Because No One is Perfect – Why We (Should) Love Capitalism – Part 1

When the Cold War ended with the defeat of the Soviet communists, capitalism emerged as the heralding beacon of international political and economic success. Just a few decades down the road however, the frequency of capitalism-related happy dances continuously dwindles. With American approval of the word ‘capitalism’ routinely decreasing in research polls and countries such as Argentina turning toward protectionist policies for development – the validity of capitalism and the integrity of the capitalist economic system come into question. It appears global, and more narrowly American, infatuation with the capitalist economic system is slowly diminishing… and we need to snap out of it.

Despite hardships with the capitalist economic system, there is a reason why, despite all odds, capitalism has persevered for over three hundred years. There is a reason why the majority of Americans can’t help but coin the term as a positive. And there is a reason why capitalism still spreads today. Capitalism is the first shared system of international trade with which every country in the world largely comprehends the terms and can choose to play the economic game. The world sees off millions of exports, purchases an array of goods for import, pays workers for labor, and guarantees very basic rights. We can claim that capitalism increases disparity, which is partially true, but saying capitalism does not increase wealth is an injustice to the accomplishments of the system. Capitalism’s greatest contributions to global growth involve the growing prevalence of economies of scale, increasing need for interdependence, and declining transportation costs. The compounding of these three factors amount to what Hans Rosling showcases in his short video, “200 countries, 200 years, in 4 minutes.” Capitalism, as Rosling illustrates, results in unbridled and unparalleled, universal global development. If you thought capitalism killed Africa, this video will show you otherwise (notice his pauses after the first industrial revolution, post-world-wars, and the great depression).

WARNING: Here comes a brief example of capitalism/segue into containerization

But why is an economy of scale important? Why is interdependence and cheap transportation so life changing? A global phenomenon, which grew out of capitalism and globalization, really helps illustrate why these three factors matter on a broad scale. The phenomenon is known as containerization. It starts catching on with containerships in the 1970s. Small countries around the world like Ghana, Brazil, and Malaysia made products and distributed them regionally due to high transportation costs to ship abroad. Most of the time, imports, manufactured and shipped from far away places, were hard to purchase with the weak, local currency of developing nations. Thus, countries like Ghana made efforts to stay as independent and self-sufficient as possible. When container ships began growing in size in the mid 1970s, all of a sudden, shipping products became vastly cheaper and faster. Where as shipping used to take up large sums of businesses’ budgets, the more containers we managed to squeeze on ships, the more shipping costs decreased. More than lowering shipping and transportation costs, businesses woke up and smelled the coffee. Companies realized that not only were products cheaper to ship, the parts were now cheaper to manufacture abroad, and eventually, it was also cheaper to assemble products abroad as well. This development knocked down numerous barriers to entry for the developing world.

Whereas countries before containerization needed the technology, labor, and resources to design, build, and ship their products, an expensive endeavor, countries post-containerization now specialize in producing a single or few product/s. China could not afford to build a computer from scratch (patents and all) and it, initially, barred them from the high-tech industry. China, with the aid of containerization and lowered transportation costs, built manufacturing facilities to produce just one or two pieces of a laptop, and offered cheap labor for assembly. China’s ability to make large profits without full-scale industry helped them rapidly develop to the manufacturing giant they are today. Without containerization leading to economies of scale, countries such as China, would not experience such rapid growth.

While wealth remains clustered in the West, development is slowly spreading in Africa, Asia, and South America. The containership allows developing countries to daydream, a little more realistically, about the riches of economic success. While computer parts may not bring home as much money as the final computer product, it allows new countries to dive into specialized production, allowing for previously unattainable rates of economic growth as their markets for product sales widen. We can thank capitalism for containerization and many other success-producing phenomena around the world – so it’s time we stopped casting it aside. All hail capitalism – even with its flaws.

In the following parts of this series I will do two broad case studies of capitalism, one in Africa and one in South America, to help illustrate the positive power of capitalism and the fragility of non-capitalist initiatives.

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