17 januari 2009

The Case for Capitalism

Film by Jacob Lundberg (inspired by Johan Norberg and R.J. Rummel)

In the next few minutes I will show you that there is every reason to be optimistic about the state of the world. The good old days are now.

Source: Angus Maddison

To begin with, world GDP per capita has quintupled over the last 100 years. The highest percentage growth occured in the 60s during the post-war boom. And in the beginning of the 21st century.

Source: Economic Freedom of the World 2008, p. 13

This is a result of slow but steady capitalist reforms in almost every country in the world. Over the last quarter-century, taxes and tariffs have been lowered, welfare states reformed, property rights established and regulations removed.

From Economic Freedom of the World 2008, p. 18

The correlation between capitalism and prosperity is clear. Countries with the highest economic freedom are also the richest. The poorest nations have the least economic freedom.

From Is Capitalism Good for the Poor?

Along with rising average income, poverty is rapidly declining. Right now, more people are leaving poverty than ever before.

Source: Indur Goklany and World Bank

Rich people spend more on healthcare, eat better and have a healthier lifestyle. Life expectancy has risen from about thirty years to almost seventy years since the turn of the century.

Source: Unesco

Fewer and fewer children have to experience what it is like not to be able to read or write. Over just the last thirty-five years, illiteracy has halved.

Source: Freedom House, World Bank, BP. See Excel file

This diagram plots the GDP per capita of the countries of the world with income from oil subtracted. As you can see, democracies can be found throughout the spectrum, while nondemocracies tend to be poor. Disregarding Singapore, it seems that every country richer than fifteen thousand dollars is a democracy.

Source: Freedom House, World Bank, BP, IMF, Angus Maddison. See Excel file

The 20th century was democracy's century. By the end of it, a majority of the world's population could elect their leaders. This is not surprising, given the correlation between richness and democracy we saw in the previous graph.

It is probable that this trend will continue. Using the fifteen-thousand treshold we established earlier and a growth prognosis, this graph shows when the world's remaining dictatorships should become democracies. In fifty years, at least ninety percent of humans will live in democracies. By the end of the century, autocracy should be completely eliminated.

Between 1816 and 1991, the world experienced 353 conflicts with more than a thousand dead. 198 of these were between dictatorships. 155 involved a democracy and a dictatorship. And the number of wars between democracies was – zero, nada, noll. It has never happened. (R.J. Rummel)

This important conclusion means that we can say with confidence that the 21st century will be the last century with war, since the entire world will most likely be democratic by the end of it. And indeed, we have already seen war deaths decrease by two-thirds since the seventies. (Human Security Report 2007)

During the 20th century, at least 86 million people died in famines. 72 million of these lived in unfree countries and colonies. 14 million lived in partly free countries. And you have already guessed it: a famine has never occured in a democracy. A democratically elected leader cannot afford to meddle in food distribution or suppress information about a famine. (R.J. Rummel)

What I have attempted to show you is that it is unrealistic to project anything but the total eradication of extreme poverty, illiteracy, oppression, war and famine during this century.

Economic growth clearly has plenty of desirable effects on human society. And there is more to it. What you will see next is a diagram showing what people in 170 countries answered when asked if they are happy.

Source: Happy Planet Index and IMF

Nobody could doubt that rich people have a high probability of also being happy people.

To summarize: Capitalism leads to economic growth. Growth leads to decreasing poverty and illiteracy and longer life spans as well as more happiness. Rich countries are democracies, and democracies don't wage war on another or experience famines.

All these indicators have improved signifacantly over the years. Mankind has never had it so good.

3 kommentarer:

  1. but jacob, what do u say about the problems when people's expectations are derived from what they see could be... people wanna be like the upper class in society (sociological perspective). Income inequality, although it is true that even the lower classes are improving their utility, is still increasing, and it leads to resentment and comparisons, which make ppl unhappy... That's probably why people yearn for the good old days

  2. Jävlar, du är ju riktigt korkad....

  3. Mayank: Are you basically saying that people get unhappy because they are jealous that others are better off than they are?

    My guess is that a bigger factor would be whether they expect to improve, or are improving. If you are hopeful for the future, you may consider yourself happier than if you weren't making progress. And you probably wouldn't care that someone is better off than you, so long as you were going in that direction.

    ...Which is why it wouldn't surprise me too much if the statistics on happiness turned out differently. It's kind of hard to measure happiness, and people might say all sorts of things for all sorts of reasons when answering an introspective poll. They could answer based on hopefulness for the future, in which case poor countries/new democracies could come out with high happiness percentages.

    Were you saying that the old days had more economic equality? I'm probably misunderstanding. Do you mean that the improvement of lower classes is making them compare themselves more, whereas when they were stuck they didn't think to compare? If so, I think it's more likely that they would be happy at the prospect of improving (unless they had a victim mentality or something).