Given the world's current financial situation — recession in Europe, sluggish recovery in the U.S., stagnation in Japan — many voices are saying that the problem is capitalism. Complaints range from "capitalism doesn't work anymore" to "capitalism only benefits the rich." Polls show that this view is particularly popular among young people; it was a driving force behind the Occupy Movement. The matter is worth discussing.
Let's begin with an instructive statistic. Starting in 1970, the percentage of people in the world who scrape by at subsistence level has declined 80 percent. This is an enormously beneficial development unmatched in human history, and the decades in which it was accomplished correspond to the decades when capitalism finally emerged as the dominant economic force in the world.
Richard Nixon made his historic trip to China in the early 1970s, triggering the process that brought the world's largest country into the modern post-war era. It had a centrally planned, communist government at the time. However, after Chairman Mao died, his successor, Deng Xiaoping, changed course and put China on a capitalistic economic path. The Chinese economy started growing at double digit rates, bringing hundreds of millions of Chinese out of poverty and laying the groundwork for the creation of a Chinese middle class.
Ronald Reagan was president of the United States and Margaret Thatcher was prime minister of Great Britain. Both were firm believers in capitalism, free markets and free trade. He began the negotiations that later became the North American Free Trade Agreement (NAFTA); she sold off previously nationalized companies and successfully challenged the unions who had kept Britain a socialist state for decades. As they were doing these things, Mikhail Gorbachev became the head of the Soviet Union and recognized that something drastic had to be done to rescue its stumbling economy.
He tried, but, in the end, the rot of half a century of "central planning" proved to be too pervasive and the Soviet Union collapsed under its own weight (As Reagan had predicted that it would). Russia, along with other satellite countries that emerged from the communist wreckage, embraced free market capitalism.
India followed suit. Ever since it had won its independence from Great Britain, India had followed the Soviet model and achieved the same result — slow growth and continued poverty. A new Indian finance minister, appointed in exciting new times, convinced the government to switch from socialist policies to those embraced in other Western countries. The results were similar to those seen in China — more involvement in the world economy, a growing middle class and millions moving out of poverty. World gross domestic product reached dramatic new highs, year after year.
Those who benefited the most in terms of seeing their lives change dramatically were those at the bottom. Jobs at factories that were supplying the needs of the new, truly global economy were available to peasants whose families had been tied to the land in systems that were feudal in their impact. They began to earn far more than a dollar a day and many migrated up into middle class status. That's the process by which the number of humans living at barest subsistence level dropped by 80 percent.
"Capitalism" was coined by Karl Marx as a derogatory term, used to attack the views of Adam Smith. He predicted a revolution as he told the poor, "You have nothing to lose but your chains." Ironically, chains have indeed been cast aside but it was capitalism, not Marxism, that did it.
Our economic problems are real, but getting rid of capitalism is not the way to solve them.
Robert Bennett, former U.S. Senator from Utah, is a part-time teacher, researcher and lecturer at the University of Utah's Hinckley Institute of Politics.
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