The big change in America has come not from the poor or the rich but within the middle class. Yes, the middle class has fragmented, just as progressives allege. What progressives fail to acknowledge, however, is that the American middle class has fragmented upward. What this means is that many people who previously were middle-class have moved up. They have joined the ranks of the well-off. We can measure this simply by looking at the ballooning of the affluent class. In 1980, according to Federal Reserve Board data, there were roughly six hundred thousand American families with a net worth exceeding $ 1 million. Today more than 10 million families are worth in excess of $1 million.9 Even recognizing the effects of inflation—$1 million today won’t buy what it bought in 1980—that is a stupendous increase in the ranks of the affluent.
Who are these people? I was on an airplane flight recently, and my Delta platinum status got me bumped up to first class. There I found myself seated next to a Hispanic plumber who was taking his second wife to St. Kitts. There she was, sitting across the aisle from him. Actually, the man wasn’t just a plumber, although he started out that way. He now owned a small plumbing business, and had several plumbers working with him. When we think of well-off people in America, we think of people who are born with privileges or of people who go into medicine or software. But the typical well-off person in America is much more likely to be a sixty-two-year-old from Flint, Michigan, or Tucson, Arizona, who owns a car dealership or a mobile home park, or runs a welding, contracting, or pest-control business. While most of these folks are white, a surprising number are first-generation or second-generation immigrants; they are, in fact, an ethnically diverse group. These are not people who lucked out—who “chose their parents carefully”—they are people who chose their professions and businesses carefully. They got their money the old-fashioned way, by earning it.
While many progressives condemn American capitalism for fostering inequality, in reality American capitalism has helped to create the first mass affluent class in world history. Previously the great achievement of the West was to create a middle class. Middle class means that you don’t lack for necessities—you have food and clothing and can take a modest annual vacation—but you don’t have surplus income, and you don’t have substantial accumulated wealth. While most of the world struggled with basic food and shelter, the West was able to provide most of its citizens with middle-class comfort. But now America has topped that by creating mass affluence, extending to many what was previously possible only for few. Mass affluence means that you can afford a big house with a big kitchen and nice cars and expensive cruises and shopping expeditions and private school tuition, and you still have money left over at the end. Millions of Americans who used to be middle class now enjoy the luxuries of affluence, and how can that be considered a bad thing?
Now the reason why some in the middle class have moved up, while others have stayed put, is that economic change and opportunity always benefit those who have the required skills and resourcefulness to benefit from them. While the old middle class was comfortably situated in manufacturing, this was precisely the sector that declined over the past few decades. Suddenly old skills were obsolete. The decline of manufacturing did not, however, spell the decline of opportunity. Rather, opportunities blossomed with the emergence of new industries—primarily in technology, communications, and various service sectors. Americans who had the educational skills and the adaptability to move into the new sectors benefited handsomely. Others remained stagnant and some even fell behind. It should be emphasized that this result is not an anomaly of technological capitalism; rather, it is how the system operates, unleashing a “gale of creative destruction” that boosts those most in tune with its “animal spirits.”
All of this, however, is in the short term. While technological capitalism can be faulted with permitting, or even creating, short-term inequality, in the long term technological capitalism creates deep and abiding equality among citizens. This is not obvious or intuitive, so let’s consider some examples. In the late nineteenth century—just over a century ago—a rich man traveled by horse and carriage, while the poor man traveled by foot. Today the rich man might drive a Mercedes or BMW, and his poorer counterpart a Honda Civic or a Hyundai. A Mercedes is faster and more luxurious than a Hyundai, but still, there has been an enormous leveling of the difference between the rich man and the poor man in getting from here to there. Another example: in the early twentieth century, the rich could escape the bitter cold of winter by going to homes in warmer climates and avoid the sweltering heat of summer by going to cooler retreats. Meanwhile, the common man had to endure the elements. Today most homes, offices, and cars are temperature controlled, and the benefits are enjoyed by rich and poor alike.
These examples could be multiplied, but here is the most telling one. A hundred years ago, the life expectancy of the average American was around forty-nine years. The gap between rich and poor Americans was considerable: about ten years. It was not uncommon for a wealthy person to live into his late sixties or seventies but quite rare for a poor person to do so. A similar gap, of course, separated the United States from poorer countries like China and India. Today the average life expectancy in the United States is around seventy-eight years. There is a gap between the rich and the poor but it’s negligible: two to three years. Poorer countries like China and India have also seen a sharp rise in life expectancy. India’s life expectancy has almost doubled, from around thirty-five years to nearly seventy years.10 That’s still below the American average, but who can deny that there has been a remarkable closing of the gap and that this is an egalitarian achievement?
