Tag: capitalism

China: Historic Empire Transformed, Fragile Leader In The Making?

SHANGHAI, CHINA—Shanghai, China’s financial capital, enjoys a double skyline. The city proper, or “old city,” sports a fascinating mix of colonial buildings and modern architecture. The “New Area” of Pudong hosts Shanghai’s four tallest structures, on the east bank of the Huangpu River.

In contrast, when I first visited Shanghai a couple decades ago there were few buildings, commercial or residential, racing skyward. Pudong was mostly empty, with more brush and trash blowing down the streets than buildings with people working in them.

But there is another China. More distant towns offer a vision into the past—more traditional, less advanced, more isolated. Shift to the nearby countryside and incomes drop substantially, averaging less than $2000 per capita. My traveling group stopped by the remains of an ancient fortress and the Great Wall, which required walking along dirt roads lined by homes constructed with bricks taken from the ruins. The primitive toilet had holes in the wooden floor, through which the ground was visible.

Tired of Poverty? Expand Capitalism

Is capitalism a coercive system that creates poverty, as a recent article in the Washington Post argued, or is it a system of voluntary exchange that has led to the greatest reduction in poverty the world has ever seen?

According to the article, “capitalism is a coercive economic system that creates persistent patterns of economic deprivation,” and should be altered through the introduction of a universal basic income. While a guaranteed income is an interesting policy proposal with pros and cons, the article’s claims that capitalism is coercive and creates economic deprivation are both unfounded.

First, let us consider whether capitalism is “coercive.” The author writes,

The only way to break the coercion at the core of the employment relationship is to give people the genuine ability to say no to their employers. And the only way to make that feasible is to guarantee that [they] have some way to support themselves whether they work or not.

Of course, people already possess the genuine ability to say no to their employers. In the United States alone, around 2 million people voluntarily leave their jobs every month—and that’s despite a lackluster economy. Employees in a capitalist system choose to engage in a relationship of mutually beneficial exchange. Employers recognize this and companies compete to become more attractive as workplaces. According to Gallup, the majority of Americans are satisfied with most aspects of their workplace—particularly with their job security, the flexibility of their schedules, and with their immediate supervisors.

Second, let us examine the article’s claim that capitalism creates economic deprivation. According to the author, capitalism harms both workers and those who cannot work. If that is so, can the author, or anyone else for that matter, point to a time in history when the vulnerable were better off? In many ways, today’s poor live better than the kings of yesteryear.

Over the last few decades, infant and child mortality have been drastically reduced, lifespans are at an all-time high, fewer people are undernourished, educational attainment is growing, gender inequality is decreasing, and access to technology is expanding.

Free enterprise and innovation have done more to uplift humanity from a state of universal poverty than any international aid program or welfare scheme. Capitalism, far from being a cause of poverty, is the reason that there is enough wealth today to even contemplate a proposal like a universal basic income.

How Capitalism Is Undermining the Indian Caste System

Karl Marx was wrong about many things but right about one thing: the revolutionary way capitalism attacks and destroys feudalism. As I explain in a new study,  in India, the rise of capitalism since the economic reforms of 1991 has also attacked and eroded casteism, a social hierarchy that placed four castes on top with a fifth caste—dalits—like dirt beneath the feet of others. Dalits, once called untouchables, were traditionally denied any livelihood save virtual serfdom to landowners and the filthiest, most disease-ridden tasks, such as cleaning toilets and handling dead humans and animals. Remarkably, the opening up of the Indian economy has enabled dalits to break out of their traditional low occupations and start businesses. The Dalit Indian Chamber of Commerce and Industry (DICCI) now boasts over 3,000 millionaire members. This revolution is still in its early stages, but is now unstoppable.

The Terrible, Horrible, No Good, Very Bad Falling Gas Prices

A left-coast writer named Mark Morford thinks that gas prices falling to $2 a gallon would be the worst thing to happen to America. After all, he says, the wrong people would profit: oil companies (why would oil companies profit from lower gas prices?), auto makers, and internet retailers like Amazon that offer free shipping.

If falling gas prices are the worst for America, then the best, Morford goes on to say, would be to raise gas taxes by $6 a gallon and dedicate all of the revenue to boondoggles “alternative energy and transport, environmental protections, our busted educational system, our multi-trillion debt.” After all, government has proven itself so capable of finding the most cost-effective solutions to any problem in the past, and there’s no better way to reduce the debt than to tax the economy to death.

Morford is right in line with progressives like Naomi Klein, who thinks climate change is a grand opportunity to make war on capitalism. Despite doubts cast by other leftists, Klein insists that “responding to climate change could be the catalyst for a positive social and economic transformation”–by which she means government control of transportation, housing, and just about everything else.

