In the December issue of The Freeman, Sandy Ikeda has two articles regarding common fallacies about capitalism and free markets. While I won’t cover all 14 points she makes here, I will add my two cents to another fallacy that the Pope, of all people, added to in recent weeks when his comments and views about capitalism were made widely-known. As the Washington Post reported:
In his most authoritative writings as pontiff, Francis decried an “idolatry of money” in secular culture and warned that it would lead to “a new tyranny.”…“Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world,” Francis wrote in the papal statement. “This opinion, which has never been confirmed by the facts, expresses a crude and naive trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system.”
“Meanwhile,” he added, “the excluded are still waiting.”
It’s the second part of his critique that I would label as another fallacy, in many regards. True, in the developed world, it’s difficult to see the service capitalism provides for people still. Many think of the financial crisis of 2008 as exemplary of the problems of capitalism, of the concrete proof that the system benefits those at the top while leaving those below far, far behind. And in the context of Wall Street wizards who manipulate symbols, computers and people, mostly to hand fortunes back and forth among themselves, this is probably a fair critique.
But, overall, the Pope is invariably wrong. The capitalists who make a fortune in the service of others are abundant all over the world today, mostly in those places termed “emerging markets.” I may be a bit late to the book, but I just finished reading Christopher W. Mayer’s “World Right Side Up”, his exploration of the world’s emerging markets in the last decade or so, and how, in many places, capitalism is still working just fine, increasing the standard of living for all at a breakneck speed.
I can think of two examples in Mayer’s book that show that capitalism is still the best system for all, that this organically arrived at system holds the most promise for humanity’s future. The first is a company called Alliance Grain Traders (AGT), based out of Saskatchewan, Canada. As Mayer notes numerous times throughout his book, food is a major issue for humanity as a whole going forward. One solution for this problem looks to be the food crops known as “pulses”, things like legumes and lentils. They are protein rich (meaning a suitable substitute for meat) and can be produced with a significantly less amount of water.
AGT’s role in all of this is their proprietary technology that separates lentils by quality and a variety of other characteristics. This process, along with their self-developed distribution network, allows AGT to get these needed foodstuffs around the world more efficiently and to a greater number of people, all while creating a fortune for themselves. In their desire to help the farmers of their province get their product to market and feed the world, they benefit themselves and all others who, often times, desperately need those pulse food goods.
Another recurrent theme in Mayer’s book is the need for water. Water for drinking, water for mining, water for just about everything. In Southeast Asia, especially, there is a severe need for potable drinking water. Again, one of those greedy, heartless, capitalists has filled the need to provide water for all, and in so doing, has made a fortune in a few short years. From Mayer’s book:
Hyflux’s CEO, Olivia Lum, knows exactly where this ship is going. They call her the “Water Queen.” Since 2006, she has overseen an almost sixfold increase in net profits, from S$15 million to S$88.5 million. Lum grew up in Malaysia in a leaky shack without any running water. She got her start in business selling ice lollipops. Selling kaya toast funded her school tuition until she got to the National University of Singapore, where she graduated in applied chemistry. It was during her three-year stint at Glaxo that she saw the immense potential of the water treatment business. Lum sold her condo and car to found Hyflux in 1989. She started selling her first water filters and chemicals off the back of her motorcycle. In five short years, she took Hyflux from a three-person company to its first million in sales. Lum owns 30 percent of the stock, fully aligning her interest with her shareholders, and her vision drives the company. Lum recently said her dream is to make desalinated water a cheap source of water, “as cheap as maybe ordinary river water treatment.”
Drinkable water to the hundreds of millions of people in Southeast Asia? Damn, greedy capitalists!
It may seem as though Pope Francis’ “excluded” are still waiting. But, in many respects, they won’t have to wait for long. Outside of Mayer’s book, the existence of System D also tells us that capitalism continues to better the lives of all, around the globe, every single day. For those unfamiliar with System D, it’s a term a group of economists gave to the world’s black and gray markets. According to their findings, it probably constitutes a $10 *trillion* dollar economy, making it the second largest economy in the world, behind only the United States.
So, again, add another item to the list of common fallacies about capitalism, as outlined by Ikeda.
The excluded *are* being included, in greater numbers than ever before, despite the protestations of the Pope and millions of others, and it’s capitalism, and not anything else, that is achieving this incredible feat.