UK Politics

Capitalism isn’t broken – the world is getting better

BY Gavin Rice   /  4 October 2018

Is the plight of the poor getting better or worse? Take your eye off the ball and listen to the mainstream media conversation and you could be forgiven for being gloomy. An emerging consensus of left-wing social commentators – you know, the ones who write armchair critiques of ‘neo-liberalism’ in the London Review of Books – talk incessantly of the failure of capitalism, as well as the ill-defined ‘injustice’ that conditions the modern world.

It’s now orthodoxy to think Margaret Thatcher enriched the wealthy at the expense of the poor, that Cameron and Osborne rigged the economy in favour of financial elites, that we are all slaves to the master of capital, and that economic life on the planet earth is so dire and neo-Dickensian that we must, with Marxian historical inevitability, be on the cusp of a fundamental rupture in the system: things can’t go on as they are.

But how have they been going on? Focus on proportionate ownership and the picture is bleak. The richest 2% now own more wealth the rest of the world combined with the top 1% controlling 43% of global assets, and the richest 300 own as much as the poorest 3 billion. What’s more, rich countries are now over 80% richer than poor countries – before colonialism and the industrial revolution the wealthier nations were only three times more prosperous than the rest.

But there’s a huge mistake being made here, and that’s to assume that the global economy is zero-sum. There is far, far more wealth in existence now than ever before. The proportion of ownership has shifted in favour of the richest, but the amount of pie to go around is unimaginably greater than could have ever been conceived even a hundred years ago.

In a new study the World Data Lab shows there are now more people who are ‘middle-class’ (defined as having expendable income for more advanced consumer goods such as refrigerators or vehicles, or having money to spend on entertainment) than those who are financially vulnerable.

Kristofer Hamel, the chief operating officer, puts this in perspective: “We are living through a landmark moment in history: the first time since agricultural civilization began when the majority of the world’s population does not live in considerable poverty.” Never before have the majority of the population enjoyed enough security to survive through a period of illness or unemployment and still have money in the bank. The picture only gets better, too: by 2030 it’s predicted that the middle class will have expanded to 5.3 billion – well over half of all people.

None of this should come as a surprise. In spite of the inexplicable consensus of economic cave-men like the Shadow Chancellor (‘the bosses took all the money!’), extreme poverty is in freefall globally with fewer than 700 million falling into this category worldwide.

The UN’s First Millennium Development Goal, set in 2000, sought to halve extreme poverty – defined on those living, in today’s money, on less than $1.90 per day – by 2015. It exceeded this goal 5 years ahead of time.

Critics will argue that the majority of this growth is due to the rapid industrialization of India and China, and to an extent that’s true. The number of people in absolute poverty in sub-Saharan Africa has actually grown slightly, showing that the trend is not necessarily all one-way.

But there is no reason to view the Chinese and Indian miracles as anomalies. They are due to the precise factors one would expect to generate wealth: the development of modern industry and infrastructure, the building-blocks of capitalism (however imperfect in China), more efficient exploitation of resources, and political stability.

It’s crude to say that a rising tide always raises all boats, but the broad global picture does show the power of the invisible hand to drive up living standards, of technology and innovation to enhance freedom and alleviate suffering, and of markets to transform and modernise developing nations.

The inevitable end of capitalism may be prophesied in the lecture halls of the Sorbonne – as it has been since the 19th Century – but in the real world, the system of free exchange has been shown time and again to generate the conditions needed for civilized life. And it’s not going anywhere.