David Clement: Pope should back down on anti-capitalism

The idea that global capitalism has failed us is objectively false, as is the warning that economic gains have been unevenly shared.

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According to Pope Francis, global capitalism has failed the world. In his last encyclical, “Fratelli Tutti” (All Brothers), he writes that “neoliberalism reproduces itself simply by resorting to the magical theories of” overflow “or” trickle down “. According to His Holiness, capitalism is a “perverse” global economic system that constantly keeps the poor on the margins while enriching the few. The Pope may be the Vicar of Christ on Earth for Catholics, but he could not be more wrong when it comes to economics.

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Over the past 40 years, global capitalism has reduced poverty at a rate never seen before. In 1980, over 40 percent of those alive then lived in absolute poverty, defined as income of less than $ 2 a day after adjusting for inflation. Fast forward to today, after half a century of globalization and “neoliberalism”, less than 10% of people live in poverty.

China and India, which were once among the most disadvantaged countries, have benefited enormously from a more globalized world. Since 1980, China has seen its life expectancy increase by 13%, infant survival by 80%, inflation-adjusted income per person by 230%, food supply per person by 44% and the average number years of education by 49%. . India’s progress has charted the same course, with life expectancy increasing by 23%, infant survival by 66%, per capita income by 487%, food supply by 23% and the average number years of education by 166%.

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To say that these growth patterns are amazing would be an understatement. In fact, this overall reduction in poverty is so significant that it overshadows the gains made during the Industrial Revolution, perhaps even during the domestication of agriculture by our species over 10,000 years ago. If the Pope thinks it’s a failure, it’s hard to imagine what success would look like.

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Critics of global capitalism might argue that reducing poverty is a good thing, but progress has been unevenly shared. To some extent this is true, but this gap is much smaller than most people realize.

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Has the significant growth in developing countries come at the expense of workers in Canada and the United States? Barely. Trading is not a zero-sum game, as the data confirms. Since 1980, Canada has made significant, albeit more modest, gains on most of the measures mentioned. Since 1980, life expectancy has increased by nine percent in this country, infant survival by 58 percent, inflation-adjusted per capita income by 64 percent, food supply by 18 percent and the average number of years of study by 21 percent. All of this represents substantial improvements.

But what about income inequality in Canada? Populists on the left and on the right will argue that the Pope is right and that globalization has exacerbated inequalities here. This is the prevailing discourse these days. Every week we see the headlines denouncing the massive wealth of innovators like Jeff Bezos or Bill Gates. But the idea that Canada has become less egalitarian as a result is not true either.

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A country’s Gini coefficient (a measure of income inequality) shows how equal or unequal the distribution of a country’s income or wealth is. Its value is zero if everyone has the same income or wealth, and one if a single person receives all of the country’s income or owns all of its wealth. Although Canada’s Gini coefficient for after-tax income has fluctuated, it is now about the same as in 1976, the first year for which Statistics Canada has data. In 1976, Canada’s after-tax Gini coefficient was 0.300. In 2018 it was 0.303 – virtually unchanged. Canada’s commitment to open markets and free trade, combined with our strong social safety net, has enabled our country to experience economic growth without rampant inequality. People who suggest otherwise just don’t have the facts on their side.

The idea that global capitalism has failed us is objectively wrong, as is the caveat that economic gains have been unevenly shared. Whether we call it global capitalism or neoliberalism, the world is a better place for it. We have all benefited from a more interconnected world. The rising tide lifted all the boats.

David Clement is the Director of North American Affairs for the Consumer Choice Center.

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In-depth reporting on The Logic’s innovation economy, presented in partnership with the Financial Post.

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