We all love a good entrepreneur story. These stories are threads in the fabric of Americana. From the barbershop owner to the bold inventor like Henry Ford, we love these stories. At their genesis, at least. But do we love when these businesses become big? What about when they start interacting with other businesses in the global marketplace? Do we believe free markets are good news for the poor?
My experience tells me we do not. Indifference is normative, as if commerce exists almost as a nonfactor for the poor. Scorn is the most-vocal response to free market capitalism. I conjure distasteful images when considering concepts like multinational corporations, Big Business, factories, and globalization. