Friday, January 23, 2009

Is Capitalism Good Or Bad?

Is capitalism good or bad?

How about the globalization movement, which is a child and catalyst of global capitalism?

Is capitalism actually a modern manifestation of colonialism?

What other alternatives do we have? What would an absence of capitalism do to the world, especially the less-developed countries (LDC)?

These questions arose after reading "Confessions of an Economic Hitman" by John Perkins. It surely is not an easy question. Strong arguments have been offered in support of capitalism, and strong arguments have been offered in support of its alternatives, such as socialism, communism, etc. Although I have been working in the business world, effectively supporting capitalism whether I like it or not --or realize it or not--, I have not really seriously thought of the benefits and consequences of global capitalism. So, I'm going to jot down some thoughts on this issue...

Supporters of capitalism claim that it is a powerful tool to develop the world's economies and uphold freedom. There are many truths to this assertion. Capitalism enables resources around the world to move around to where it's needed, and consequently enables development. For example, Indonesia has many natural resources but lacks technology and money. So western techonology and money pours into Indonesia through corporations, NGOs and governmental entities. The resulting development benefits everybody: the country, as well as the investors.

In a way, Capitalism is a manifestation of individual freedom, because Capitalism is egalitarian, much more so than colonialism. This means that anybody can make it in the business world, as long as one works hard, works smart, and possessing luck / favorable circumstances wouldn't hurt. In contrast, the benefit of colonialism mainly goes to the colonialists, which are members of a particular nation. Discrimination is a natural part of colonialism. In addition, property ownership is a major part of individual freedom. Capitalism respects one's right to own properties, while the opposite is true with colonialism, socialism and communism where properties either belong to the colonialists, the community, or the government.

People who opposes capitalism argues that it is a new form of colonialism and slavery. Capitalism provides legitimacy for a group of people with superior resources -namely, money and technology- to "rule over" other people with inferior means. I would say that this is really relative. Let's say a sweatshop in Indonesia pays its labors $0.50/hour or $1,000/year. An American may think that's a very low wage. But Indonesians may think that it's much better than farming or working as a domestic maid.

Some people also think that disproportionate benefits of capitalism go to a small group of people, namely the capital owners. Many LDC citizens believe that foreign corporations get most the benefits from exploiting their country's natural resources. I think this is where government of LDC's holds an important role: they need to negotiate favorable and fair terms with investors (where everybody wins), while at the same time wisely distributing and allocating capitals in a way that maximizes the country's economic development. The most difficult hurdle in this case is that corruption in LDC governments is rampant.

Capitalism not perfect, but I would argue that it is better compared to the least favorable alternatives. Take it into perspectives, the world we live in is not perfect; it's full of greed and selfishness. And these values are inherent in capitalism. The homo economicus which is really a fancy term for greed and selfishness is really the basic premise on which capitalism operates. Here's another gentle reminder that in this imperfect world, we just have to live with imperfect means.


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