These advocates of central planning remind me of University of Washington international studies professor Daniel Chirot assessment of the fall of the Soviet empire. From the time of Lenin, noted Chirot, soviet planners considered western industrial systems of the late nineteenth century their model for an ideal economy. By the 1980s, after decades of hard work, they had developed “the most advanced industries of the late 19th and early 20th centuries–polluting, wasteful, energy intensive, massive, inflexible–in short, giant rust belts.”

Morford and Klein want to do the same to the United States, using climate change as their excuse, and the golden age they wish to return to is around 1920, when streetcars and intercity passenger trains were at their peak (not counting the WWII era). Sure, there were cars, but only a few compared with today.

Newsweek: Back in Print, Confused as Ever

Dumb arguments against libertarianism are increasing, as guardians of the expansive state begin to worry that the country might actually be trending in a libertarian direction. This may not be the dumbest, but as Nick Gillespie said of a different argument two weeks ago, it’s the most recent:

‘You Ready to Step Up?’

The deadly drug war in Long Island’s Hempstead ghetto is a harrowing example of free-market, laissez-faire capitalism, with a heavy dose of TEC-9s
To be fair, author Kevin Deutsch never uses the terms “laissez-faire” or “free-market” in his detailed article, so we should probably direct our disdain at Newsweek’s headline writers. Deutsch does portray the second-ranking guy in the Hempstead Crips as a businessman seeking to “recruit talent, maximize profits and expand their customer base.” But even the drug dealer gets the difference between selling prohibited substances and doing business in a free market:
“We’re looking to market, sell and profit off drugs the way any business would handle their product,” Tony says. “Only our product is illegal, so more precautions need to be taken. It’s all systematic and planned, all the positions and responsibilities and assignments. All of that’s part of our business strategy. It’s usually real smooth and quiet, because that’s the best environment for us to make bank. But now, we at war, man. Ain’t nothing quiet these days.”
Deutsch describes the competition between the local Crips and Bloods in terms not usually seen in articles about, say, Apple and Microsoft or Ford and Toyota:
As for strategies, they seem to have settled on a war of attrition, aiming to kill or maim as many of their enemies as possible….
They’re far better armed and willing to use violence than the smaller neighborhood cliques scattered throughout Nassau County….
They’re also able to keep out other competitors through use of brute force….
It’s one of hundreds of similar conflicts being fought by Bloods and Crips sets throughout the country. These battles breed shootings, stabbings and robberies in gang-plagued, low-income neighborhoods each day. 
These are, of course, just the sorts of consequences that libertarians and economists expect from prohibition. As Tim Lynch and I wrote in the Cato Handbook on Policy a decade ago,

drug prohibition creates high levels of crime. Addicts commit crimes to pay for a habit that would be easily affordable if it were legal. Police sources have estimated that as much as half the property crime in some major cities is committed by drug users. More dramatic, because drugs are illegal, participants in the drug trade cannot go to court to settle disputes, whether between buyer and seller or between rival sellers. When black-market contracts are breached, the result is often some form of violent sanction, which usually leads to retaliation and then open warfare in the streets.

Jeffrey Miron of Harvard’s economics department and Cato made similar points in his book Drug War Crimes, as have such economists as Milton Friedman and Gary Becker. Miron also noted that prohibition drives up the prices of illegal drugs, making the trade attractive to people with a high tolerance for risk. And so in that sense, it’s true that some people will usually enter the prohibited trade – in alcohol, gambling, prostitution, crack, or whatever – and will employ some techniques that are also used in normal business enterprises. As Tyler Cowen says, there are markets in everything. Given our natural propensity to truck, barter, and exchange in order to improve our own situation, we can expect people to step into any trade, prohibited or not. Better that such trade should take place legally, within the rule of law, than underground, where violence may be the only recourse in disputes.

When the government bans the use and sale of a substance, and imprisons hundreds of thousands of people in an attempt to enforce that prohibition, that’s not “laissez-faire, free-market capitalism.” Duh. 

Kindly Inquisitors

This week Jonathan Rauch celebrates the new, expanded edition of his book Kindly Inquisitors: The New Attacks on Free ThoughtHe’s also guest-blogging at the Volokh Conspiracy, itself newly hosted at the Washington Post. In his first post, Rauch sums up a key point of his book and also why its reissue is so timely:

Over the past 20 years, the idea that minorities need protection from hateful or discriminatory speech has gained ground, both in American universities’ speech codes and in national laws abroad. In fact, I argue, minorities are much better off in a system that protects hateful or discriminatory speech than in a system that protects them from it.

Kindly Inquistors offers a moral defense of free inquiry, with a focus on how minorities fare under different approaches to controversial speech. Rauch concludes that when individuals disagree, the only proper approach is the “checking of each by each through public criticism.” 

He terms this approach liberal science, and he recommends it not just in science, but in public policy. One of the most interesting facets of Kindly Inquisitors is the way that Rauch links the free inquiry of science to the free inquiry found in liberal democratic societies; both, he argues, are also akin to the free inquiry found in capitalism.

