The C Word

The free market economy is the only economic system that has ever delivered prosperity to the masses. This is simply historical fact. To deny it is like denying evolution or the holocaust.

In much the same way I would tend to avoid holding a philosophical discussion with committed creationists, it is also pretty tiresome to debate politics or economics with people who won't start by acknowledging the implications of this basic premise.

Just take at GDP per capita in Western Europe in the 1000 years before 1700 and then in the roughly 300 years since. Prior to the industrial revolution the majority were living on the equivalent of $2 a day or less i.e. in extreme poverty. And there was no aid coming in from abroad.

I suppose we can tussle over the present day case of China, but the fact is that within the context of a single party state and the deeper culture, the Chinese Communist Party has liberalised its economy just enough to drag millions out of long-term poverty in a comparatively short space of time. 

Nevertheless, there are people out there — be they at the summit of the Catholic church or the UK Labour party — who more than occasionally use the term Capitalism as if it were wholly synonymous with the system of divided labour and free market exchange as described by Adam Smith.

And as the C word has obviously negative connotations in many quarters, this subterfuge of political vocabulary has enabled countless ideologues to unleash the inverse proposition that free market economics inherently create poverty, and not just sometimes, but always.

This is nothing less than a modern dressing up of the old Marxist fallacy that wealth creation is essentially a euphemism for poverty creation. 

Many still show a degree of intellectual caution by prefixing capitalism with 'unfettered', but post-2008 others have become more emboldened. (And when they plead that it's not all of capitalism, just the bad bits, it's a bit like listening to Trump attest that he didn't mean ALL Mexicans, when you sort of have to know that he did.)

Of course there are many aspects of modern capitalism that appear to reverse the historical thrust towards more equitable prosperity. Some of these may be under political control, others might not be. A good few may be more cultural or even geographical.

These structural problems within the unevenly globalised system present some of the most serious challenges we face in this century, but they do not represent any sort of justification for a full system reboot based on illiberal economic principles which have time and again been shown to fail, and yes, create poverty. 

In other words, if the game is rigged, it is our collective duty to attempt to un-rig it, not dig an old abandoned game out of the cupboard and brush the dust off it.

But the notion that it is liberal economic systems that create poverty per se persists, along with the parallel absurdity that free market is inherently a zero sum game. 

Many of those who espouse it have benefitted their entire lives from the material conditions and education that liberal systems provide, and yet still appear to peddle a discourse that appears to favour North Korea lite over any version of South Korea.

Here in Latin America generations of unscrupulous politicians and intellectuals have almost certainly denied the masses the prospect of real prosperity by turning them against the free market with the old chestnut about how they would be fabulously rich if they hadn't been robbed, first by the Portuguese and Spanish and then by the Gringos.

Hogwash of course — and it would be almost impossible to build a credible academic case for such a position using a balanced selection of historical sources.

Yet it is by transcending this rather callow sense of historical grievance that many other nations in the developing world, particularly in Asia, have adapted liberal economic principles to their own requirements and duly prospered.