to its own devices, to suggesting that the state should provide it whilst noting that the state often doesn't do so very well, to then finally arguing that the government should create the conditions where the private sector will invest in infrastructure. It is difficult to cut through this line of argument, but we would simply say that, if the state performs its proper functions effectively and provides a secure regime for the protection of property rights and good business conditions, the private sector can be a prolific provider of infrastructure and far more effective than the state. This is true, for example, of Victorian railways and of modern mobile phone and satellite infrastructure (including in Africa). It is interesting that Tim points to corporate short-termism encouraged by quarterly reporting. We agree and always disagreed with it being a statutory regulatory requirement. Blame should fall where blame is due. But given how long politicians have dithered over new UK airport capacity, how poor politicians are at picking winners, and the impact of the short political cycle, it's not entirely clear why Tim trusts the state to think longer-term.