In all these areas, free inquiry can nevertheless cause genuine harm. Why not restrict, just a bit, if it will prevent some suffering? In the book, Rauch answers:

The truth is that liberal science demands discipline as well as license… It does not give a damn about your feelings and happily tramples them in the name of finding truth. It allows and – here we should be honest – sometimes encourages offense. Self-esteem, sensitivity, respect for others’ beliefs, renunciation of prejudice are all good as far as they go. But as primary social goals they are incompatible with the peaceful and productive advancement of human knowledge. To advance knowledge, we must all sometimes suffer. Worse than that, we must inflict suffering on others.

For many, these words will not be welcome. And for a few truly loathsome people, they will be all too welcome. Undeniably, words a lot like these have been used as a pretext to hurt, which they should not be.

Yet we classical liberals have always welcomed the progress that comes from free minds, from the free exchange of ideas, and from the freedoms of travel and commerce, even if at times they bring disruption, embarrassment, or loss. In science, in public opinion, and in the marketplace, there will always be failures. And yet for a society to succeed, such failures cannot be avoided.

Our faith in mankind’s ability to find and act upon the truth is key: We trust that the process of inquiry, with its defeats as well as its victories, will bring a better and better life for us all. 

The Great Fact of Economic Growth, in Three Glimpses

In Bourgeois Dignity: Why Economics Can’t Explain the Modern World, economic historian Deirdre McCloskey writes about the “Great Fact” – the enormous and unprecedented growth in living standards that began in the western world around 1700. She calls it “a factor of sixteen”: we moderns consume at least 16 times the food, clothing, housing, and education that our ancestors did in London in the 18th century. Two new books help us to understand what that means.

In Sunday’s Washington Post, Jonathan Yardley reviews Flyover Lives, a family memoir by Diane Johnson. She found diaries from some of her Midwestern ancestors, and Yardley notes what they tell us:

It must be just about impossible for a denizen of middle-class 21st-century America to imagine the toil and suffering that Catharine Martin [born 1800] and her counterparts underwent every day: living in crude houses — mere huts when they first settled in Illinois and elsewhere — slaving at open fires to prepare food for their families, and worst of all watching children fall ill and having nothing in their powers to help them: “Within a year of her marriage, with the fated fertility of women then, Catharine had her first baby, and named her Catharine Anne, after herself. They called her Sissie. This baby was followed by Charlotte Augusta in 1830 and Martha Olivia in 1831. When they were one, three, and five years old, all three little girls died in the space of a week or two.” Catharine herself was ill but survived to write many years later: “When I got up, my house was empty, three little prattlers all gone, not one left.”

This isn’t so long ago. Catharine Martin was the great-great-grandmother of Diane Johnson. Go back another century, and read about 18th-century life in another new book, Three Squares by Abigail Carroll:

Invited to dine with a ferryman and his family, [a 1744 traveler from Maryland to Maine] declined. He described the meal: “They had no cloth upon the table, and their mess was in a dirty, deep, wooden dish which they evacuated with their hands, cramming down skins, scales, and all. They used neither knife, fork, spoon, plate, or napkin because, I suppose, they had none to use.”

By the standards of the age, the ferryman’s repast was ordered: “Only about a third of the families in seventeenth-century Virginia had chairs or benches, and only one in seven had both,” writes Ms. Carroll. Only about a quarter of the early Virginian houses had tables.

And finally, I note an older book on my own Scottish ancestors, The Scotch-Irish: A Social History by James G. Leyburn:

The squalor and meanness of [lowland Scottish] life around 1600 [or 1700] can hardly be conceived by a person of the twentieth century. A cluster of hovels housed the tenants and their helpers….A home was likely to be little more than a shanty, constructed of stones, banked with turf, without mortar, and with straw, heather, or moss stuffed in the holes to keep out the blasts….The fire, usually in the middle of the house floor, often filled the whole hut with malodorous clouds, since the smoke-clotted roof gradually stopped the vent-hole. Cattle were tethered at night at one end of the room, while the family lay at the other end on heather piled upon the floor….Vermin abounded…skin diseases…Infectious diseases were propagated readily.

According to scholars such as Angus Maddison and Brad DeLong, GDP per capita hardly rose for thousands, or tens of thousands, of years before the emergence of capitalism. And then after 100,000 years of stagnation (by DeLong’s estimates), around 1750 capitalism and growth began, first in Northern Europe and the American seaboard, and spreading ever since to more parts of the world. That is, the existence of relatively free markets is the reason we don’t live like my Scottish ancestors. This is indeed the Great Fact of the modern world. We should celebrate it, even as we work to extend the benefits of markets to people and nations who don’t yet enjoy as much capitalism as they should.