Capitalism Doesn't Work?
Bill Gates, bloviating at the World Economic Forum in Davos, Switzerland, is issuing a clarion call for a "kinder capitalism" to aid the world's poor. Mr. Gates says he has grown impatient with the shortcomings of capitalism. He thinks it's failing much of the world. This, of course, from a guy who's worth around $35 billion, give or take a billion.
Don't you just love it?
A guy without a college degree who invented a new technology process in his garage that literally changed the entire world, a guy who took advantage of all the great opportunities that a free and capitalist society has to offer and got filthy rich in the process, is now trashing capitalism and telling us it doesn't work. What chutzpah.
For all his do-good preaching, Mr. Gates is ignoring the global spread of free-market capitalism that has successfully lifted hundreds of millions of people out of poverty and into the middle class over the last decade. Think China. Think India. Think Eastern Europe. (Maybe even think France under Sarkozy.) Mr. Gates wants business leaders to dedicate more time to fighting poverty. But the reality is that economic freedom is the best path to prosperity. Period.
The latest stats out of China are revealing. Here's a country that was a basket case not so long ago and today is the world's fourth largest economy — hot on the heels of Germany, the third largest economy. China just reported 11.2% fourth-quarter GDP, its fastest growth rate in 13 years. Total output for China is now 24.7 trillion yuan, or $3.42 trillion at current exchange rates.
At $14 trillion, the U.S. economy is still four times the size of China's. But we've had free-market capitalism for more than 300 years. China's only had it for about 15. China is still an undemocratic, authoritarian, and repressive society that lacks the benefits of political freedom. But it was the late Milton Friedman who argued that the onset of free-market capitalism was the precursor to full-fledged democratic capitalism. China's on the right track.
Mr. Gates says he has witnessed steep income and cultural inequities in his travels around the world, in particular to Africa. But for this he should blame the absence of capitalist principles, not capitalism itself.
Even the most compassionate corporate executives are not going to bring prosperity to impoverished countries with statist economies. Until Africa's nations undertake the market-oriented reforms that have boosted China and the other Asian Tigers — like South Korea and Taiwan — they will continue to rank at the bottom of the world prosperity scale.
The Heritage Foundation/Wall Street Journal 2008 Index of Economic Freedom reveals how free-market economics is spreading like wildfire while state-run socialism is on the decline. And it's no wonder why.
The free-market countries are prospering mightily while the least-free economies are mired in poverty. We're talking North Korea, Cuba, Zimbabwe, and Iran. Also noteworthy is Venezuela. As the neosocialist Hugo Chavez attempts to adopt Fidel Castro's failed economic model, he's sinking his nation toward Cuba-type poverty.
Economist Mark Perry, on his Carpe Diem blog site, reports that both the U.S. share of world GDP and its global stock market capitalization are shrinking. But this isn't a bad thing at all. It doesn't mean that America is heading downwards. On the contrary, it means that newly freed economies are heading up.
The reality here is that the rising tide of global capitalism is lifting all boats that employ it. Capitalism works. It's a good thing. It's the key to unlocking a nation's prosperity. In fact, free-market capitalism is the greatest anti-poverty program ever devised by man.
Another billionaire, George Soros, the Davos partygoer who finances nearly every left-wing political-action group on both sides of the Atlantic pond, recently wrote in the Financial Times that the era of capitalism is coming to an end.
Mr. Soros, of course, has been predicting this for at least 20 years — through the greatest world boom in history. And how was it that Mr. Soros made his money? Trading currencies in the technologically advanced world financial markets, the very same markets that were spawned by 20th century free-market capitalism.
So I just have to smile when billionaires like Bill Gates and George Soros turn cold shoulders to the blessings capitalism bestows. Or when their buddy, Warren Buffett, broadcasts the importance of hiking tax rates on successful earners and investors.
Look fellas, the command-and-control, state-run economics experiment was tried. It was called the Soviet Union. If you hadn't noticed, it was a miserable failure.
Mr. Kudlow is host of CNBC's "Kudlow & Company."
