In 1940, a movie came out that became a good ingredient in the communist propaganda the Soviet Union felt was necessary to keep its citizens in check. In the movie, Grapes of Wrath, the Joad family is affected harshly by the Great Depression and like many American families of the
time, they decide to relocate from their home in what became the Dust Bowl to California. The intention of the Soviet propaganda machine was to show how plain greed, a supposed intrinsic feature of capitalism, could affect innocent families like the Joad family. Things however went sour for the Soviet propaganda machine propaganda machine as they realized their audience became more discontent than they became satisfied with their socialist regime after watching Grapes of Wrath. Why? Instead of focusing on the wilderness America had been portrayed as or even on the main message; capitalism brings greed and people suffer because of greed (a fairly innocuous message), the audiences the so surprised that family that is as poor and desperate as the Joad family owned a car, something that very content families in the Soviet Union still considered a luxury. The lesson here is not the fact that the Soviet Union deeming it necessary to use propaganda to keep its citizenry away from “evil capitalism” made it automatically inferior. Indeed, the era of McCarthyism, and the Cold War showed America also used its own methods to keep its citizens from “evil socialism”, sometimes literally (like in the case of Japanese-Americans). The important lesson to write down however is that, apart from capitalism, other forms of economic organization either fails to recognize self-preservation and self-interest as an intrinsic motivator in human endeavor or they basically seek to suppress this self-interest to achieve some sort of communal good. Capitalism is the only mode of economic organization that both recognizes this intrinsic feature of human beings and in fact, taps it as its underlying premise for achieving social utility. If Grapes of Wrathtaught us anything, it is that the Soviet Union lied throughout its existence. The Soviet Union had told the world, not only that socialism was the best thing for Soviets but that Soviets were in love with the idea of sacrificing their self-interest to achieve communal interest. The Grapes of Wrath fiasco taught us that Soviets, like all else, were intrinsically self-interested and wanted to own an old, rickety Volkswagen. This article seeks to explore what the best bet for the global poor is. The article is premised on two very important claims. First, a global poor will exist no matter what mode of economic organization is predominant. Second, capitalism is the best bet for the global poor to move out of the damnation of eternal poverty. But first, a couple of clarifications.
Capital is indeed deeply flawed. It will be very inefficient for capital to be analyzed in its ideal form. Although all economies that practice capitalism approximate to the ideal of the invisible hand that works out perfectly, it is noble to note that capital is very imperfect. The Great Recession of 2008 showed that markets are indeed not free and this lack of freedom allows for manipulation that can lead to disaster, which mostly wrecks the global poor. Markets that are presumably free are only free a far as the political powers and social norms of the day dictate it to be. In his book, 23 things they don’t tell you about capitalism, Ha-Joon Chang argues that free trade is a matter of kung-fu masters and piano wires. The seeming free trade is only built on particular restrictions that are not obvious initially but support trade’s “free nature”, pretty much like the seemingly gravity defying kung-fu masters in Hong Kong movies were “defying gravity” by resting on almost invisible piano wires. A good example of these restrictions is immigration controls. Many advocates of free trade argue that in a market economy, the invisible hand will dictate how much labour will be paid as the forces of demand and supply interact in an economy. They therefore argue that there should be no interference in the form of minimum wage controls or trade unions since these restrictions will put the price of labour above its “natural cost” and thus, firms that hire labour will be producing at an inefficient level. This argument totally ignores the influence of immigration restrictions, something that free market advocates seldom advocate for. In fact, if all people and indeed all labour were completely mobile, the price that free market advocates argue is “natural cost” of labour will be way above the true cost which will be the price level after Bangladeshi janitors enter the British cleaning services market and drive down janitor wages to its barest minimum. But immigration controls makes sure British janitors are protected from the kind of competition that will make wages go that low. Chang was right – free markets are a matter of kung-fu masters and piano wires. Because markets are not free, individuals with influence on the system (for example Wall Street gurus and real estate tycoons in the stock market crash of the 2008) to manipulate it to affect poor people. Even if they are not making poor people lose homes and income like they did in 2008, their self-interests mean they are always doing the best they can to widen the inequality gap through lobbying for reduced taxes, saving a disproportionate amount of their income resulting in increased borrowing by poorer households and making it difficult for governments to use central bank policies to correct inefficiencies like inflation. Also, income does not trickle down like free market advocates would have us believe. The argument that inequality does not matter much because rich will spend on things that the poor enjoy like wages when they get more and expand their capital proves untrue as globally, evidence shows inequality is not reducing significantly although the rich keeps earning more. In fact, the richest 100 people in the world as of early 2016, controlled about half of all of earth’s resources. Certainly, trickledown economics has deceived us. It is certainly true that capital is deeply flawed. So why is it still the best bet for the global poor? We start the analysis from the first premise that says a global poor will always exist regardless of the mode of economic production that is predominant.
