August 27, 2024
From its
beginnings, the capitalist economic system produced both critics and
celebrants, those who felt victimized and those who felt blessed. Where victims
and critics developed analyses, demands, and proposals for change,
beneficiaries, and celebrants developed alternative discourses defending the
system.
Certain kinds of
arguments proved widely effective against capitalism’s critics and in obtaining
mass support. These became capitalism’s basic supportive myths. One such myth
is that capitalism created prosperity and reduced poverty.
Capitalists and
their biggest fans have long argued that the system is an engine of wealth
creation. Capitalism’s early boosters, such as Adam Smith and David Ricardo,
and likewise capitalism’s early critics such as Karl Marx, recognized that
fact. Capitalism is a system built to grow.
Because of
market competition among capitalist employers, “growing the business” is
necessary, most of the time, for it to survive. Capitalism is a system driven
to grow wealth, but wealth creation is not unique to capitalism. The idea that
only capitalism creates wealth or that it does so more than other systems is a
myth.
What else causes
wealth production? There are a whole host of other contributors to wealth. It’s
never only the economic system, whether capitalist or feudal or slave or
socialist. Wealth creation depends on all kinds of circumstances in history
(such as raw materials, weather, or inventions) that determine if and how fast
wealth is created. All of those factors play roles alongside that of the
particular economic system in place.
When the USSR
imploded in 1989, some claimed that capitalism had “defeated” its only real
competitor—socialism—proving that capitalism was the greatest possible creator
of wealth. The “end of history” had been reached, it was said, at least in
relation to economic systems. Once and for all, nothing better than capitalism
could be imagined, let alone achieved.
The myth here is
a common mistake and grossly overused. While wealth was created in significant
quantities over the last few centuries as capitalism spread globally, that does
not prove it was capitalism that caused the growth in wealth. Maybe wealth grew
despite capitalism. Maybe it would have grown faster with some other system.
Evidence for that possibility includes two important facts. First, the fastest
economic growth (as measured by GDP) in the 20th century was that achieved by
the USSR. And second, the fastest growth in wealth in the 21st century so far
is that of the People’s Republic of China. Both of those societies rejected
capitalism and proudly defined themselves as socialist.
Another version
of this myth, especially popular in recent years, claims capitalism deserves
credit for bringing many millions out of poverty over the last 200 to 300
years. In this story, capitalism’s wealth creation brought everyone a higher
standard of living with better food, wages, job conditions, medicine and health
care, education, and scientific advancements. Capitalism supposedly gave huge
gifts to the poorest among us and deserves our applause for such magnificent
social contributions.
The problem with
this myth is like that with the wealth-creation myth discussed above. Just
because millions escaped poverty during capitalism’s global spread does not
prove that capitalism is the reason for this change. Alternative systems could
have enabled an escape from poverty during the same period of time, or for more
people more quickly, because they organized production and distribution
differently.
Capitalism’s
profit focus has often held back the distribution of products to drive up their
prices and, therefore, profits. Patents and trademarks of profit-seeking
businesses effectively slow the distribution of all sorts of products. We
cannot know whether capitalism’s incentive effects outweigh its slowing
effects. Claims that, overall, capitalism promotes rather than slows progress
are pure ideological assertions. Different economic systems—capitalism
included—promote and delay development in different ways at different speeds in
their different parts.
Capitalists and
their supporters have almost always opposed measures designed to lessen or
eliminate poverty. They blocked minimum wage laws often for many years, and
when such laws were passed, they blocked raising the minimums (as they have
done in the United States since 2009). Capitalists similarly opposed laws
outlawing or limiting child labor, reducing the length of the working day,
providing unemployment compensation, establishing government pension systems
such as Social Security, providing a national health insurance system,
challenging gender and racial discrimination against women and people of color,
or providing a universal basic income. Capitalists have led opposition to
progressive tax systems, occupational safety and health systems, and free
universal education from preschool through university. Capitalists have opposed
unions for the last 150 years and likewise restricted collective bargaining for
large classes of workers. They have opposed socialist, communist, and anarchist
organizations aimed at organizing the poor to demand relief from poverty.
The truth is
this: to the extent that poverty has been reduced, it has happened despite the
opposition of capitalists. To credit capitalists and capitalism for the
reduction in global poverty is to invert the truth. When capitalists try to
take credit for the poverty reduction that was achieved against their efforts,
they count on their audiences not knowing the history of fighting poverty in
capitalism.
Recent claims
that capitalism overcame poverty are often based on misinterpretations of
certain data. For example, the United Nations defines extreme poverty as an
income of under $1.97 per day. The number of poor people living on under $1.97
per day has decreased markedly in the last century. But one country, China—the
world’s largest by population—has experienced one of the greatest escapes from
poverty in the world in the last century, and therefore, has an outsized
influence on all totals. Given China’s huge influence on poverty measures, one
could claim that reduced global poverty in recent decades results from an
economic system that insists it is not capitalist but rather socialist.
Economic systems
are eventually evaluated according to how well or not they serve the society in
which they exist. How each system organizes the production and distribution of
goods and services determines how well it meets its population’s basic needs for
health, safety, sufficient food, clothing, shelter, transport, education, and
leisure to lead a decent, productive work-life balance. How well is modern
capitalism performing in that sense?
Modern
capitalism has now accumulated around 100 individuals in the world who together
own more wealth than the bottom half of this planet’s population (over 3.5
billion people). Those hundred richest people’s financial decisions have as
much influence over how the world’s resources are used as the financial
decisions of 3.5 billion, the poorest half of this planet’s population. That is
why the poor die early in a world of modern medicine, suffer from diseases that
we know how to cure, starve when we produce more than enough food, lack
education when we have plenty of teachers, and experience so much more tragedy.
Is this what reducing poverty looks like?
Crediting
capitalism for poverty reduction is another myth. Poverty was reduced by the
poor’s struggle against a poverty reproduced systemically by capitalism and
capitalists. Moreover, the poor’s battles were often aided by militant
working-class organizations, including pointedly anti-capitalist organizations.
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