Sprawling free markets in countries that became more capitalist over the last 25 years have meant many more people enjoy improvements in well being and opportunities to advance human capabilities. There is no evidence that countries that eschewed freer markets and embraced substantially greater state control performed better on any of these major indicators. On the contrary, those countries that adopt increased taxation, increased regulation, fiscal mismanagement and enormous public debt have performed demonstrably worse.
From a global perspective, we have witnessed remarkable progress of mankind through the increased acceptance of free market policies in both rich and poor countries.
By , that number has fallen to In just the past 25 years increased private ownership, increased free trade, and lower taxes all came at the hands of politicians like Deng Xiaoping in China, Margaret Thatcher in England, and Ronald Reagan in United States.
In the years following the adoption of these policies by these global leaders, per capita income nearly doubled from to ; Tariffs fell and trade increased; Schooling and life expectancy grew rapidly, while infant mortality and poverty fell just as fast.
In my lifetime alone, freer markets have improved the lives of billions of people from all walks of life. When we look back at our own history, the tremendous economic growth that Americans experienced from the time of the original Tea Party up to was the result of economic freedom from government regulation, open boarders for free immigration, and very few trade restrictions on the global flow of goods, services, and capital. Anyone could get on a boat, land on Ellis Island and become an immigrant and this benefited both domestic Americans and the immigrant alike.
Wealth allows for the improvement of the human condition. For example, in , our average life expectancy in the U. Today it is As recent as , it took the average American wage earner hours of labor to earn enough to purchase a cellphone. Capitalism has kept this promise quite well over the broad span of history. Compared with earlier periods in history, the material conditions of life have improved dramatically since the birth of capitalism. For the years up to around , economic output per person was flat.
In other words, the median person in was no better off, economically speaking, than the median person in Work by the team at The World in Data , led by Max Roser, makes the point visually — and dramatically.
The idea of economic improvement is now so culturally embedded that even half a decade of no progress sends alarm bells ringing, let alone half a millennium. In previous eras, the past was almost exactly the same country, at least in economic terms, where they did things pretty much the same as now.
In a feudal or agricultural economy, things today were likely to be quite similar to things a century ago, as well as to things a century later. But once the capitalism engine revved up, the future entered our collective imagination. Novels began to be set there. More practically, economic forecasting became an industry in its own right. What will the US economy be like in , or ? How big? Growing how fast? What jobs will it contain?
How many? A great deal of time and money is spent, both by governments and companies, trying to answer these questions, as well as they can which is, inevitably, not very well. Maybe my children would have more than me; maybe not. Either way, the condition of the future was unlikely to have much to do with human activities.
This is why pre-capitalist societies tended to be deeply religious; a good harvest was in the hands of weather systems, which in turn meant it was in the hands of the Gods. Marx accused religion of being the opium of the masses, distracting them from capitalist exploitation. But capitalism has steadily undermined religion by reliably promising that the future will in fact be materially better, and not because of divine intervention but because of the manmade market. The greatest promise of capitalism is that each generation will rise, on the shoulders of the one before, as a result of the natural workings of a market economy.
It should be no surprise that the greatest challenges to capitalism come when that promise begins to be questioned. If capitalism loses its lease on the future, it is in trouble. Markets run on psychology. We work to live see my previous essay in the series on work. Back in the s, Paul Samuelson showed that growth provides a rationale for Social Security.
Later, "endogenous growth" theories called for a government role in supporting research and development. But who cares about economic theories, right? What does history tell us? Using the past as a guide to the future has always been the most daunting of challenges.
After all, middle-class incomes have been stagnating in rich countries on and off since the early s. Energy and water - certainly the most important natural resources - have become scarcer and more expensive. In other words, we really have started hitting our resource limits. And yet in many ways, rich countries like the U. Despite the increasing prices of oil and gasoline and water, people in the developed world have not clamored for capitalism's downfall.
In fact, Occupy Wall Street itself - a movement made up mostly of economically successful, educated people - turned out to be mostly just a protest against the excesses of the finance industry and the pro-rich policies of the GOP, not the beginning of a global anti-capitalist revolution. Graeber may have given the movement its moniker, but OWS was also known as "Krugman's army. Looking at history, we see that the biggest challenges to capitalism actually came during times of rapid growth. The early 20th Century was the heyday of communism, anarchism, and socialism.
But this was a time of immense growth, technological progress, and increased material standards of living. There remains, however, the problem of Malthus. A zero-growth steady state economy is not necessarily a sustainable one. Writing in the eighteenth century, at the dawn of the industrial revolution when even the British economy was still overwhelmingly agrarian, Malthus viewed the natural capital of deepest concern as being productive agricultural land. There are clear constraints on planetary endowment.
To be truly sustainable, the natural capital of the planet must carry the economy indefinitely without suffering irreversible or catastrophic damage. Sustainability requires that natural capital have the capacity to absorb all waste products from human activities and to replenish itself sufficiently over time to maintain its stock, including, notably, its capacity to produce food.