Functionally speaking, the poor is defined by the World Bank in recent times as people who live on less than $1.90 a day. This, although quite definitive of the modern global poor, does not give an accurate yardstick of what the global poor of pre-Industrial Revolution era would be. Intuitively, the poor thus constituted mostly of the colonized, the landless and slaves. This is a relative measure of poverty, that is accurate because these groups of people mostly lived on very little and had to slave away (some literally) most of their day to earn enough to last them another day, much like the global poor now. Before capitalism became a predominant as a mode of economic organization, the predominant ways of production were through feudalism, imperialism and in some African societies, communalism that mimicked Soviet style socialism. Although this is not an exhaustive list, these were the modes of organization that was employed in the world with a few imperial powers and feudal lords who owned land which was the main factor of production pre-Industrial Revolution. And although imperialism mimics modern day capitalism, it was largely controlled by an elite that meant it wasn’t a system where every actor was a free being in the sense of the word as modern day capitalism has it. In these economic systems, the poor formed the overwhelming majority of the world population. In imperial times, the wealthy often constituted individuals who benefitted from inter-continental trade that thrived on exploitation of less organized societies rendering them poor and structurally incapable of trading on fair terms to bring equal gains. In the times of the feudal lords as well, production by the serfs who occupied these lands were disproportionately shared between them and the lord, often to their disadvantage. This meant that they had to work exceedingly harder than their masters and still enjoy significantly lesser than them. The ability of humans to own other humans in those times also suggests a wide inequality gap between the owners of the means of production and the “others”. Even in the communal societies that were characterized by communal land tenure systems that ensured everybody had a shot at wealth, there were chiefs and decision makers who decided how these lands were distributed and more often than not, certain groups of individuals such as women and “slave families” as well as strangers who found themselves in the society had no equal shot at all to wealth like the system would suggest. In modern socialist societies, even if we were to ignore the inequality that obviously existed between the working class (i.e. every citizen) and the state officials marked by privileges and access to wealth as a “central planning body”, we have to admit the human rights abuses in those states. An obvious indicator is the rate at which people tried to cross the Berlin Wall into West Germany. It is no coincidence that human rights abuses are that high in socialists states. As the fiasco with Grapes of Wrath taught us, human beings are intrinsically discontent with not being able to enjoy the fruits of their labour and also that human beings cannot note inequality between themselves and others (who usually are state officials with access to cars and other luxuries in the case of socialist societies) and ignore it being the self-interested creatures that they are. At this point, it is very clear that, economic inequality is neither a feature of capitalism nor even a side effect of it. The global poor will exist regardless of the mode of economic organization a society or even the world as large will employ.
Given that the global poor will exist regardless of what economic system we practice, what is the best way to lift as many people out of absolute poverty as possible and what is the best way to use this inequality to make the world a better place for the global poor? The rest of the articles argues that capitalism, despite its flawed nature is still our best bet to lift people out of poverty. This focuses on evidence gathered post 1990 when the world reached the neo-liberal dawn after the fall of the Soviet Union. This comes in two arguments. First, capitalism forces the owners of means of production to engage the real demands of the global poor in a way that does not occur in other systems. Second, capitalism provides a hope that other systems do not provide.
