The number of poor people who can't afford food for their children is a lot smaller than it used to be -- thanks to capitalism. Capitalism didn't create malnutrition, it reduced it. The globalization of capitalism from 1950 to the present has increased annual average income in the world to $7,000 from $2,000. Contrary to popular legend, poor countries grew at about the same rate as the rich ones. This growth gave us the greatest mass exit from poverty in world history.
The parts of the world that are still poor are suffering from too little capitalism. Foreign direct investment in Africa today, although rising, amounts to only 1% of global flows. That's because the environment for private business in Africa is still hostile. There are some industry and country success stories in Africa, but not enough.
Contrary to those claims that capitalism only favors the rich and that capitalists are in competition with the poor, profits are of immense help to the poor, whether or not they directly receive it. Here are ten reasons:
1. Employment. Profit equals investment which equals employment. The paychecks that employees get are a slice of the gross profits that any business makes. The best way to overcome poverty is to work.
2. Education. The best way to get work is to be educated. The poor can’t pay for it, so others do, out of their profits, and provide it free of charge to the poor.
3. Health. Miraculous medical advances and drugs come from profitable companies in capitalist nations, but the poor of the world benefit. AIDS drugs for Africa, for example. Hospitals in America will treat, free of charge, any person showing up at the emergency room, regardless of ability to pay. But someone pays, and that is someone who has made a profit and has the available funds.
4. Taxes. The rich pay the bulk of the taxes. A lot of those taxes are spent on the poor. Even the unemployed poor benefit from profits, because the more profitable a nation is the more gross tax revenue it can generate. For the poor who truly need some help from the system, some of those taxes provide valuable assistance such as food stamps and rent subsidies.
5. Philanthropy. Programs that do "social good", whether it is the food bank, library, charity hospital or providing playground equipment, cannot exist without profits. Those who truly cannot help themselves need – and receive – the help of those who earn a profit. Fund-raising for charitable causes, or even for the local T-Ball team, is generally done by approaching businesses, and those that are profitable are the ones who are able to help out.
6. Innovation. The pursuit of profit drives the improvement of the production and distribution process and the products themselves to the point where even the poor have things like television and washers and dryers as everyday items. It is the profit motive that "sees" that if only a product can be produced at a certain price point, market share can be gained. Wal-Mart became the biggest retailer in the world by focusing on making products as available and inexpensive as possible but did so in order to secure a profit.
7. Economic Growth. Profits grow the economic pie, so that we all share. The poor in America today live a better life than the poor in most nations and certainly more so than the poor in America a hundred years ago. In a profit driven economy there is no such thing as a static group of “the rich” and “the poor.” Economic growth offers more solutions than does economic redistribution.
8. Legal Protection. Having the right to an attorney and a jury of your peers is of no use unless the attorney, the police and the justice system can be provided at someone’s expense. Poor people don’t pay for the other poor person’s lawyer.
9. Upward Mobility. Without profits, no one moves up. Many of America’s rich were once poor immigrants who came here solely because profit was not possible, or as possible, where they were born.
10. Freedom. Profit can only come from freedom - the freedom to act on your dreams and to sell your labor, your services and your ideas on the open market. The poorest people in the world live in nations which offer the least freedom.
via the Illinois Policy Institute
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