Posts tagged with: capital

Blog author: jsunde
Monday, October 13, 2014
By

capterrorismThe Middle East is enduring yet another wave of terror and political change, spurring countless Western analysts and elites to offer their preferred strategies and solutions, most of which involve military force, foreign aid, or some mixture of the two.

In last weekend’s Wall Street Journal, Peruvian economist Hernando De Soto sets forth a less predictable path, arguing for “an aggressive agenda for economic empowerment,” similar to that which was promoted in Peru during the 1990s.

I know something about this. A generation ago, much of Latin America was in turmoil. By 1990, a Marxist-Leninist terrorist organization called Sendero Luminoso, or Shining Path, had seized control of most of my home country, Peru, where I served as the president’s principal adviser. Fashionable opinion held that the people rebelling were the impoverished or underemployed wage slaves of Latin America, that capitalism couldn’t work outside the West and that Latin cultures didn’t really understand market economics.

The conventional wisdom proved to be wrong, however. Reforms in Peru gave indigenous entrepreneurs and farmers control over their assets and a new, more accessible legal framework in which to run businesses, make contracts and borrow—spurring an unprecedented rise in living standards… Over the next two decades, Peru’s gross national product per capita grew twice as fast as the average in the rest of Latin America, with its middle class growing four times faster.

(more…)

What are the barriers that prevent the poor from moving into the middle class? One surprising answer, says Megan McArdle, is an excess of social capital.

In the video below, McArdle explains why understanding how social and financial capital function in low-income communities can help us be more effective in helping then poor.

Conference: “Global Commodities: The Material Culture of Early Modern Connections, 1400-1800″

Global History and Culture Centre – University of Warwick – 12-14 December 2012. This International conference held at the Global History and Culture Centre of the University of Warwick seeks to explore how our understanding of early modern global connections changes if we consider the role material culture played in shaping such connections. In what ways did material objects participate in the development of the multiple processes often referred to as ‘globalisation’? How did objects contribute to the construction of such notions as hybridism and cosmopolitanism? What was their role in trade and migration, gifts and diplomacy, encounters and conflict? What kind of geographies did they create in the early modern world? What was their cultural value vis-à-vis their economic value? In short, this conference seeks to explore the ways in which commodities and connections intersected in the early modern world.

(more…)

I can always find common ground with the Distributists I meet. We want to replace the government-corporate cronyism that characterizes so much of our current economic system. And we want our culture to raise up young people with the skills, virtues and freedom to accumulate productive capital and invest it in ways that promote human flourishing for themselves and others.

But then there’s the question of centralized political power in the economy. Sometimes when Distributism is described, you get the sense that Distributism and one of its leading early proponents, Hilaire Belloc, have always been committed to a largely grass roots, bottom-up strategy of change. But Belloc himself painted a different picture in An Essay on the Restoration of Property:

We must seek political and economic reforms which shall tend to distribute property more and more widely until the owners of sufficient Means of Production (land or capital or both) are numerous enough to determine the character of society…. The effort at restoring property will certainly fail if it is hampered by a superstition against the use of force as the handmaid of Justice. (P.29)

So when I have a conversation with Distributists, the first thing I like to clear up is what they mean by Distributism. Do they merely want people and companies to model best-Distributist practices voluntarily, so as to propagate Distributist ideas and behaviors in a free marketplace of ideas? Do they just want to get the federal government out of the job of picking winners and losers in the economy? Or do they also want to vote in politicians who will arrogate to the federal government expanded powers to seize and redistribute private property and keep it more evenly distributed?

Until those questions are cleared up, the opportunities for muddle and fog are just too great to bother wading in.

Hilaire Belloc, An Essay on the Restoration of Property, (Norfolk, Virginia: IHS Press, 2002).

Earlier this week on the Acton Institute Facebook page, Rev. Sirico’s archived article “What is Capitalism?” was posted and sparked a lively discussion between two people (click here to see our Facebook page and the discussion). This blog post is to serve as my response.

Your idea of communionism, at least from what I understand from your comments, bears some resemblances to communism which has the end goal of society or the community possessing property in common. This, however, doesn’t preserve human dignity properly; nor does not foster interdependence among people. Instead it creates a society dependent on a centralized government.

In his Summa Theologica, Thomas Aquinas explains some of the core the problems with common property. Like Aristotle, he notes, that individuals are better managers of property because it allows for a more orderly fashion of management, and as he states “human beings content with their own property live in a condition of peace. And so we observe that quarrels arise rather frequently among those who possess goods in common not individually.” The quarrels can arise because no individual is specifically responsible for the care of the common property. There is no person who feels like he or she has stake in the property. A direct result, and historical example, of common property is the tragedy of the commons.

In Capital Marx argues that there is no value in human labor per se. He states “human labour, creates value, but is not itself value. It becomes value only in its congealed state, when embodied in the form of some object.” This is contrary to Christian beliefs. There is intrinsic value in human labor itself. To work is a calling and a form of stewardship. In the encyclical Laborem Exercens, (“On Human Work”), Pope John Paul II explains how working is a direct expression of our human dignity. Such preservation of human dignity cannot be found in a system that devalues work.

The idea of property that you advocate is also found in Marx’s Capital and the Manifesto of the Communist Party. This idea is flawed on many levels. It doesn’t take into account that the entrepreneur purchases the raw goods that the workers use to make the end product. As a result, based on any definition of property, the entrepreneur is the sole owner of the raw goods and it is his or her private property, not the worker. The worker engages in a contract with the entrepreneur in an exchange of services. Just because the worker uses his or her services, which he or she is paid for by the entrepreneur, does not translate into the worker becoming the owner of the raw good which becomes the final product.

