Saturday, August 30, 2014

Michael Strong's Excellent Response To Jonathan Haidt's "Three Stories about Capitalism"

Haidt has written the excellent book The Righteous Mind: Why Good People Are Divided by Politics and Religion. Strong is an entrepreneur. See Three Stories about Capitalism

Haidt's first story is Capitalism is exploitation. The second is Capitalism is our savior. The third story is "We celebrate the fact that the wide embrace of free markets has lifted more than a billion people out of poverty. Yet we know we can do better."

Here is the comment that Strong left:
"Excellent short summations on Story 1 and Story 2, and a good start towards Story 3. For the past ten years John Mackey, co-founder and CEO of Whole Foods Market, and I have been working on our version of Story 3 (see http://www.flowidealism.org, http://www.consciouscapitalism.org, and http://www.radicalsocialentreps.org). We certainly believe that free enterprise, and all human activity, should be driven first and foremost by moral concerns and that a blind adherence to profit-maximization often produces monstrous results. We need to create a Story 3 in which all of humanity obtains the extraordinary benefits of entrepreneurial value creation while nonetheless preserving a world that is environmentally sustainable and in which most human activity is devoted to improving the lives of others rather than indulging in materialism, consumerism, and wasteful status competitions.
That said, the hegemony of Story 1 in academia over the past century has led to numerous blind spots that need to be addressed in order develop a version of Story 3 that will produce positive results. For instance, most people, including most scholars, blithely assume that the tragedies in Bangladeshi sweatshops are due to an absence of adequate government regulation. As a consequence, the default assumption among most educated people around the world is that developing nations need more regulation in order to prevent a “race to the bottom.”

As it turns out, prior to the collapse of the factories in Bangladesh a union-supported labor commission concluded that Bangladeshi labor law was “fairly comprehensive and progressive” and a review of some aspects of the Bangladeshi building codes by a Japanese commission concluded that in some respects the Bangladeshi building codes were excessively stringent – by Japanese standards.

It turns out that in Bangladesh, as in many poor nations, there are abundant laws – indeed, by several metrics (World Bank’s Doing Business index, the economic freedom indices) Bangladesh is one of the most highly regulated nations on earth. Indeed, it is a fair generalization that poor countries are poor because of excessive regulation. For instance, the lowest ranked thirty nations on Doing Business and economic freedom indices are mostly African. It requires seventeen documents to import a good legally into the Congo, it costs over $500 to get a document notarized in Senegal, etc.

Conversely, although China is almost universally denounced as one of the most horrific examples of unregulated capitalism, few of its critics seem to be aware that nonetheless average urban wages in China have gone up more than 5x in the past twenty years. With 700 million urban Chinese, this has to be considered one of the greatest moral achievements in history. This is not to belittle the egregious human rights abuses and environmental damages that have taken place in China in the past twenty years. But there are a billion Africans who would love to see their average earnings go up 5x in the next twenty years. There is no way that foreign aid, charity, NGOs, “Fair Trade,” or any other manifestation of “caring” can increase average wages 5x for hundreds of millions of people in a couple of decades. Before moving on to Story 3, we need to start from an accurate understanding of where the world stands regarding the implementation of Story 2. We are not there.

Despite the fact that this information has been well documented and is widely available, I suspect that neither the Dalai Lama nor Professor Haidt was aware of the over-regulation of poor nations or the extraordinary wage growth for the masses in China. The “righteous minds” who dominate the universities are so obsessed with imposing Story 1 on us all that they refuse to acknowledge empirical information that is inconsistent with their narrative. Before we can get to a really rich development of Story 3, we need to reduce the hegemony of Story 1 among university professors (especially those in the humanities and non-economics social sciences).

Once we have cleared up the many misconceptions due to the “righteous minds” of anti-capitalist academia and their social dominance on most campuses, then we can move forward in dramatically positive ways in crafting positive versions of Story 3 that will change the world for the better."

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