The Blessings Of Capitalism

The Blessings of Capitalism

Adapted from the presentation “Christianity & Capitalism” made at Grace Brethren Church in Long Beach, CA on July 5, 2009.

by Eric M. Jackson, author of The PayPal Warswww.ericmjackson.com

http://www.ericmjackson.com/


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What has Capitalism Produced?(i.e. Where’s the Beef?)


(Source: Angus Maddison, "World Population, GDP and Per Capita GDP, 1-2003 AD," at the Groningen Growth and Development Centre. http://www.ggdc.net/) 3

11500

17001870

19131950

19521954

19561958

19601962

19641966

19681970

19721974

19761978

19801982

19841986

19881990

19921994

19961998

20002002

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

Total World Economic Output (in Trillions $)

A.D. 1 A.D. 1000 A.D. 2000

The World Economy is No Longer Stagnant


(Source: J. Bradford DeLong, “Cornucopia: Increasing Wealth in the Twentieth Century,” Department of Economics, U.C. Berkeley, http://www.j-bradford-delong.net/TCEH/2000/TCEH_2.html) 4

The U.S. Economy is the World’s Largest


(Source: U.S. Patent Office, http://www.uspto.gov/web/offices/ac/ido/oeip/taf/h_counts.htm)

1790 1800 1810 1820 1830 1840 1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 20000

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

U.S. Patents Granted

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Knowledge has Exploded


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U.S. Economy Has Created Millions of Jobs

(Source: Bureau of Labor Statistics, February 6, 2009. Available at http://www.ritholtz.com/blog/2009/03/hh-est-survey-differences/)


Poverty and Income Distribution• Capitalism has produced an uneven distribution of

wealth between the rich and poor.

7Lowest Quintile Second Quintile Third Quintile Fourth Quintile Top 5% $-

$25,000

$50,000

$75,000

$100,000

$125,000

$150,000

$175,000

$200,000

U.S. Family Income Limits, 2006

(Source: U.S. Census Bureau, available at http://www.census.gov/hhes/www/income/histinc/f01ar.html)


• But income levels for the lowest quintile (which is not a static group of people) have risen over time.

8(Source: U.S. Census Bureau, available at http://www.census.gov/hhes/www/income/histinc/f01ar.html)

20062004

20022000

19981996

19941992

19901988

19861984

19821980

19781976

19741972

19701968

19661964

19621960

19581956

19541952

19501948

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

Upper Limit for Lowest Quintile


9(Source: U.S. Depts. of Commerce, HUD, and Energy. Data available at http://www.heritage.org/Research/Welfare/bg2064.cfm)


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(Source:http://www.heritage.org/Research/Welfare/bg2064.cfm)

• Hunger hasn’t been eliminated, but 92.5% of poor U.S. households (and 98% of all households) reported they had "enough food to eat" during the past four months.


The Third World

• “Zero Sum Game” – Is the Developed World’s wealth the cause of the Third World’s poverty?

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• In spite of this, Third World poverty has fallen in recent decades as world GDP and trade have risen.

19701990

0%

5%

10%

15%

20%

25%

30%

35%

40%

World Population Below Absolute Poverty Line

(Source: Jay Richards, Money, Greed, and God, p. 92.)

• Peruvian economist Hernando de Soto says lack of formal property rights impedes capitalism, robs Third World citizens of $9.3 trillion of wealth.


(Sources: Economic freedom scores, The Heritage Foundation, http://www.heritage.org/Index/Ranking.aspx. Food expenditure data, U.S. Dept. of Agriculture, http://www.ers.usda.gov/briefing/cpifoodandexpenditures/data/2004table97.htm.)

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Free Economies = Meeting Basic Needs

30 40 50 60 70 80 90 1000%

10%

20%

30%

40%

50%

60%

f(x) = 2.0907752514644 exp( − 0.0348800897588752 x )R² = 0.473557601499277

Economic Freedom and Availability of Food

Economic Freedom Score (0-100)

% o

f GD

P Sp

ent o

n Fo

od

FreeModerately/Mostly FreeMostly UnfreeRepressed


Economic Growth = Longer Lifespans

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(Source: www.gapminder.org.)



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The Environment• No economic system is pollution-free.• “Natural resources” change over time.• Some analyses suggest global environmental conditions

are improving—e.g. Index of Leading Environmental Indicators.

• Bottom Line: What is the cost-benefit?

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“Earth got about 0.7 degrees Celsius warmer in the 20th century while it increased its GDP by 1,800%…let’s stipulate that all of the warming was the result of our prosperity and that this warming is in fact indisputably bad (which is hardly obvious). That’s still an amazing bargain. Life expectancies in the United States increased from about 47 years to about 77 years. Literacy, medicine, leisure and even, in many respects, the environment have improved mightily over the course of the 20th century…” – columnist Jonah Goldberg

(Sources: Index of Leading Environmental Indicators, Pacific Research Institute, http://special.pacificresearch.org/pub/sab/enviro/2008/study.html. Jonah Goldberg, “Global Cooling Costs Too Much,” http://article.nationalreview.com/?q=MmJiZDEyYzkxYWE0OWYxMWY4Y2ZjYzI2YmNmOGExMDE=.)


Key Takeaways• Capitalism isn’t a perfect institution, but it has a

formidable track record across the centuries:– Economic growth– Explosion of knowledge– Income inequality but rising living standards for the

poor– Greater availability of food– Longer life spans – Potential for the third world

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Economy & Finance

The Blessings Of Capitalism