What Does The World Think Of Capitalism? by Richard Morrison, Foundation For Economic Education
The public is misled by pop culture
Capitalism seems to have few defenders these days. The laudable desire to sympathize with the poor and distressed has led many to believe there’s less growth and opportunity than there really is, and to overestimate the scale and scope of questionable business practices. A new international poll from the London-based Legatum Institute about public attitudes toward capitalism highlights exactly these problems.
The poll surveyed people in the UK, US, and Germany, as well as in the up-and-coming economies of Brazil, India, Indonesia, and Thailand. Large majorities in both developed and rapidly developing countries believed that, in a capitalist economy, “the rich get richer and the poor get poorer.”
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Yet as Legatum notes, these impressions are “at odds with reality.” Around the world, both the rich and the poor and getting richer, according to analysts from the World Bank and other organizations. We are actually seeing rising incomes, higher literacy rates, and improved health outcomes across the board — and it’s the economic growth generated by a mostly free economy that makes that possible.
Ideological opponents of free markets have been effective at popularizing their views via the political process, but I suspect a more important reason for these negative attitudes is a popular culture in which businessmen are frequently portrayed as villains.
In addition, the continual drumbeat of stories about wage stagnation and income inequality, however concerned one might be about those effects, has managed to convince large numbers of people that the big picture trends of global economic life are upside down.
There’s more trouble when it comes to perceptions of business ethics. Survey respondents were asked whether they agreed with the phrase, “Most of the biggest businesses in the world have dodged taxes, damaged the environment or bought special favors from politicians.” Large majorities, from 65 percent in the United States to 77 percent in Thailand, responded in the affirmative. On the face of it, this seems like an even more daunting attitude to overcome.
But on this question, I wonder what unstated assumptions underlay those responses. Over what timespan are we judging corporate reputation? How severe are the infractions we’re considering?
Suppose one of the “biggest businesses” in the world has been around for over 100 years and operates in 50 different countries. Are we able to give an answer favorable to the business world only if we believe that that company has never dodged any tax, never caused any negative environmental consequences and never engaged in a single instance of cronyism, even once, over the course of a century? If that’s the case, then even I would probably join the majority of respondents — few companies are perfect.
And that’s before getting into the question of whether having “dodged” taxes means illegal tax evasion or perfectly legal tax avoidance. Suppose that a company operates a manufacturing facility that accidentally develops a small fuel leak, but then cleans up the mess. Does that mean they’ve “damaged the environment” for the purposes of the question, or are respondents envisioning massive disasters like the BP Deepwater Horizon explosion?
This might sound like hair-splitting, but it goes to the heart of the question. There is fraud, double-dealing, and generally shady conduct to be found in every area of human endeavor — at nonprofit groups, religious institutions, the military, law enforcement, and civilian government agencies.
The real question is whether business enterprises and the people who run them are largely law-abiding and generally a good force in society. I believe they are, and I suspect I have more company than this poll suggests.
A recent study by my colleagues Fred Smith and Ryan Young also bolsters this positive impression. In “Virtuous Capitalism,” they look at two major sets of reasons why we see fewer instances of cronyism and corruption than economic theory would suggest.
The first category includes practical reasons why lobbying for special favors is more expensive that it, at first, appears — multiple firms chasing the same subsidy, for example. The second set of explanations involve examples of virtuous and cooperative conduct that are counter to the homo economicus caricature of people in business situations. In the real world, people do not always value an additional dollar of profit over their own commitment to fair play, mutual benefit, and community.
The best answer to this mismatch of attitudes and reality is better data. Teachers and professors who specialize in economics need to do a better job of giving context to discussions of poverty. Organizations that focus on civic engagement and political organizing need to do the same.
But we also need better communicators. Artists and writers need to work with business leaders to tell the story of American enterprise in all of its imperfect, yet inspiring, glory. Otherwise, it’ll be more bad news next year.