Beautiful but poor: The Transkei is still largely untouched by capitalism. Source: Tyler Brown
Pope Francis and Julius Malema live worlds apart. But both have a deep dislike – one might even say hatred – of an economic system in which trade, industries, and the means of production are largely or entirely privately owned and operated for profit. This system is called Capitalism.
During a march in Limpopo yesterday, Malema again pronounced the EFFs anti-capitalist sentiments. An Economic Freedom Fighters retweet summarised it best: (The) EFF HAS DECLARED WAR ON #CAPITALISM; MALEMA: THIS IS A DECLARATION OF WAR AGAINST EUROPEAN CAPITALISM.
And a month earlier, Pope Francis made an arguably more eloquent (and damning) critique of capitalism:
Time, my brothers and sisters, seems to be running out; we are not yet tearing one another apart, but we are tearing apart our common home. Today, the scientific community realizes what the poor have long told us: harm, perhaps irreversible harm, is being done to the ecosystem. The earth, entire peoples and individual persons are being brutally punished. And behind all this pain, death and destruction there is the stench of what Basil of Caesarea – one of the first theologians of the Church – called “the dung of the devil”. An unfettered pursuit of money rules. This is the “dung of the devil”. The service of the common good is left behind. Once capital becomes an idol and guides people’s decisions, once greed for money presides over the entire socioeconomic system, it ruins society, it condemns and enslaves men and women, it destroys human fraternity, it sets people against one another and, as we clearly see, it even puts at risk our common home, sister and mother earth.
Ouch. If the Pope and Malema are against it, who on earth wants to be for it?
Well, actually, history is. #awkward
Let’s look at what’s happened to world poverty since 1936, when the Pope was born. Or since 1981, when Julius Malema was born. The remarkable thing is that in 1936, more than half of the world’s people were living in extreme poverty (56%). In 1981, the year that World Bank data starts, 43% of the world’s people were still living in poverty. In 2011, that figure had fallen to 14%. In short, global poverty has fallen enormously in the space of Pope Francis’s lifetime. And the reason? The ‘dung of the devil’: capitalism.
Here’s another statistic to baffle the mind: As The Economist reports, in the decade between 2003 and 2013 (which includes a global financial crisis), the income of the median-person in the world has doubled. Yes, doubled! Why? Because India and China have opened their economies, encouraged innovation, reduced state-involvement and allowed economic growth to improve the living standards of their people.
And all of this has happened despite immense global population growth; in 1936, there were roughly 2.7 billion people, and in 1981 there were 4.5 billion.
We are not only more affluent, but we also live longer. And healthier: we have eradicated illnesses, like smallpox, and we have access to modern medicine that can fight diseases from the common cold to tuberculosis that in the past would have likely killed us.
Blame capitalism for reducing poverty in China: The Shanghai skyline in three decades
Even the poorest of the poor have access to services that the richest of the rich could never have imagined in 1936. With the press of one button, a cellphone now has access to the world’s information on Wikipedia. It is estimated that 90% of the world’s population has watched at least one episode of Idols, an unthinkable share only two decades ago. And most governments now provide free or affordable schooling and sometimes even university education – a luxury product in 1936 (just ask anyone older than 80).
Of course, capitalism is not perfect. The market cannot and does not solve everything; no economist in their right mind would claim this. Adam Smith, the father of economics, was clear about how the state should create the rules and institutions for the ‘invisible hand’ to do its thing. And those people that, for whatever reason, are excluded should be taken care of by state institutions like pension funds, disability insurance and free schooling.
We can also just ask the poor. If capitalism is so bad, why is it that poor people in non-capitalist countries want to migrate to capitalist countries? Why is it that poor, rural people in South Africa migrate to the cities (where ‘European capitalism’ arguably has a bigger footprint)? Is it because, and this might sound radical to some, they believe they can attain a better life for them and their children in these capitalist places? I think so.
I appreciate the leadership qualities of the Pope and Malema; they are charismatic and have large numbers of followers that look to them for guidance. That is even more reason they need to understand that people are not poor because of capitalism, they are poor because of not having enough capitalism. (Replace the word capitalism with innovation, as Deirdre McCloskey suggests, and suddenly the ideological blinkers fall off.) Here is Venezuelan economist Ricardo Hausmann:
In poverty-stricken Bolivia, Francis criticized “the mentality of profit at any price, with no concern for social exclusion or the destruction of nature,” along with “a crude and naive trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system.”
But this explanation of capitalism’s failure is wide of the mark. The world’s most profitable companies are not exploiting Bolivia. They are simply not there, because they find the place unprofitable. The developing world’s fundamental problem is that capitalism has not reorganized production and employment in the poorest countries and regions, leaving the bulk of the labor force outside its scope of operation.
As Rafael Di Tella and Robert MacCulloch have shown, the world’s poorest countries are not characterized by naive trust in capitalism, but by utter distrust, which leads to heavy government intervention and regulation of business. Under such conditions, capitalism does not thrive and economies remain poor.
The ANC, in a discussion document released last week, knows this. It says
capitalism remains the dominant socio-economic system on a global scale. In the era of globalisation, there has been much technological progress which has opened up vistas for human progress and created the basis for the alleviation of poverty on a grand scale.
Spot on. Excellent. But then:
However, the rampant unregulated practices of the past 30 years, including appropriation of most of national income by a few, have undermined its legitimacy.
That is incorrect. Poverty has fallen significantly in South Africa over the last 30 years (the ANC should know better, they ruled for 21 of those 30 years). What has undermined the legitimacy of the ruling government is its inability to get capitalism (or innovation) working in places like the former bantustans (see picture), where conditions are not much better than they were 30 years ago. Where capitalism has worked – in the main metros – it has created jobs and wealth and a better life for all (although for some more than for others). Where capitalism has not been allowed – where chiefs still prevent private ownership, for example – poverty has remained high and living standards low.
If the Economic Freedom Fighters and others continue their campaign in South Africa to discredit capitalism as the solution to poverty, we will never alleviate it, especially not in those regions where the problem is acute. If Pope Francis continues to discredit capitalism in his speeches to the poor and destitute of the world, they will continue to remain poor and destitute. (The conspiracy theorists would say that that is what the church wants. That would be silly, because the church benefits from a rich flock. Ask John Oliver.)
Let us learn from that one true source of wisdom: history. India and China have managed to reduce poverty dramatically by embracing capitalism, not rejecting it. South Korea have managed to reduce poverty dramatically by embracing capitalism, while North Korea, by rejecting capitalism, could not. Pope Francis and Julius Malema should embrace capitalism if they really cared about the plight of the poor.
