Capitalism and Poverty

business_ethics_highlights_2Capitalism is a bit like science, or democracy. Potent, but imperfect as usually practiced. As Winston Churchill said, “Democracy is the worst form of government, except for all those other forms that have been tried from time to time.” He could just as easily have been talking about capitalism. Capitalism is a potent mechanism for improving human well being. But it doesn’t do so evenly, and there are (of course!) lots of opportunities for individuals operating within capitalist contexts to do bad things. And sometimes the blame gets aimed at capitalism itself, at the very idea. The commentary below tackles one such criticism. >>>

LINK: Does Capitalism Cause Poverty? (by RICARDO HAUSMANN at Project Syndicate)

…In poverty-stricken Bolivia, [Pope] Francis criticized “the mentality of profit at any price, with no concern for social exclusion or the destruction of nature,” along with “a crude and naive trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system.”

But this explanation of capitalism’s failure is wide of the mark. The world’s most profitable companies are not exploiting Bolivia. They are simply not there, because they find the place unprofitable. The developing world’s fundamental problem is that capitalism has not reorganized production and employment in the poorest countries and regions, leaving the bulk of the labor force outside its scope of operation…..

What do you think?

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One comment

  1. Perfecto Jr. Villalba

    Capitalism is both a cause and an antidote of Poverty.
    Poverty is wrought by Capitalism, yet it is also fought by Capitalism.

    Poverty in some countries is wrought by capitalism through the worker exploitation that comes with inadequate government regulation. Further resentment of capitalism is often fueled by the environmental damage which results from a lack of government regulation and/or enforcement in that area.

    Poverty is fought by capitalism through job creation. With the freedom to gain personal profit comes extra incentive for people to work hard at developing, testing, marketing, and ultimately producing their innovative new ideas. Take technological advances an example. The developing and testing stages, create room for employment for people such as scientists and engineers. The marketing stage creates more room for employment in the business sphere. The production stage creates employment at the products’ factories, the material suppliers’ factories, the warehouses, the wholesalers, the retailers, and perhaps more.

    However, this job creation would turn from a blessing into a curse, from an antidote back to a disease, if a lack of government regulation as stated earlier permits exploitation of the worker and the environment.

    A key step therefore in fighting poverty is striking a balance between freedom of enterprise and rules governing fair play. For the sake of innovation and job creation, the profit incentive must be kept alive. For long term sustainability of the environment, and the lives and satisfaction of the working people, adequate regulation must be enforced for their protection. How much or how little regulation is difficult if not impossible to immediately and arbitrarily quantify. However, humans wouldn’t have survived as long as they have if it weren’t for their ability to figure things out.

    Another important factor to consider, is educational opportunities. This is especially important in a world where technology is slowly killing manual labor jobs, leaving primarily of course the jobs that require higher education. A flaw in pure capitalism is the inability of children of poor families, no matter how smart they are, to pay for higher education. Student loans increase their ability, but not fully due to the fear of possibly being unable to repay those debts if the future job market becomes too tight. Government investment in making higher education cheaper, if not free, would increase the opportunity for more people from all across the socio-economic spectrum to attain it, thereby increasing job prospects for all and reducing the risk of poverty.

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