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The Secret Stories Blog

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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Integrate or Die

Gone are the days of structural adjustment, the International Monetary Fund, and the heralding power of the West. Rather, emerging more and more, are the financial loan blunders of the developed, defaulted debt of the developing, and the catchall scapegoat of globalization. Where developing countries of the 1970s and 1980s were told by the IMF to chose a crop and plant it plantation style, countries today are told to manufacture – anything, everything – in the hopes of striking it rich. Moreover, the person telling developing countries how to make their money in the 70s and 80s was the IMF, our now largely irrelevant, conservative moneylender. Advice today comes from transnational companies we bash as greedy, profit mongers but not-so-secretly reward with tax breaks and incentives.

Our trend toward industrial rather than agricultural development relies heavily on the economic influence of globalization. More narrowly, countries today, without the division of communism and capitalism, are forcibly thrown into a capitalist open-market system by an all-too-pushy invisible hand. Developing countries today are engaging blindly in laissez-faire economic practices like gladiators who were thrown blindly into the coliseum thousands of years ago. Very few make it, trampling over others to stay alive. Several other countries are killed in the ring, swallowing debt and pride to avoid starvation and collapse. Countries fight in the international arena because the price of “economic independence” is frightening and, in modern times, nearly unheard of. To be isolated from the international global economy is to be disadvantaged – integrate or die.

The current capitalist economic system creates the world in which we live in and this blog is concerned with the general effects of our current economic system on individual country development, domestic and international relations, and widespread global changes. We need to evaluate the impacts of our present and future actions not to save ourselves, but to understand ourselves.

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