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Capitalism is the answer

By Peter Bowden - posted Friday, 9 February 2024

The lesson came from a wide variety of observations summarised best by Adam Smith's The Theory of Moral Sentiments (1759) and An Inquiry into the Nature and Causes of the Wealth of Nations (1776). Both include the statement that the self-seeking rich are often "led by an invisible hand…without knowing it, without intending it, advance the interest of the society." Smith was saying that by solely pursuing their own self-interest - and not any conscious intention to be of help to others - and by trading with each other, they benefit their societies.

Marx and Engels were right when they observed in the Communist Manifesto that free markets had in a short time created greater prosperity and more technological innovation than all previous generations combined. A century and a half later, all evidence shows that capitalism has lifted millions and millions from hunger and poverty.

Today's story about global capitalism, shared by rightâ€wing and leftâ€wing populists, but also by large sections of the political and economic establishment, does not deny that prosperity has been created. But we need to ensure that we have a fair society, with those at the bottom able to earn a sufficient wage. Elton Musk has become the first person with more than $300 billion to his name. He is the richest person ever, according to Forbes. He takes the top spot from Amazon founder Jeff Bezos, who had held it since 2017. According to the World Bank, Musk's net worth exceeds the GDPs of Colombia, Finland, Pakistan, Chile and Portugal.


But the issue is not a question of how much more than the masses does the super-rich own. It is a question of income distribution or inequality. How is it shared among the masses? Income inequality is often unfairly distributed on the basis of sex or gender, race or colour and age. One of our prime objectives is to remove any of these barriers. One approach is to measure the

Gini coefficient representing the income inequality, the wealth inequality, or the consumption inequality within a nation or a social group. It was one of the measures often sought by this consultant when working in a country, but usually used only as background information. The Gini coefficient is a number between 0 and 1, where 0 corresponds with perfect equality (where everyone has the same income) and 1 corresponds with perfect inequality (where one person has all the income-and everyone else has no income. The level of income inequality in a given country can help indicate the quality of life for its average citizen. Income inequality impacts a nation both economically and politically, with effects that include political polarization, negative attitudes towards the wealthy, slower GDP growth, reduced income mobility, higher poverty rates, and greater household debt. On the other hand, income inequality that is extremely low can sometimes indicate a lack of economic growth.

Lorenz curve is a graphical representation of the distribution of income or of wealth developed by Max O. Lorenz in 1905 for representing inequality of the wealth distribution. The opening sentence reads:

There may be wide difference of opinion as to the signiï¬cance of a very unequal distribution of wealth, but there can be no doubt as to the importance of knowing whether the present distribution is becoming more or less unequal.

President Obama said in his 2012 State of the Union address that the decades-long trend in inequality was "the defining issue of our time" undermining economic growth and social and political cohesion in the US.

The Centre for Ethics in the United States published its opinion September 25, 2020


Our nation's social fabric is torn by political polarization, distrust, disinformation, exclusion, coarsened public discourse, and divisions along geographic, cultural, and tribal lines. The precarity of that social fabric has been exacerbated by stagnating social mobility, widening socioeconomic inequality, and structural inequities, often along racial, ethnic, and gender lines.

Obama called for a rise in the federal minimum wage, something that neither chamber in Congress was likely to support, but otherwise offered no new policy prescriptions to address a problem that he said affected many developed countries.

He also tied redress income inequality to the success of his health law, which has struggled since its rollout in October.

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About the Author

Peter Bowden is an author, researcher and ethicist. He was formerly Coordinator of the MBA Program at Monash University and Professor of Administrative Studies at Manchester University. He is currently a member of the Australian Business Ethics Network , working on business, institutional, and personal ethics.

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