13 October 2014

Capitalism and low taxes are very popular – in emerging and developing countries


Ed Miliband, leader of the UK Labour Party, is attacking the “predator” businesses of capitalism. Banks are competing with big oil companies to be public enemy number one. The shelves of trendy bookstores from London to LA are groaning under the weight of anti-capitalist tracts. Unions, environmentalists and right-wing populists are all complaining that globalisation has been bad for workers, for the planet and for traditional communities. Times are tough for capitalism. Or are they? If we look beyond the shores of the advanced western nations – with their debts, large welfare systems and unionised public sectors – we actually find that global confidence in capitalism is high and, if anything, it is rising.

The US-based Pew Research Center has just completed a massive international survey. Nearly 50,000 people were questioned in 44 advanced, emerging and developing countries and the survey found that a clear majority of the world wants more capitalism even if it leads to inequality. The world appears to believe that lower taxes are more likely to produce what people want than higher taxes. The world’s peoples are more concerned about unemployment and inflation than the gap between the rich and poor. And guess where optimism in capitalism is highest? In the “Socialist Republic of Vietnam”. Capitalism may be under fire in the advanced countries (countries that might be better called large state countries) but in notionally communist nations, notably China, and in poorer nations throughout Asia and Africa there is growing belief in the power of free markets.

And why wouldn’t there be? These are tough times in North America, Europe, Japan and other mature economies but these are the greatest of times for the world as a whole. Poverty rates are tumbling. Life expectancies are rising. Labour-saving devices are spreading across the world, freeing women from back-breaking labour and children from household or farmstead toils that prevent them from getting a frontier-expanding education. The entrepreneur and philanthropist Bill Gates has written about this momentous time in global history:

“The global picture of poverty has been completely redrawn in my lifetime. Per-person incomes in Turkey and Chile are where the United States level was in 1960. Malaysia is nearly there, as is Gabon… Since 1960, China’s real income per person has gone up eightfold. India’s has quadrupled, Brazil’s has almost quintupled, and the small country of Botswana, with shrewd management of its mineral resources, has seen a thirty-fold increase.”

 And Gates is exactly the right person to celebrate this happy transformation. Gates is the most admired person in the world according to another global opinion survey, by YouGov for The Times, that was published at the start of this year. He’s more popular than the politicians Barack Obama (2nd placed) and Vladimir Putin (3rd), the religious leader Pope Francis (4th) and the sportsman Sachin Tendulkar (5th). Perhaps business isn’t so unpopular, after all, especially when combined with the philanthropy that Mr Gates’ entrepreneurialism made possible?

Vietnam is the country most in love with capitalism. A whopping 95% believe that “most people are better off in a free market economy, even though some people are rich and some are poor”. Bangladesh, then China, then Ghana and Nigeria are next most positive. You have to go to Europe to find pessimism. Greece and Spain are much more anti-free market than any African nation, for example. 50% of Greeks and 51% of Spaniards disagree with the idea that most people are better off under free markets and pessimism does seem to be gripping large parts of the developed world. While parents in emerging markets are twice as likely to think their children will be better off than worse off, a large majority of people in advanced nations expect bleak futures for their own offspring. 86% of the French expect their children to be poorer than themselves. In Vietnam it’s the reverse. 94% expect future generations to be more prosperous.

If Europe wants to know why it’s in such trouble it might be wise to wonder if other factors than the market economy are to blame. The German Chancellor Angela Merkel has famously noted that “Europe accounts for just over 7% of the world’s population, 25% of its economy, and 50% of global social welfare spending.” Europe spends too much of its taxes on welfare rather than prosperity-enriching infrastructure. Its great political projects, notably the one-size-doesn’t-fit-all Eurozone, mean that it rather than the more red-blooded Anglosphere capitalist economies are still in the economic doldrums. Its environmental policies are saddling its manufacturing industries with uncompetitive energy costs. And then there’s the problem of family breakdown. Weak family structures are powering the growth in the western welfare state. It’s expensive to put so many children into state-financed childcare and elderly people into taxpayer-financed homes. If the advanced economies had the family networks of the developing world they might be more resilient.

Pew is among those western authorities that seem to have overlooked the power of family ties in its otherwise fascinating and insightful survey. Like President Obama in the design of his social policies, Pew is obsessed with the question of inequality in its design of its global questionnaire – even though the evidence suggests that it is deficits in parenting and other forms of social capital that most explain social immobility. The rising Tory star and government minister Sajid Javid can certainly testify to this power. He didn’t have much material wealth but he had a mother and father who worked hard and gave him and his brothers everything. We overlook social capital partly because it’s much harder to measure than economic capital but also because too many western politicians don’t like to make value judgments about which family types are strongest. Pew asked lots of questions about the importance of education, hard work, luck, bribes, gender and connections to “getting ahead”. Although they also wondered if membership of “wealthy families” helped explain success in life there was no focus on the general importance of strong, resilient families for economic and social resilience. Sajid Javid, the Tories’ fastest rising star and a man who made millions in banking, could tell them that they may be missing one of the biggest reasons why the advanced nations are losing faith in the possibility of a better tomorrow.

Tim Montgomerie is a leader writer for the The Times and founder of ConservativeHome.