Why it's time to defend capitalism

OPINION: It may be a dirty word in the Corbyn era, but capitalism has proven to be the best antidote to poverty, argues historian Rainer Zitelmann.

by Rainer Zitelmann
Last Updated: 25 Feb 2019

In August 2015, Jeremy Corbyn wrote the following on his website: "In a sense history is being played out to its fullest extent in Venezuela, where the Bolivarian revolution is in full swing and is providing inspiration across a whole continent… and Venezuela is seriously conquering poverty by emphatically rejecting the neoliberal policies of the world’s financial institutions. Success for radical policies in Venezuela is being achieved by providing for the poorest, liberating resources, but above all by popular education and involvement."

Of course, we now know precisely how this experiment of "socialism for the 21st century" ended: The same as every other socialist experiment over the past 100 years – in disaster. Many people have forgotten these failures, 30 years after the collapse of socialism. 

In many Western countries, capitalism has become a dirty word, while socialism is a new attraction. This is even true of the United States, where the Democrats are calling for drastic taxes on the rich (70 per cent) and using sharp anti-capitalist rhetoric.

Above all, anti-capitalists complain about growing inequality. They ignore the fact that no other era in human history has seen so many people escape poverty in such a short time as over the past 30 years. 

One example is China: In 1981, as many as 88 per cent of the population were living in extreme poverty. Today, the figure is just 1 per cent. There is only one reason for this extreme decline in China’s poverty rate: continuous reductions in state influence over the economy (although it remains comparatively very strong).

The Chinese allowed private ownership and dramatically expanded market freedoms. Inequality has risen. No other country in the world has created as many new billionaires every month as China. This shows, however, that anti-capitalists are wrong when they claim that capitalism is a "zero-sum game" in which the rich only obtain their wealth at the expense of the poor.

Capitalist globalisation has led to a global reduction in poverty, not only in China. In the 1960s, South Korea was one of the poorest countries in the world. It embraced capitalism and now has a thriving economy; North Korea remains poor.

The situation is different in Venezuela. In 1970, the country was among the world’s 20 richest countries. When Hugo Chavéz came to power in 1999, Venezuela was regarded by many left-wing intellectuals and politicians in Western countries as a role model in the fight against poverty and capitalism. 

Then everything went downhill: Since the mid-1970s, the economy has been repeatedly weakened by ever more stringent labour market regulations. Venezuela has seen 20 years of socialist experiments cause hunger and poverty, and millions of people have now fled the country.

A comparison of the development of Chile and Venezuela in recent decades clearly demonstrates the superiority of capitalism. Chile is the most capitalist country in Latin America. It’s also the country in which people’s lives have improved the most.

Anti-capitalists argue that they never aimed for a regime like Venezuela, Cuba or even North Korea, they wanted "democratic socialism." But the kind of "democratic socialism" which fills the dreams of left-wing Democrats in the USA or the supporters of Jeremy Corbyn in Great Britain has also failed – only people have forgotten.

"Democratic socialism" existed in Great Britain and Sweden in the 1970s: With extremely high taxes on the richest members of society and economies under strong state influence. 

In both countries, this experiment with "democratic socialism" ended in economic disaster. Only once capitalist reforms had been implemented were Britain and Sweden able to get back on the path to prosperity and growth. Sweden has long since ceased to be a socialist country: in the Heritage Foundation's Index of Economic Freedom, Sweden is now one of the 20 most capitalist countries in the world.

Over the past 100 years, all real-world experiments have consistently produced similar outcomes – overwhelming evidence pointing to the conclusion that more capitalism means greater prosperity. However, as the German philosopher Georg Wilhelm Friedrich Hegel said: "What experience and history teach is this – that peoples and governments never have learned anything from history, or acted on principles deduced from it". 

Rainer Zitelmann, historian and sociologist, is the author of the recently published The Power of Capitalism. The table of contents and extracts from the book are available here.

Image credit: Public Domain Pictures/Pexels


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