world economic forum
world economic forum

By James Gorrie

New survey puts blame on capitalism for rising inequality.

According to Harvard political scientist Francis Fukuyama, the fall of the Soviet Union meant the end of history.

Modern history, Fukuyama contended back in the 1990s, was defined as the struggle between two fundamentally opposed systems: Soviet communism and the liberal capitalist democracies.

Communism had lost, the Berlin Wall came down, and the world, it was believed, would only become better and better.

A few things happened along the way, such as radical Islam, 9-11, and 20 years of U.S. warfare in the Middle East. History is not nearly as compliant as one might hope.

The Davos Message?

However, from a recent survey—and just in time for the World Economic Forum in Davos—we learn that most people in the world don’t believe that the capitalism of the Western democracies is the best route for the future.

The key point prompting the survey concerns the question of growing inequality around the world, with the question: “Does capitalism as it exists today do more harm than good in the world?”

That’s undoubtedly a loaded question, but the answer is not as simple as much of the world thinks it is.

The results of the poll, which questioned over 34,000 people in 28 countries, from the United States and Europe to Russia and China, are predictable. The conclusion among 56 percent of those polled was that capitalism does indeed do more harm than good in the world. (Don’t tell anyone, but Russia is now one of the world’s most unequal nations.)

But we can see from the figure of 56 percent that the negative perception of capitalism isn’t really definitive. In fact, given that most of the nations who expressed the greatest distrust in capitalist democracy are either being anti-democratic and/or have high levels of corruption, the poll is rather anti-climactic.

Complaints of the Corrupt

More pointedly, it’s really just a new round of bellyaching by the usual suspects. About three out of four Thais and Indians were critical of Western capitalism, with the French reporting a slightly lower percentage of negative feelings. Notably, other negative poll results came from Asian, Gulf, African, and Latin American nations.

Should we care about these results?

Not really. Naturally those countries want to blame more successful nations for their own woes. That’s good politics for those few at the top who wish to hold on to their power, wealth, and status at the expense of their people.

On the flip side, guess which countries had majorities that believe that capitalism does indeed do more good than harm? The answer is predictable: United States, Canada, Australia, South Korea, Hong Kong, and Japan.

But what should we make of the rising inequality in the world, or, for that matter, right here in the United States?

Looking at Inequality

Historically, inequality has risen and fallen in the United States. Much depends upon policies in place from one period of time to the next.

For example, when laws make it difficult to start a business through excessive regulation and high taxes, business creation slows down and fewer jobs are available. Federal Reserve policies also affect the economic picture in powerful ways.

But simply pointing a finger at who holds most of the wealth, although somewhat relevant, doesn’t reveal everything. There’s also another important way to look at inequality.

For example, it seems that Jeff Bezos of Amazon is getting wealthier every year. His business is growing by leaps and bounds. (I’m not arguing for or against Amazon here, by the way.)

But Amazon is also hiring more and more workers—and, yes, using drones, too. But drones have to be made by someone as well. The larger point is that Amazon workers, and many others, have jobs that they didn’t have before, and are likely better off with their Amazon job than without it.

Sure, Bezos’s wealth is growing faster, but so what? Relatively speaking, thousands of people’s wealth is growing compared to their wealth level in a lower paying job or without a job at all.

What’s more, those working at Amazon don’t have to remain at that level, either. It’s worth remembering that Bezos once worked at MacDonald’s. The opportunity to improve one’s personal economic station is a huge advantage of “inequality” as long as opportunity abounds.

Guaranteeing equality takes a very powerful state and harsh penalties for stepping out of line. Improving equality in opportunity is the key, not guaranteeing equality of outcomes.

Most Nations Have High Inequality

Or, as is the case in most of the world, if a nation’s legal system is corrupt and highly political, serving those in power rather than being transparent and fair, economic growth and opportunity are stifled. Inequality and poverty increase.

That’s because only those with the money to bribe can afford to be in business and stop market competitors from market entry. That’s how many, if not most, of the world’s nations function, including the whiners who made the poll read the way it does.

It’s also worth noting that unlike in most capitalist countries, where the rich become powerful, in communist nations, Communist Party leaders and bureaucrats—the powerful tiny minority at the top—are the ones who become rich.

The wealth inequality gap between Party members and the rest of the people is huge. Living in palaces, shopping at the most upscale stores, and travelling like rock stars was, and still is in countries where communism persists, the Party life. Constant food scarcity, lagging technological innovation, poor health care, and dismal pay levels was the lot of the vast majority of the people over whom the Soviets ruled with an iron fist in the name equality.

When Soviet communism fell, the liberal democratic economies of the West were proven to be superior in providing better economic conditions, greater levels of opportunity to acquire wealth, and more innovation across the technological spectrum. Overall, they were just better at providing a better life for their people.

That’s precisely why, in the 1990s, people wanted leave those failed countries and come to … wait for it …

The Western liberal democracies. And sadly, for most of the world, that reality remains today.

James Gorrie is a writer and speaker based in Southern California. He is the author of “The China Crisis.”

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