The idea of private property that you advocate, rescinding property rights for all corporations, is dangerous on many levels. It puts political rights, religious rights, and all private property rights in danger. Marx notes that the abolition of private property for the bourgeois leads to the abolition of family because, according to his argument, the family is rooted in property and private gain. Furthermore, Marx articulates that his beliefs, which bring forth a communist centralized system, also abolish religion.

In Federalist Paper No. 10 James Madison argues how the first object of any government is the protection of property. Furthermore, in Democracy in America Alexis de Tocqueville explains that what makes America successful is its protection of private property for all. No landed property class exists. He articulates how the protection of private property translates into the protection of political rights even to the least of all citizens. Furthermore the right to property fosters “…obedience to established law, of the influence of good mores in republics, and of the assistance that religious ideas lend to order and freedom…” What makes America special and successful, according to Tocqueville, is the protection of rights for all people. As Tocqueville demonstrates, the right of property needs to be protected because other rights stem from it. This right extends to even corporations. Rights should be guaranteed for all, not winners and losers picked by the government.

Again, private property should be protected at all levels, for both individuals and corporations. Hernando de Soto explains this in his book and in an essay both titled, The Mystery of Capital. Through examples found in his essay, book, and case studies (which can be found by clicking here), de Soto effectively argues using proven facts, statistics, and real world examples that the protection of capital and private property rights has led to economic prosperity in the west, whereas the lack of protection is a leading reason to the economic disparity in poor countries. If we fail to protect private property rights on all levels, then we begin down a path of economic decline. Without the protection of private property rights, and an effective legal structure to guarantee such protection, the wrong message is being sent to businesses. No business will want to invest in an economic climate that is hostile towards them.

A market system, which is what Rev. Sirico argues for in his article “What is Capitalism?” actually fosters virtues that all Christians value. This is articulated by Stephen Grabil in his essay “The Market, School of Virtue.” Here Grabil shows that greed is not what makes a free market churning, but instead it is virtue. Some of the virtues fostered in a free market are trustworthiness, self-control, sympathy, and fairness. Jay Richards, author of Money, Greed, and God: Why Capitalism Is the Solution and Not the Problem, demonstrates that greed is a vice which even Adam Smith condemned. Richards also shows why greed does not lead to a successful market economy, but actually destroys it.

In regards to the referenced Fulton Sheen article titled “New Slavery” it is important to note that the article was written in 1943 when many monopolies were present in the market. Acton has never believed in or supported crony capitalism. Monopolies do not allow competition which is bad for the consumer and the worker. Also, Sheen does not advocate for the end of private property in his article. Instead he says we have a right to private property and our use of it should be righteous “Possession [of property] has two faces, two aspects: we all have a right to private property, but this is accompanied by our responsibility for its righteous use.” As Sirico articulates in the posted article, when the market is structured successfully it is the consumer who has primary control and then next is the worker. This is because of competition. Monopoly capitalism comes when the government gets into bed with businesses, and essentially block new entrepreneurs and potential new competitors from entering into the market.

Free markets are not just about an economic system. It is something greater than economics, it is about freedom. The freedom to choose what to purchase, the freedom for the worker to find an employer and not be forced into employment with the state or a monopoly, and the freedom to hold property and have it protected, this freedom is what capitalism is about. Tocqueville saw this in his visit to America and correctly articulated how the protection of private property, in all levels, has led to the great freedom Americans enjoy. However, Tocqueville also recognized the need for virtuous men and women because he knew America cannot succeed, nor its structure of government without them. As he states, “There are no great men without virtue; without respect for rights, there is no great people: one can almost say that there is no society; for what is a union of rational and intelligent being among whom force is the sole bond?”

Last month the World Bank published a report titled, “Where is the Wealth of Nations?” (HT: From the Heartland). The report

describes estimates of wealth and its components for nearly 120 countries. The book has four sections. The first part introduces the wealth estimates and highlights the level and composition of wealth across countries. The second part analyzes changes in wealth and their implications for economic policy. The third part deepens the analysis by considering the importance of human and institutional capital, and by linking wealth to production. The fourth part reviews existing applications of resource and environmental accounting in developed and developing countries.

Also out recently is an index of the most globalized nations by Foreign Policy (HT: International Civic Engagement). The top ten, based on 2005 data, which claims to “measure countries on their economic, personal, technological, and political integration”:

  1. Singapore (252,607)
  2. Hong Kong (NR)
  3. Netherlands (421,389)
  4. Switzerland (648,241)
  5. Ireland (330,490)
  6. Denmark (575,138)
  7. United States (512,612)
  8. Canada (324,979)
  9. Jordan (31,546)
  10. Estonia (66,769)

In parenthesis after the name of the country in the top ten, I’ve placed the total wealth estimate for the year 2000 from the World Bank report (appendix 2 PDF).

Look at Estonia, for example. Even though its total wealth score is much smaller relative to other nations on the globalization list, the majority of its wealth score (41,802) in the World Bank report is garnered from “intangible capital,” which refers to, as the From the Heartland blogger put it, “the value of the nation’s economic and political institutions,” such as the rule of law. And now compare Estonia with the Republic of Congo, which has almost the same ratings in terms of tangible capital as Estonia, but whose -12,158 intangible capital rating keeps its total wealth score disturbingly low (3,516).

Clearly it isn’t the case that countries that only have rich natural resources have something to offer the international marketplace. Strong and responsible economic and political institutions can foster intellectual creativity, technological innovation, and social capital that more than makes up for deficits in natural resources.

Blog author: jspalink
Wednesday, June 20, 2007
By

As developing countries turn increasingly to private capital markets, the World Bank is facing not only a steep decline in demand for its loans but a crisis of relevancy. Sam Gregg looks at the changing market and how the rules of private lending might also provide a better check on corruption in the developing world. Adieu, World Bank?

Read the complete commentary here.