Capitalism and Economic Development

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William LaraqueMr. William Laraque is an Advisor for the Empowerment of Global Business Success, Greater New York City Area.

From Strategic Management Forum (Global), Linkedin.

Joseph Schumpeter was right. In his response to Marx’s assertion that Capitalism would die, Schumpeter asserted that capitalism could only be understood as a cycle of destruction and creation.

It is no longer cool to refer to Marx, Schumpeter or revolution. In business and economics today, we prefer the term “creative disruption.”

Important to this discussion on the usefulness of capitalism in the wake of the Great Recession of 2008, Joseph Stiglitz of Columbia U. has explained how destructive inequality is to economic growth. Stiglitz wrote in “The Price of Inequality,” that “much of America’s inequality is the result of market distortions with incentives directed not at creating new wealth but at taking it from others.”

Martin Wolf of the Financial Times has written exhaustively as to why bank lending is less useful as a driver of economic growth than government issuance of bonds.

In my mind, what has brought all of these ideas together is Hernando De Soto’s article in today’s WSJ entitled “The Capitalist Cure for Terrorism.”

In this very moving article, De Soto links the aspirations of the poor, the common entrepreneur with the need for property rights, title to land, to goods, and their use in the pursuit of wealth and happiness. The ecosystem of a country either accommodates these aspirations or it’s highly motivated aspirants have no recourse but to turn to violence. This scenario played out in Peru, in the Arab Spring and is playing out as I write on the streets of Missouri and Main Street U.S. To quote Rev. Jesse Jackson, “prison is the exhaust of a failed economic engine.” The U.S. has more prisoners per capita than does Russia.

To quote from pages 158 and 159 of the exhortation of Pope Francis I, the “Evangelii Gaudium,” the Joy of the Gospels, the Pope quotes from the bishops of Brazil: “We wish to take up the daily joys and hopes, the difficulties and sorrows of the Brazilian people. Yet we desire even more than this; our dreams soar higher. We are not simply talking about ensuring nourishment or a “dignified sustenance” for all people but also their general temporal welfare and prosperity. This means education, access to healthcare, and above all employment, for it is through free, creative, participatory and mutually supportive labor that human beings express and enhance the dignity of their lives. A just wage enables them to have adequate access to all the other goods which are destined for our common use.”

The economic and financial ecosystem must be created within a country to serve the common, entrepreneurial aspirations of even the least of our brethren. De Soto beautifully illustrated how this is to be accomplished. I have nothing but this to add.

 

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