By Shafiq Kyazze.
Have you ever been scrolling down your Facebook or Twitter timeline and alas, you came across a post or video ridiculing capitalism and how its evil. You might have liked or shared the video because the presenter might’ve made plausible arguments about the distress and destruction caused by capitalism. But what if I told you that this person was wrong about capitalism? What if I told you that capitalism has fueled the world towards better standards of living? Did you know that capitalism is the most efficient and best economic system known in the world?
Capitalism is an economic system. An economic system is a way scarce resources are allocated. Capitalism is an economic system that emphasizes freedom of people engaging in the market; a free market system. It advocates for your freedom to choose whatever you want to purchase and sell in a market. Other economic systems include Communism, socialism etc. By comparison, communism is an economic system where resources are allocated by the state according to one’s needs whilst socialism is an economic system where the means of production are owned by the state.
The fundamental problem with state-owned means of production is that the state purchases and sells products based on what it thinks the price is, not what the actual price is. Under a state planned economic system, the government body of a country would have to determine the prices of every product which is by far the least efficient way to set prices for every product given that an individual body does not posses all knowledge about all things.
Essentially, it’s impossible for the government to accurately set more than a million prices for a million or more products. Trading of products using wrong prices can lead to a massive decrease in the supply of the good which can lead to grave economic situations.
In capitalism however, the seller of the product determines the price of the product they are selling which is less strenuous and more efficient since the seller only focuses on setting the price for one product and has a lot of knowledge about what they are selling.
Numerous people talk about capitalism being the main cause of poverty and tragedy in the world. However, convincing evidence would suggest that such a statement is utterly false. It is crucial to note that other economic systems have been tested and yielded effects that are grievously deleterious i.e. socialism has caused a food crisis in modern day Venezuela and communism caused millions of deaths, malnutrition and famine in China under Mao.
Interestingly after the death of Mao Zedong, the former leader of communist China, the country adopted a bit of Capitalism leading to higher incomes and better standards of living. It is estimated that 246 million people rose from living on $1 a day in China between 1990 and 2004. An article published in the Guardian in 2017 further illustrated the effects of the structural economic changes in China, the headline read “Obesity: the big, fat problem with Chinese cities.” Other statements in the article included:
“With an increasingly urban population, rising disposable incomes and a growing demand for international cuisines, it is no wonder China is home to a high number of fast-food brands.”
“Swelling waistlines are the most visible symptom. Even the state-run media outlet Global Times found that China now has the largest overweight population in the world – 20.8% of men and 14.9% of women in a nation of 1.4 billion people – bumping the United States to second place, according to a study published in the Lancet Medical Journal.”
“That’s more than 43 million men and 46 million women classified as overweight”
It is imperative to point out that a country which suffered heavily from a shortage of food, millions of deaths and extreme poverty under communism has now gone on to experience rising disposable incomes, less poverty and an overweight problem. I’m in no way saying that being obese is healthy, but rather, if I was given a choice to choose between obesity and famine as situations to affect a country, I would choose the former since it’s easier to improve one’s diet and become healthy.
Moreover, those in present day China have higher incomes providing them with a wider range of food options ranging from healthy to unhealthy food. These higher incomes enable them to purchase healthier foods than their predecessors who had fewer incomes consequently leading to little to no options.
The argument for capitalism can be extended further, let’s take two countries Cote d’Ivoire and Ghana. As of 1960 both countries had just gained their independence, Ghana chose to embrace socialism and had a slightly higher real per capita and was more economically prosperous at that time than Cote d’Ivoire which adopted capitalism. After 20 years (1980) the results were in: Cote d’Ivoire had real per capita incomes that were 65 percent higher than those in Ghana. The bottom 20 percent in Cote d’Ivoire averaged higher incomes than the majority of the Ghanaian population. Ghana is a very mineral-rich country and was popularly known as the “Gold coast” because its richly endowed with gold.
Unfortunately, as Ghana stepped away from the free-market system economic policies, it lost a lot these benefits. What this shows is that capitalism is a necessary prerequisite for economic success.
This same pattern has been repeated around the world and can be seen between India and South Korea (as of 1960), Hong Kong and Mainland China (before China made part of its markets free).
Innumerable countries have experienced a vast increase in their quality of life and wealth such as Estonia, Japan, Sweden, Singapore, Chile, Rwanda and plenty more.
The next time someone tells you that we should embrace communism, ask them between North Korea (communist system) and South Korea (the capitalist system) which one has its citizens trying to escape from their country to join the other. It’s no coincidence that the wealthiest countries in the world are among the most capitalist countries. There is simply a strong and consistent positive correlation between wealth and capitalism.
Shafiq has a strong background in philosophy and history having been exposed to such issues at a very tender age. He has a voracious interest in economics, history, politics, philosophy and social issues. He is a Chemical engineering student at The University of Manchester. Shafiq is also an avid Barcelona fan and is currently a writer for TCS.
