Celebrating Capitalism’s Global Success

J U LY / A U G U S T 2 0 0 8 W W W. T I K K U N . O R G T I K K U N 7 Celebrating Capitalism’s Global Success THE CONTRARIAN BY GEORGE VRADENBURG W eareinthemidstofatransformational shift of economic, financial, political and (ultimately) military power from the United States to a new generation of nations: China, India, Russia, Brazil, the Persian Gulf states and others. This shift reflects an era of extraordinary historic progress in reducing levels of global poverty, and it also reflects a massive shift of the relative share of total global wealth from wealthy nations to historically poorer nations. The United States represented almost 50% of global economic activity after the end of the Second World War; it now represents less than 30% of global economic activity and that percentage will be inevitably dropping further in the coming years. No longer are we confronting a world where five of the six billion humans living on earth are in abject, less-than-$2-aday poverty. That’s the old narrative. We are now in a world where five of the six billion humans on earth are on a predictable rising economic arc. That isn’t the end of poverty by any means, but it is to say that striking progress on global poverty is occurring. And it is occurring because more nations are embracing global trade and the international financial system . This rapid and broad extension of global prosperity is good for America. Continuing this progress requires continued attention to certain critical actions. First, we should extend the benefits of free trade by phasing out the subsidies paid by Europe and the United States to their agricultural sectors, subsidies which harm subsistence farmers in the poorest nations of the world. Second, governments and private investors must accelerate efforts to reduce the dependence of the world on oil. It has been estimated that over $1.5 trillion a year in wealth is transferring from oil-consuming nations to oil-producing nations (some of that wealth is financing terrorists). That wealth transfer is proving to be a drag against the economic rise of the low and middle class families in oil-consuming nations around the world. Third, the international community must continue its efforts to eliminate the corruption in the governments of poor nations (take Myanmar, for example). What is the political reaction to this decline in poverty around the world here in the United States? Strikingly, the very “progressive” elites that championed a war against global poverty are now reacting with alarm because they see the growth in third-world wealth as coming at the expense of low and middle income families in America. This reaction is generating protectionist policy proposals that would, if implemented, be counterproductive to the fight against global poverty. While it is true that income inequality is rising in the United States, this rising inequality is occurring because those with certain education levels or skills or in certain economic sectors are better positioned to take advantage of growing global markets and wealth than others. Surely the response to this challenge is not to create barriers to the very global trade that is spreading global prosperity, but rather to increase our investment in primary and secondary education and in health (where our performance is terrible), job retraining (where our efforts are misdirected and mismanaged), and innovation (life science and energy, as two examples). The competitive strength of other nations is growing in part as the result of their increasing investment in education, health and basic research. At the same time, the United States is disinvesting in basic education and in the research and development (R&D) that is the fuel of our own innovative strength. Our rate of national R&D investment has declined from 2% of GDP to less than 1%, even as the rate of investment in China and other nations is climbing above 3% of GDP. Unless we change our investment priorities, the growth in productivity here will decline and our nation will not be able to sustain current existing standards of living for our people. Our country should not demonize the growth of the rest of the world...