By John Dashe, Class of 2022
Everyone wants to live in a prosperous and economically just society. For nearly the entire history of our country, most Americans knew this meant capitalism. But no longer, as a 2016 Harvard survey found that a majority of millennials oppose capitalism. And this dramatic shift in perception warrants a defense of capitalism to win over the unconvinced. A common narrative among young people is that capitalism fuels greed, with the rich getting richer at the expense of the poor. Their skepticism is understandable; younger people grew up in the years after the 2008 housing crash and the devastating recession that followed.
While the excesses of economic materialism are indeed an unfortunate reality, socialism is not the solution. And despite its flaws, the power of free trade in reducing poverty is undeniable. The last several decades have seen unprecedented growth in international trade, alongside a huge reduction in poverty. Recent World Bank data shows that in the last 25 years,1.2 billion people have been lifted from poverty. Even better, those living in extreme poverty dropped from 37% to 10%. Recent International Monetary Fund analysts concluded that this growth resulted from reductions in trade barriers across the globe. In other words, capitalism is causing a massive drop in global poverty. There are still countries that, to their detriment, restrict free trade in favor of socialism. One of the best examples is Venezuela, where last year the economy contracted nearly 20% while prices ballooned 800%. In Zimbabwe, massive land reform and subsequent economic disaster caused hyperinflation that forced the country to ditch its own currency in 2009. Both countries have seen huge increases in poverty and declines in quality of life. These countries, and many others, suffer from heavy-handed governments and over-regulated economies. Instead of wealth redistribution and economic justice, citizens get poverty and suffering.
In socialist economies, state-controlled enterprises and over-regulation discourage innovation and growth. Capitalism, thanks to its transactional nature, does the opposite. Free markets require people to be productive, and create opportunities for economic participation. Countries like China, Vietnam, and India are prime examples. All recently opened up their markets, and all experienced rapid economic growth and huge reductions in poverty. In China, the extreme poverty rate dropped from 84% to 10% in thirty years. And in India, the number of people suffering from hunger plummeted 90% since free market reforms in the 1990s. Capitalism does not just reduce poverty, but it provides social benefits as well, as the Cato Institute’s Michael Tanner finds. Literacy rates rise, and people become healthier, with higher life expectancies and lower child mortality rates. Let’s not to mention the transition to green energy, helping sustain our environment for future generations.
Free trade is not just good policy, it also fulfills our moral imperative to serve the poor. Pope Francis writes in his letter Evangelii Gaudium that Christians are called to work towards the “liberation and promotion of the poor, and for enabling them to be fully part of society.” What better way to serve the poor on a larger scale than to uplift them materially and allow them greater economic freedom? Francis writes that Jesus’ command to his disciples, “You yourselves give them something to eat!” (Mark 6:37), means eliminating “structural causes of poverty.” With this in mind, it is evident that removing systemic barriers to free enterprise is the best way to reduce poverty. Looking at the issue both empirically and through the Christian worldview, it is clear that to uplift the poor and promote socioeconomic justice, the world must fully embrace free trade.