In Defense of Global Capitalism

CATO INSTITUTE

Contents

Preface..............................................................7I. Every day in every way .........................................19The half truth.......................................................20Poverty reduction....................................................25Hunger...............................................................31Education............................................................36Democratization......................................................38Oppression of women..................................................43China................................................................47India................................................................51Global inequality....................................................54Reservations.........................................................60II. ... and it's no coincidence.....................................63That's capitalism for you!...........................................64Growth-a blessing....................................................72Freedom or equality? Why choose?.....................................84Property rights-for the sake of the poor.............................90The East Asian "miracle".............................................99The African morass...................................................104III. Free trade is fair trade........................................113Mutual benefit.......................................................114Important imports....................................................120Free trade brings growth.............................................128No end of work.......................................................136Freedom of movement-for people as well...............................145IV. The development of the developing countries.....................151An unequal distribution-of capitalism................................152The white man's shame................................................156The case of Latin America............................................163On the trade route...................................................169"Let them keep their tariffs"........................................173The debt trap........................................................177The right medicine...................................................186V. Race to the top.................................................191I'm all for free trade, but .........................................192Child labor..........................................................198But what about us?...................................................203Big is beautiful.....................................................210"Gold and green forests".............................................224VI. Irrational, international capital?..............................239The leaderless collective............................................240Regulate more?.......................................................249Tobin tax............................................................253The Asian crisis.....................................................259Instead of crisis....................................................264The "dictatorship of the market".....................................268VII. Liberalize, don't standardize...................................277The right to choose a culture........................................278The onward march of freedom..........................................286Notes................................................................293Index................................................................307

Chapter One

The half truth

At least since 1014, when Archbishop Wulfstan, preaching in York, declared that "The world is in a rush and is getting close to its end," people have believed that everything is growing worse, that things were better in the old days. Much of the discussion surrounding globalization presupposes that the world is rapidly going to hell in a handbasket. A few years ago, Pope John Paul II echoed his colleague of a thousand years ago by summing up world development in the following terms:

Various places are witnessing the resurgence of a certain capitalist neoliberalism which subordinates the human person to blind market forces and conditions the development of peoples on those forces.... In the international community, we thus see a small number of countries growing exceedingly rich at the cost of the increasing impoverishment of a great number of other countries; as a result the wealthy grow ever wealthier, while the poor grow ever poorer.

The world is said to have become increasingly unfair. The chorus of the debate on the market economy runs: "The rich are getting richer, and the poor are getting poorer." This statement is offered as a dictate of natural law, not as a thesis to be argued. But if we look beyond the catchy slogans and study what has actually happened in the world, we find this thesis to be a half-truth. The first half is true: the rich have indeed grown richer-not all of them everywhere, but generally speaking. Those of us who are privileged to live in affluent countries have grown appreciably richer in the past few decades. So too have the Third World rich. But the second half is, quite simply, wrong. The poor have not, generally speaking, come to be worse off in recent decades. On the contrary, absolute poverty has diminished, and where it was quantitatively greatest-in Asia-many hundreds of millions of people who barely twenty years ago were struggling to make ends meet have begun to achieve a secure existence and even a modest degree of affluence. Global misery has diminished and the great injustices have started to unravel. This opening chapter will contain a long succession of figures and trend descriptions that are necessary to correct the very widespread misunderstanding that exists concerning the state of the world.

One of the most interesting books published in recent years is On Asian Time: India, China, Japan 1966-1999, a travelogue in which Swedish author Lasse Berg and photographer Stig Karlsson describe new visits to Asian countries where they traveled during the 1960s. Then, they saw poverty, abject misery, and imminent disaster. Like many other travelers to those countries, they could not bring themselves to hold out much hope for the future, and they thought that socialist revolution might be the only way out. Returning to India and China in the 1990s, they could not help seeing how wrong they were. More and more people have extricated themselves from poverty; the problem of hunger is steadily diminishing; the streets are cleaner. Mud huts have given way to brick buildings, wired up for electricity and sporting television aerials on their roofs.

When Berg and Karlsson first visited Calcutta, a tenth of its inhabitants were homeless, and every morning trucks sent by the public authorities or missionary societies would go around collecting the bodies of those who had died in the night. Thirty years later, setting out to photograph people living on the streets, they had difficulty in finding any such people. The rickshaw, a passenger cart pulled by a barefoot man, is disappearing from the urban scene, and people are traveling by car, motorcycle, and subway instead.

When Berg and Karlsson showed young Indians photographs of what things looked...