Compassionate Capitalism

Capitalism has proven itself over the last few decades to be decisively the best economic system. The market economy, where individuals fend for themselves, and reward themselves for the risks that they alone would bear, provides the definite incentive for people to put their productive capacity to full use. In the process, the society as a whole prospers, and living standards are raised.

Yet, in a typical capitalist society, there still exists a significant minority who are very poor; so poor, in fact, that they cannot afford the basic necessities of life, namely food, shelter, and health. This minority is the smudge on the capitalist ideal, and the weakest link in any economic debate.

The presence of this unfortunate minority creates two major problems. The first problem is political. When poverty exists amongst wealth, the wealth creates resentment. This friction between the economic classes creates social segregation, easily developing into more serious social instability. The more visible the inequality exists, the more vocal the movement toward an artificially equal society will become, whose sole goal is to overturn capitalism and to pursue the only economic utopia that people dream of in socialism and communism.

The second is psychological. No matter how wealthy a society is in general, pockets of poverty prevent it from indulging in its true greatness. Humans are compassionate beings. We do not let people suffer if we could prevent that by sacrificing a little of ourselves. Therefore, as people become wealthier through hardwork and ingenuity, and have attained a level of security brought by this increase in wealth, they would like to see society to be improved as a result of their own improvement in fortune.

There are many popular ways to solve the poverty issue. The most popular one is to ignore that there is a problem. Wealthy people lock themselves up in gated communities surrounded by people of their own economic class. Once or twice a year, they redeem themselves by resorting to the second most popular solution, namely throwing money aimlessly at the problem, by attending a charity auction or write a tax-deductible check. The ruling elite, on the other hand, create socialistic tax code and paternalistic government programs that heavily benefit the poor but disproportionately burdens the diligent middle class.

The poor must be helped. The hungry ones must be fed. The cold ones must be housed. The sick ones must be treated. The society has an moral obligation - and government a legal one - to accommodate the poor. The market economy dictates that the animal spirit must lead the way. The wealthy have legitimate claim to a better lifestyle as rewards for taking extreme risks. Yet, it is absolutely wrong to use the same argument to condemn the poor. The fundamental faith that free market capitalism places in the human condition is that people have a uncontrollable desire to better themselves. Therefore, the true capitalist view is that the poor are missing opportunities that will propel them out of their economic hardships. Instead, they are caught in a vicious cycle where the poor are punished for their poverty, where opportunities to succeed are restricted to those who are already on the path to success, rather than be open to those who need these opportunities the most.

The goal of every public welfare program, then, is to make its own service redundant, not more useful. Welfare services must not only help beneficiaries with their immediate needs, but must work to ensure that those people become more self-sufficient and less reliant on these services. For every dollar that is spent on helping the underprivileged, it must teach the recipient to progressively earn that dollar themselves, through education and counselling. No one should get a free ride on others' work. At the end of day, even a billionaire needs to do some work to earn another dollar.

Sunday June 25, 2006