This requirement is as true of a steady state economy as of any other and applies to alternative economic systems as it does to capitalism. Human societies today consume prodigious quantities of natural capital. With much of the global population still living in deep poverty, that level of consumption is likely to grow dramatically in the coming century. But even if consumption did not grow, steady state consumption over time might still deplete reserves of natural capital sufficiently that it would be no longer able to support prevailing levels of consumption.
Degrowth of the economy can be achieved in one of two ways, reducing population or reducing per-capita consumption. These two levers are not unrelated. Malthus imagined that humans, like bacteria in a petri dish, reproduced geometrically in relation to resource availability. In fact, the opposite is the case. As human populations move from subsistence agrarian economies to modern industrial economies, and become more affluent in the process, fecundity levels decline.
The human population over the past century has risen dramatically, but not because people were having more children. Rather, thanks to better public health and medical care, more children are surviving to adulthood, and adults are living much longer. The distinction is an important one.
Fertility rates in virtually all developed economies are at or near replacement levels, meaning that native-born population levels are either stable or falling. Many emerging economies are at or near replacement levels of fertility as well, largely due to rising societal wealth and incomes. Indeed, differences among demographic models as to when and at what level global population will stabilize are almost entirely attributable to different assumptions about economic growth rates in Africa and Developing Asia.
Accordingly, efforts to stabilize global population and reduce per-capita global consumption are potentially at cross-purposes. A global population that continues to live in subsistence agrarian economies will likely be much larger than one that has fully made the transition to an urban and industrial economy, even as the latter consumes at significantly higher levels.
A more equitable distribution of a smaller pie would presumably allow those remaining in deep agrarian poverty to make the leap to modern living standards and fertility rates.
Such a scheme might be possible theoretically but as a practical matter would appear to be unlikely, requiring some combination of voluntary austerity and redistribution at a global scale or, lacking that, some form of global government that would mandate limits on personal consumption and would forcibly redistribute wealth from richer precincts of the global economy to poorer ones.
Even if such a scenario were plausible, it is not clear that it would actually degrow the economy. Actually degrowing the economy significantly from present levels would probably leave large populations stranded in deep agrarian poverty. And to provide a first-world perspective, such a perfect redistribution would require — for global GDP to be maintained at its current level — High Income countries World Bank designated to reduce their present GDP by between about 60 percent to 70 percent, again depending on the accounting method.
There is also the small matter of whether such a scheme could actually sustain itself economically or ecologically. It is not clear that such a scheme could work without large-scale collectivization, as it is not clear that the incentives necessary to keep producers producing, savers saving, and investors investing in new or replacement capital voluntarily could be sustained.
The history of the collectivization of production has not been good for either living standards or the environment. Incomes stagnate as more work often does not bring greater income. Stagnant incomes bring lower savings and capital reinvestment, and lower capital reinvestment brings aging capital stock and infrastructure and ultimately stagnant or declining economic productivity.
These problems become self-reinforcing. Incomes stagnate further with declining productivity, and with declining incomes comes less surplus either to redistribute or invest in new capital and infrastructure. Aging capital stock and declining productivity also bring greater calls on natural capital. In short, natural capital is not the only endowment that societies erode at their own risk.
Societal wealth, the product of economic surplus made possible by rising economic productivity, is also an endowment that grows as societies develop economically. Erosion of that endowment erodes the surplus necessary to reinvest in new capital that is capable of sustaining living standards while requiring declining calls on natural capital. Malthus erred not only because he failed to understand the relationship between fertility rates and food consumption but also because he underestimated the rate at which agricultural productivity would improve.
By growing more food on every acre of land, human societies avoided mass starvation. More broadly, rising economic productivity due to technological advances raises incomes, creates economic surplus that can be reinvested in new capital and infrastructure, and produces more economic output from less natural capital input. So long as there are large populations living in deep poverty, gains in economic productivity will be put toward greater output, assuring that some or all of the efficiencies associated with productivity gains will be put toward greater production and consumption.
But once everyone on the planet achieves a satisfactory level of consumption, consumption of goods and services should stabilize while calls on natural capital should stabilize and then decline. By satisfactory levels of consumption, what I mean is a standard of living that would be recognizable to the average citizen of an advanced developed economy — modern housing, an ample and diverse diet, sufficient electricity for run-of-the-mill household appliances, roads, hospitals, well-lit public spaces, garbage collection, and so on.
The saturation of demand for goods and services in advanced developed economies in the latter half of the twentieth century provides a reasonable proxy for the point at which most people start to see diminishing utility from further household consumption. In a zero-growth world, in which household consumption has saturated while labor- and resource-sparing technological change continues, leisure time grows continually over time while societal calls on natural capital decline.
Getting to a zero-growth steady state economy with declining calls on natural capital will require, then, sustaining — or better yet, accelerating — two trends that capitalism has proven better able to advance than any alternative economic arrangement to date: lifting large agrarian populations out of poverty, and improving resource productivity through technological change.
The former, as noted above, is also the key to stabilizing global population.
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