Author: William Saint
Date: September 6, 2011
Tags: ,

The Principles of Capitalism and Their Effects in the World

May 2011 by William Saint

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“Glob­al­iza­tion has deliv­ered a lot… but it also has a dark side: a large and grow­ing chasm between the rich and the poor. Clearly we need a new form of glob­al­iza­tion.”[1]
—Dominique Strauss-Kahn, Man­ag­ing Direc­tor, Inter­na­tional Mon­e­tary Fund
 

In its Accra Con­fes­sion of 2004, the World Alliance of Reformed Churches iden­ti­fied the fol­low­ing ten prin­ci­ples to be asso­ci­ated with cap­i­tal­ism as it is presently prac­ticed in the world:

  1. The economy’s pur­pose is to gen­er­ate profit
  2. Unre­strained competition
  3. Unlim­ited eco­nomic growth and accu­mu­la­tion of wealth
  4. Con­sump­tion must be encouraged
  5. Dereg­u­la­tion of markets
  6. Unre­stricted cap­i­tal movements
  7. Taxes are a con­straint on growth
  8. Own­er­ship of pri­vate prop­erty has no social obligation
  9. Pri­va­ti­za­tion of util­i­ties and nat­ural resources
  10. Nature is a com­mod­ity to be mar­keted and consumed

With the fall of the Berlin Wall in 1989, the “cold war” between the prac­ti­tion­ers of social­ism and cap­i­tal­ism was effec­tively won by the lat­ter. In the minds of many around the world, this con­firmed the “right­ness” of the cap­i­tal­ism model and its under­ly­ing prin­ci­ples. Over the past two decades, these prin­ci­ples have cre­ated the phe­nom­e­non called eco­nomic glob­al­iza­tion. What have been the con­se­quences?[2]

1.   Profit as economy’s pur­pose: The com­mon good is not a con­sid­er­a­tion
Cor­po­rate prof­its have trended steadily upward since the col­lapse of the Berlin Wall kicked off a sus­tained period of global cap­i­tal­ist expan­sion (see chart below). In 2009, the For­tune 500 com­pa­nies more than tripled their earn­ings to $391 bil­lion.[3] Although admit­tedly depart­ing from a depressed level of prof­its dur­ing the Great Reces­sion of 2008, this jump was the sec­ond largest in the 56 year his­tory of cor­po­rate profit mon­i­tor­ing and occurred while much of the world was—and still is—struggling against eco­nomic adversity.

U.S. Bureau of Eco­nomic Analy­sis, Cor­po­rate Prof­its from 1984 to 2010 (in $ billions)

2.   Unre­strained com­pe­ti­tion: Coun­tries are not the ben­e­fi­cia­ries
In the 1980s free mar­ket eco­nom­ics (var­i­ously called mar­ket fun­da­men­tal­ism, neolib­er­al­ism, or the Wash­ing­ton Con­sen­sus) was in ascen­dency, com­bin­ing “exces­sive opti­mism about what mar­kets could achieve on their own with a very bleak view of the capac­ity of gov­ern­ments to act in socially desir­able ways. Gov­ern­ment stood in the way of mar­kets instead of being indis­pens­able to their func­tion­ing, and accord­ingly had to be cut down to size.”[4] Con­se­quently, the role of gov­ern­ment in reg­u­lat­ing mar­kets was put under siege and forced to retreat in a num­ber of areas, includ­ing social pro­tec­tion, con­sumer pro­tec­tion, and envi­ron­men­tal protection.

Free trade agree­ments pro­lif­er­ated, elim­i­nat­ing pro­tec­tion­ist bar­ri­ers that inter­fered with a com­pet­i­tive mar­ket and pro­gres­sively inte­grat­ing national economies into a glob­al­ized free mar­ket econ­omy. Although cor­po­ra­tions, par­tic­u­larly the strongest ones, ben­e­fit­ted from this new envi­ron­ment, coun­tries did not. For exam­ple, Har­vard econ­o­mist Dani Rodrik notes, “Most recent esti­mates put the over­all gains to the United States from a global move to free trade in tenths of 1 per­cent of U.S. gross domes­tic prod­uct.”[5]

3.   No lim­its to growth and wealth accu­mu­la­tion: The rich get richer
At the start of the age of neolib­er­al­ism in 1980, the world con­tained just 12 bil­lion­aires. By 1990 the num­ber had climbed to 99, and by 2000 it was 322. Today the num­ber of bil­lion­aires is 1,011.[6] This expo­nen­tial increase is indica­tive of income inequal­ity trends in the world. World Bank data show that inequal­ity has been increas­ing world­wide. In 2005, the rich­est 10 per­cent in the world received 55 per­cent of the world’s income. In con­trast, the poor­est 50 per­cent got only 6.6 per­cent.[7] Thus, there is no global catch-up for poor coun­tries, and no global equal­ity of oppor­tu­nity. Poor coun­tries will likely remain poor and rich coun­tries will con­tinue to be rich, with wealth con­cen­tra­tion grow­ing faster than poverty reduc­tion.[8]

One Response to The Principles of Capitalism and Their Effects in the World

  1. Avatar of Gary Green Gary Green says:
    November 22, 2011 at 1:07 pm

    I invite read­ers to also read “Good Cap­i­tal­ism Bad Cap­i­tal­ism, and the eco­nom­ics of growth and pros­per­ity” avail­able at the fol­low­ing URL: http://www.acton.org/pub/religion-liberty/volume-17-number-4/good-capitalism-bad-capitalism-and-economics-growt

    Another good source of infor­ma­tion on the sub­ject of cap­i­tal­ism and social­ism is a video pre­sen­ta­tion enti­tled Rev. Robert A. Sirico on Social­ism and Social Jus­tice, avail­able for view­ing online at: http://vodpod.com/watch/3357265-rev-robert-a-sirico-on-socialism-and-social-justice

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