Now who is responsible for this achievement? The answer, remarkably, is technological capitalism itself. It is technological capitalism that produced the advances in medicine and food production that have reduced infant mortality, disease, and starvation. I am not denying that government policies and private philanthropy have also helped, but their impact is minimal compared to that of technological capitalism. Technological capitalism has not only equalized life expectancy, it has also equalized the availability of countless amenities that are now available to the rich and poor alike. Economist Joseph Schumpeter made this point in a general way when he wrote, “Queen Elizabeth owned silk stockings. The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort.”11
How does this process occur? In America, we can see it by considering examples such as automobiles and computers. When the automobile was first invented, it was dismissed as a “rich man’s toy.” But not for long. Eventually Henry Ford introduced the Model T, and brought the price down so his workers could afford them. Similarly, computers were first thought to be just for big corporations, and then just for rich people, and pretty soon for everyone. Cars and computers took a while to go from rich people’s contrivances to mass items, but the cell phone seems to have morphed within just a few years from an expensive curiosity to a universal necessity. Even Indians in remote villages and in urban slums now have cell phones. International phone calls that were once prohibitively expensive are now within the reach of ordinary folk.
None of this happened “automatically” or “by accident.” Consider the example of phone calls. In 1920 it cost $20 to make a long-distance phone call from New York to San Francisco. No ordinary citizen could afford that, yet someone had to make phone calls at that price, or else there would have been no market for phone service. In footing the big initial bill, the rich paid the fixed cost of bringing long-distance service to the masses. Today a coast-to-coast phone call costs almost nothing. The same trend of improved technology at lower cost is equally true of cars and computers and advanced medicine. In each case, the rich pay the high initial price, which funds additional research and development, which in turn enables technological improvement, economic efficiency, and lower prices. Former luxury items are now within
the reach of the common man. The broad spread of technology and medicine, far from representing a theft by the rich, represents a subsidy on their part that has greatly benefited the larger society. In the words of Friedrich Hayek, “Many of the improvements would never have become a possibility for all if they had not long before been available to some… . Even the poorest today owe their relative well-being to the results of past inequality.”12
My conclusion is that technological capitalism is by far the best system for giving entrepreneurs and workers their “fair share.” This fair share, whether measured in terms of profits or wages, is precisely what people are entitled to as a result of the value they create for their fellow citizens. While short-term inequality frequently results from the dynamic energy of a capitalist economy, that energy also produces mass affluence that ultimately raises life expectancy and living standards for everyone.
CHAPTER 12
A GLOBAL SUCCESS STORY
The end of empire has been accompanied by a flourishing of other means of subjugation.1
KWAME NKRUMAH, NEOCOLONIALISM
We live today in a world of economic globalization—a global marketplace that has been decisively shaped by America and the West. Progressives claim that the first step in this globalization was the direct colonialism of the British and the French, and it has been followed by America-led “neocolonialism,” another form of economic exploitation that amounts to theft. To a generation that grew up in the Third World in the 1950s and 1960s, nothing seemed more obvious than that colonialism itself was theft on a grand scale. Britain, for example, took cotton and other raw materials from India, converted them into finished products in the factories of Manchester and Liverpool, and then sold those products domestically and internationally. Indians would end up buying shirts manufactured in England with Indian cotton—while the Indian handlooms closed down.
Yet for the British to purchase cotton at the Indian market price does not seem, by itself, to constitute theft. The Indian farmers had been selling at that price to the Indian handloom mills. Nor can the British be faulted for using the machines of the Industrial Revolution to efficiently convert cotton into cloth, nor for selling that cloth to Indians more cheaply than the Indian handlooms could. Not only were British manufacturers not stealing from the Indian people; they were actually giving them a better deal than they were previously getting from the Indian mills. Moreover, there is a deeper factual point that often goes unrecognized in the anti-colonial literature. In that literature we read innumerable claims to the effect that “the Europeans stole rubber from Malaya, and cocoa from West Africa, and tea from India.” But as economic historian P. T. Bauer points out, before British rule, there were no rubber trees in Malaya, nor cocoa trees in West Africa, nor tea in India. The British brought the rubber tree to Malaya from South America. They brought tea to India from China.2 And they taught the Africans to grow cocoa. In these cases, far from “stealing” native resources, the British deserve credit for introducing profitable crops that benefited the native economies as well as British global trade.
Even more broadly, it makes no sense to claim that the West grew rich by taking everybody else’s stuff for the simple reason that there wasn’t very much to take. Most Third World countries were desperately poor before colonization, so they could hardly be worse off in material terms after the colonizers went home. How, then, did the West become affluent if not by stealing from Asia, Africa, and South America? The reason is the West invented some new things that didn’t exist before. These inventions were modern science, modern technology, and modern capitalism. Science here refers not merely to invention but to what Alfred North Whitehead terms “the invention of invention,” a new mechanism for generating knowledge and converting that knowledge into usable technological products. Capitalism here refers not merely to trade but to property rights, contracts, courts to enforce them, and later limited liability, credit, stock exchanges, insurance, and the whole ensemble of institutions that Adam Smith outlined in the Wealth of Nations. Science, technology, and capitalism are Western institutions that developed due to internal causes, from the scientific revolution to the Industrial Revolution.
