the myth that capitalism only rewards the rich _ swarajya

7/1/2015 TheMythThatCapitalismOnlyRewardsTheRich|Swarajya

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The idea that capitalism goes hand in hand with social marginalisation does not fitreality

Capitalism is a great system for filling the pockets of the already rich. Butthis prosperity comes at the expense of common people, who struggle hard toafford basic services such as health care in the unforgiving market system. Thisis a common critique against economic freedom. During the19th and 20thcentury leftist intellectuals would still argue that socialism and state planningcould create greater prosperity than markets. Realityproved these ideas wrong big time. It is today quite evident, even for those who would ideologically wishotherwise, that free markets are best at fostering innovation and growth. So thecritique against markets has changed. Today it is more along the line: well, yes,capitalism creates prosperity, but only for a small handful. If you are an ordinaryguy who wants to live a long and healthy life, avoid capitalist countries whichare all about the survival of the fittest. However, even this theory struggles inthe face of reality.

To find out if markets really translate to poor social outcomes, lets look at theUnited Kingdom. According to the Index of Economic Freedom, thecountry hasthe 13th freest economy in the world. Since the UK is amongst the more marketoriented countries we should expect assuming the socialist critique to be true that the country has appalling levels of human progress. To test this theory,we can turn to the Human Development Index. This United Nations project hasfor long examined how good countries fare in terms of equality, educationalopportunities, health and other welfare measures. A quick glance at the latestdata shows that the UK is a country with a high rate of human development moreprecisely ranked at 14th place internationally. This means that the UK is aplace where the great majority live long and prosperous lives, with widespreadaccess to health, education and social services. Good social outcomes andcapitalism is, at the very least, not an impossible mix.

Perhaps this is not surprising, since the UK combines free markets with arelatively large welfare state. Places which have a higher economic freedomranking that the UK tend to have much slimmer welfare states. What happens ifwe instead of the UK look at the 5 most capitalist places on the planet?

The Myth That CapitalismOnly Rewards The Rich



Economic Freedom

Index*HDI Rank**

Life expectancy at

birth (2013)**

Inequality in life

expectancy**

Hong Kong 1 15 83.4 2.8

Singapore 2 9 82.3 2.8

New Zealand 3 7 81.1 4.8

Australia 4 2 82.5 4.2

Switzerland 5 3 82.6 3.9

United Kingdom 13 14 80.5 4.5

According to the Index of Economic Freedom four former UK colonies are themost market oriented places in the world, namely: Hong Kong, Singapore, NewZealand and Australia. In fifth place comes Switzerland. These free-marketMeccas have low levels of taxation and correspondingly limited frame of publicservices offered to citizens. Of course, societies with small welfare services canill afford generous social security and other social goods such as universalhealth care. Surely the most capitalist places on the planet fit the leftistcritique, having systems that rewards the rich and the rich only?

The Human Development Index is all about the welfare opportunities for ordinarypeople. It is therefore telling that the 5 most capitalist places in the world havegood rankings in this global welfare index. Australia has the second highestranking in the human development index (after oil-richNorway). CapitalistSwitzerland ranks at an impressive global 3rd place. Also New Zealand (7thranking) and Singapore (9th) outpace the UK. Hong Kong ranks only one spot(15th) below the UK. On the other hand, super-capitalist Hong Kong has thehighest life expectancy at birth in this group (an impressive 83.4 years, secondonly to Japan globally). As shown in the comparison below, the UK has a lowerlife expectancy than all of the 5 most capitalist places in the world. Stunningly,even the inequality in life expectancy is lower in Hong Kong, Singapore,Switzerland and Australia than the UK. New Zealand has only a slightly higherrate than the UK.

Sources: *Index of Economic Freedom; *Human Development Index. In all cases thelatest available data is given.



Human Development Index** Economic Freedom Score*

1 Norway 27

2 Australia 4

3 Switzerland 5

4 Netherlands 17

5 United States 12

6 Germany 16

7 New Zealand 3

8 Canada 6

9 Singapore 2

10 Denmark 11

Human Development Index** Economic Freedom Score*

187 Niger 127

Clearly, the idea that capitalism goes hand in hand with social marginalization doesntreally fit reality. To further illustrate this point, lets look at the 10 countries with thehighest Human Development ranking

10 countries with highest Human Development Score


As shown above, all of these countries share a common feature they are amongstthe most market oriented places in the world.

And if we look at the 10 countries with the lowest Human Development ranking?

10 countries with lowest Human Development Score



186 Congo 168

185 Central African Republic 166

184 Chad 165

183 Sierra Leone 147

182 Eritrea 174

181 Burkina Faso 102

180 Burundi 132

179 Guinea 144

178 Mozambique 125


Again the pattern is clear: all of them share a common feature they are amongst theleast capitalist countries in the world. To sum up, the myth as capitalism as a systemthat rewards the rich, and the rich only, lives on in a world where the least capitalistcountries struggle with very low human welfare, and the most capitalist countriescombine prosperity with good social outcomes.

This piece was first published on www.capx.coon June 21, 2015, and has beenreproduced here with permission.

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