What he said was that by its very success, the capitalistic system was destroying the stability of the societies that they serve. It did so by rewarding the people who were at the cutting edge of growth and economic activity in ways that have seldom been possible in the past. Today just 10 per cent of the world’s population control more wealth than the remaining 90 per cent and the disparity between the haves and have not’s is expanding rapidly.
This trend coupled to the very rapid changes in technologies and in the nature of work and employment mean that more and more people are feeling “left out” and these pressures are resulting in a wave of political discontent that is sweeping across the world. Perhaps the “Yellow Jacket” phenomenon in France best symbolizes this – no real leadership, no principles or objectives, just a society wailing at its misery and non-acceptance of the status quo.
Then I was sent an article by a US Professor of Economics who had studied China in 1980 and recently went back recently to try and find out what had happened in the interim. What he discovered was very important – he found that the Chinese Communist Party had maintained its near total control over the politics and the social organisation of China but had used Capitalistic principles to drag China out of the 19th Century where it had been locked down in poverty by the Government created by Mao Zedong.
In 1980 China had a life expectancy of 32 years, GDP Per capita was lower than in Zimbabwe today. Hundreds of millions lived in absolute poverty and tens of millions died annually from disease and poor malnutrition. Today China has become almost a middle-income society and a billion people have been lifted from poverty. Less than 1 per cent of the Chinese population remain classified as absolutely poor – and it was done without aid or any other form of support from the global community.
In the process, China has not lost its character as a society which is much more equal than most. Income disparities exist but on nothing like the scale in most countries in the West. The chronic corruption that characterizes societies in Africa, Asia and many countries from the former Soviet Union and Russia, has not taken root in China – because such failures in governance are met with severe and consistent penalties – China executes its corrupt leaders and business managers, treating corruption as a real threat to society and economic growth. Which it is.
Ray Dalio said that the solutions lie in not abandoning the system which has created such wealth and opportunity but to use the system to drag society along in the rush into the future – no other system can react fast enough to the changes taking place. But he said that the very people who are driving this process and benefitting from it – people like himself, had to take the lead to make sure the system served everyone’s needs and not just their own.
He said this was not just philanthropy but a wise investment. He said societies that invested in education and health were inevitably rewarded by having a more motivated and innovative society that was suited to the new world in which we live. He invested his own wealth in two main areas – start up financing for small scale entrepreneurs and in training for real jobs. He said the first gave people opportunity while the second prepared young people for the new working environment which society and the economy was now creating.
Another major weakness in the West is how the concentration of wealth is changing our politics. Anyone who had been in politics in a reasonable democracy will tell you that it takes money to win an election. A Party like the MDC, committed to social democratic principles and its membership drawn almost exclusively from the poor and the lower echelons of the working class, has to fight elections against a ruling Party who not only has access to State resources but also the resources of a criminal class who feed off the Party and a capitalist class who are uneasy about what they view as “leftist” policies and a Party controlled by the working class.
In the neo capitalistic systems of most African countries – the State dominates the economy and no business can survive without patronage and “protection”. This combination is toxic to opposition politics in all developing countries and explains why democracy has such a lousy track record in these countries. Many query whether it is the most appropriate for their countries, but what is the alternative – China? Africa has tried the “One Party” State and knows this is worse, so we are probably stuck with democracy as the best of our lousy options.
If that is the case, then we all have a stake in reengineering our economies so that they serve our societies in all the ways that are necessary – creating opportunities for everyone who needs work and dignity, using the surplus created by our business class to serve the needs of the population – and not simply through taxation and State intervention. We need our business elite to recognize that they must support democracy by backing people of integrity and capacity to who want to contest both local and national elections. It is very difficult for outsiders to support the opposition in any given country. Not only does the local power elite make it illegal they also make it very difficult and even dangerous for those with real money to back organisations and individuals who might challenge the status quo. Creating a responsive and effective democracy is not easy or cheap.
Having said that the lessons from the China experience is worth repeating from the Stanford University website:
- Invest in primary health care and universal rights to education;
- Give your farmers security of tenure and make the resources available to ensure that they can produce a surplus and be independent;
- Develop strategies and policies that will support manufacturing and export activities;
- Devolve power and resources and allow local communities and regions to develop themselves; and
- Ensure that infrastructure precedes growth rather than following growth.
They listed a sixth item as being the full development of women as a resource to drive initiative and development across the entire economy. I would have added, along with Ray Dalio, do not be afraid to borrow money – just be careful to always invest in enterprise that shows a higher level of return than the cost of borrowing. All the Asian Tigers including China and Japan are now the most highly indebted States in the world. So far this has not been a threat as they have consistently shown that they can generate returns on investment that are higher than the costs of debt service.
The global capitalistic system has created vast surpluses of cash – some estimates put it at over US$100 trillion, which is constantly seeking a safe place to invest – at very low returns. Because China has consistently pursued sound macroeconomic policies and always serviced its obligations, they have been able to borrow the huge sums that they have used productively to turn China into the manufacturing giant that now dominates world trade and has lifted the Chinese people out of poverty in half a Century.
Zimbabwe could do no better than to emulate these policies and practices as it pursues its new policies of openness and market driven growth. Much more than just development and the reduction in poverty levels is at stake.