As noted, in most other forms of economic organization, the rich are under no compulsion to solve the problems of the poor. This was because, the rich always had more power to engage the poor without solving their problems for them and also, they could get as rich as they wanted even without solving the problems of the poor (who often constituted the majority). But most importantly, the rich had no market incentive to solve the problems of the poor since they could control the poor’s access to wealth anyway and the poor couldn’t have even paid for the solutions they would provide. In socialist regimes, the state could cherry-pick which problems it would want to solve and you had no alternative but comply with their decision since the balance of force was on their side. Also, imperialist societies could exploit the local with which they traded in a way that meant they could achieve unimaginable amounts of wealth without solving any real social need. Case in point, companies that were created by Royal Charters like The British East India Company could gain lots of wealth by trading in things like salt and petty commodities (which to be fair are things the societies needed) but they never had any real incentive to expand into solving the problems of the polities they traded in. In the case of slave owners, they solved the needs alright but there was no market incentive for them to do things like provide things like an education to the poor slaves they lived with. This by no means suggests that there were no innovations in those economic systems. In fact, there were and we enjoy some of them today. But the truth is, they were mostly enjoyed by royals or the global rich because the incentive to produce on a large scale to improve access wasn’t there. That meant, the global poor were doomed to almost eternal damnation. Then comes capitalism. In capitalism, there exists a premise that a man should provide whatever need exists and they would benefit from producing it. This means that, there is always market incentive to produce for the poor. It is through this that we have had improved access to more quality life for the global poor. Now, there is a market incentive for “Big Pharma” to produce drugs to cure diseases that affect the poor. Clean water, hygienic toilet facilities, proper transport services, safer housing, quality food are all more available to the global poor now more than ever. In other economic systems case in point socialism, this would be left to the central planners to decide which problem is worth solving given the resources at hand. This is also not to say capitalism has cured all the worlds problems but to say more people have access now more than ever. This is because, markets respond to the needs that exist and produce solutions that correct them, for money. This production also has required the hiring of the global poor in ever growing industries and this has meant an upsurge in income for most households. Unlike other methods of economic production, the global poor can demand for higher wages and although they won’t be successful in getting wage hikes every now and then, the supply of their skill is a better bargaining point in a free market than in a socialist system where you either keep quiet about your wages (lest you are labelled a traitor)or defect like man North Koreans are increasingly doing. In fact, the number of people living on less than $1.90 is now less than half of what it was in 1990 (10.7% of the world’s population lived on less than $1.90 as compared to 55% in 1990). Coming with this need for labour is also an economic incentive to spread education far and wide and also, a market incentive for households to send their children to school. Without this, households will be less incentivized to educate their children and these children will most likely have to fall on agriculture and come to be at the mercy of unpredictable weather with no other alternative source of income. This expanded need for education has created backward and forward linkages with other benefits such as improved quality of life – social education campaigns on how to live a more quality life are only as successful as the literacy rates that exist in those societies. In fairness, the biggest gains in bringing people out of absolute poverty have occurred when countries like China and India have liberalized their economies and adopted more capitalist methods of production. Although this major gain is significantly concentrated in East Asia and the Pacific, it is of no doubt that the dawn of neo-liberalism has lifted more people out of poverty than ever before. Even if we were to consider cases of doubtable causality, like arguments that the world has been relatively safer since 1990 and that not all the success can be attributed to neo-liberalism, it’s only intuitive to conclude that the best shot poor people have at coming out of poverty lies with capitalism, deeply flawed capitalism.
Second, capitalism offers hope to poor people in a way that no other system can. The point of departure of this argument is that despite its huge gains, capitalism has not been able to lift all people out of extreme poverty. For these kinds of people, the most valuable possession they have is hope – the notion that they can do something about their situation even if all the cards are stacked against them. In other forms of economic organization the way to get to the top was to start from the top. You had to be either a royal, come from an elite family or part of a political master class ruling everyone else. Though there were few cases in which one could get to the top from the bottom, a large majority had their destinies condemned to eternal poverty. For example, the landless in feudal times had to work totally absurd hours (in comparison to modern times) almost all days a week before they can barely survive. This life provided no sort of escape to the landless, who without a merciful weather would be damned. That’s not the end of the story. They had no way out of this cycle because their services on the land was all they were useful for (and really all they were needed for) and at no point could they consider leaving it. In modern day capitalism, a lot of the rural landless are pretty much like the landless in feudal times – a slave’s work ethic and more dependent on the weather than the crops they grow. The difference however, is that the rural landless always have hope in capitalism. There is always the opportunity to use one’s level of education, no matter how little, to pursue better opportunities. They could also use any talent or skill they possess (including but not limited to music, art or sporting talent) to get out of poverty. Because there is a market incentive to provide these goods, the landless with limited opportunity can catapult themselves out of poverty and bring whole communities out of poverty along with them. Even when the poor has not been able to do this, there are countless of such stories that keep inspiring the global poor to at least dream (something the poor in other economic systems cannot afford). It is certainly true that these dreams could sometimes drive unhappiness and discontentment in some people. But in a world where any kind of differentiated ability can drive unhappiness, it is certainly worthy that the poor can have at least some sort of escape whether they come in the form of dreams, abundance of Premier League games every weekend or just pleasurable music. All this is made possible by market incentives and plain self-interest that are intrinsic in capitalism.
Since the dawn of the new era of the ubiquity neo-liberalism, there has been significant improvements in the life of the global poor. It is not a coincidence. It is the result of plain self-interest. Because everyone wants to survive, the poor will continue to get access to a better life and not condemned by the wishes of a lord or state official. All humans, like the Soviets, want the Joad family’s old rickety car. The want to live life beyond what another human says they can live up to. Capitalism provides this escape. There are both empirical and psychosocial evidence to show this escape. The global poor is indeed better off under deeply flawed capital.