I figure I need to write something about the G20 summit in Britain this past week. One cannot listen to news coverage of such a gathering without hearing about the protests that occur at the same time. These protests have generally intrigued me. As you may have guessed, I generally fall on the side of mixed market capitalism as the way to prosperity.
There seems to have been a change in either the way the protests are being conducted, the way in which they’re being policed, or both. There has been a dramatic drop in the violence and destruction associated with these protests. The worst we heard out of the London summit was a few bank windows being smashed. This is pretty minor compared to Genoa in 2001. The estimated number of protesters (always unreliable) has also been falling. This could also be a change in the organization, policing, or both. It could also be there is less to protest about.
The oft cited statistic of those protesting “capitalism” is concerns the unequal distribution of wealth. True enough, those at the extreme upper end of the wealth distribution had done extremely well over the last 20 years, with the gap between the filthy stinking rich and those of us claiming to be middle class growing. There has been an increase in relative poverty. The gap between rich and not so rich in the developed world has grown. There’s no point in debating this, it’s a fact of the data. But a part of me (remembering what my mother always said) wonders why I should care if other people have more, so long as I have what I need (want)?
There is another, more important, statistic. This concerns absolute poverty. Absolute poverty is the number of people for whom simple survival from one day to the next is in doubt. A commonly agreed on definition (at least agreed on by researchers) is trying to live on less than about two dollars (nominal US funds at PPP) a day. This number has been falling pretty steadily. Whole countries are suddenly developing middle classes, where virtually none existed before. This is pretty exciting stuff for an economist. This strange idea called capitalism was actually creating and distributing wealth in a pretty neat way.
Many point to our current troubles as grounds of abandoning capitalism. It’s clear that the previous incarnation of the system had big flaws. We should be, and many are, working to fix them in an intelligent way. But giving up on the only system that has consistently produced wealth for such a large number of people? Ask the newly middle class in Brazil, China, and India if they think this is a good idea.
Next time I’ll try and tackle why of the current talk about protectionism worries me.