The impact of the West in transforming developing countries for the better was noted in the nineteenth century by, of all people, Karl Marx. Marx credited colonialism with transforming feudal society into modern industrial society. “England has broken down the entire framework of Indian society,” Marx acknowledged. In particular, “It was the British intruder who broke up the Indian hand-loom and destroyed the spinning wheel.” Marx added, “This loss of his old world … imparts a particular kind of melancholy to the Hindu.” Even so, Marx emphasized that the Hindu had been living in a village system based on the hierarchy of caste and economic and social oppression. Moreover, “These idyllic village communities, inoffensive though they may appear, have always been the solid foundation of Oriental despotism.” Marx pointed out that through such mechanisms as railways and steam power, Britain unified India and integrated her into a global system of trade. Marx termed this a “fundamental revolution in the social state of Asia,” a positive development that he characterized as a “regeneration.”3
Progressives today reject this aspect of Marx, because Marx seems to say that while colonialism is theft, the theft was historically necessary as part of the modernizing process. Marx didn’t justify colonialism or capitalism but he sought to transcend them. Progressives, however, want to reverse them, and their abhorrence for Marx’s views in these areas is part of the reason many on the left have soured on Marx. Today’s progressivism is less indebted to Marx than it is to Lenin. Lenin “rescued” Marx by arguing that colonialism represented the final crisis of capitalism. In Lenin’s view, the Communist revolution had not occurred in Europe because European leaders found a temporary solution to their domestic problems. They ameliorated internal class conflict by conquering other countries and exploiting the workers there. Lenin called on people in the colonies to drive out the colonizers. This, he concluded, was good not only for the self-determination of the colonies but also to accelerate the crisis and collapse of European capitalism.4 This double benefit helps explain why the otherwise foreign ideology of anti-colonialism became so attractive to many leftists in the West.
Marx might have disappointed the progressives, but was he right? On this particular issue, I think he was. No one, least of all Marx, suggested that the British came to India with purely noble intentions. Some Englishmen, like Macaulay and Kipling, spoke of the “white man’s burden” to share civilization with the lesser peoples, but today such rhetoric is rightly dismissed as a rationalization for conquest. Like previous conquerors—the Afghans, the Persians, the Arabs, the Mongols—the British ruled largely for their own benefit. In order to administer the empire, however, the British had to build roads, railways, and ports. They also built the major cities of India: Bombay, Calcutta, and Madras. (The subsequent re-naming of these cities does nothing to change the historical fact that they were founded and built by the British.) The British also had to educate a native class of Indians. This required teaching them English. Education exposed Indians to new ideas that were largely alien in traditional Indian culture: modern science and technology, self-government, the rule of law, property rights, human rights, individualism, and self-determination. Ultimately the Indians learned the very language of political liberation from their captors.
Since India’s independence in 1947, Indians have been reluctant to acknowledge the benefits of empire. Years ago I wrote an essay in the Chronicle of Higher Education titled “Two Cheers for Colonialism” and it stirred up a big controversy when it was republished in India. Even some of my relatives were outraged, with one of my aunts advising me, “We Indians are not supposed to say things like that.” She was right; I was violating a national taboo. But that’s changing. Recently India’s Prime Minister Manmohan Singh spoke at Oxford University and there he did something no previous Indian politician dared to do—h
e praised the British legacy in India. “Today with the balance and perspective offered by the passage of time and the benefit of hindsight, it is possible for an Indian prime minister to assert that India’s experience with Britain had its beneficial consequences. Our notions of the rule of law, of a constitutional government, of a free press, of a professional civil service, of modern universities and research laboratories have all been fashioned in the crucible where an age-old civilization met the dominant Empire of the day.”5
Why did it take more than fifty years for an Indian leader to state the obvious? The reason is that, for most of this time, India failed to take advantage of what it gained from the British legacy. In this respect, India was similar to many other former colonies in Asia and Africa. Ironically this failure is due to the leadership of these nations falling under the anti-colonial spell. The anti-colonial ideology, forged in the colonies and subsequently embraced by many in the West, blamed the West for the poverty and underdevelopment of the “Third World.” So the new leadership of many independent countries adopted a resolutely anti-Western stance. Because the West was opposed by the Soviet Union, these leaders were putatively non-aligned but in practice pro-Soviet. Because the West was capitalist, India and others decided to go in the socialist direction.
This was, as we now know, a disastrous mistake. We can see this by comparing, say, South Korea and Kenya. When Kenya became independent in the early 1960s, it was at the same economic level as South Korea. But Kenya took the socialist road and South Korea took the capitalist road. Today South Korea is many times richer than Kenya. Sure, there are important cultural differences between the two countries. But we can also verify the superiority of capitalism to socialism by comparing South Korea with North Korea. Same people, same culture. Yet North Korea remains desperately poor while South Korea is a comparatively rich country. India suffered the same fate as other socialist nations—it had a stagnant economy, and indeed for nearly half a century India was symbolized by the “begging bowl.”
Dinesh D'Souza - America: Imagine a World without Her Page 18
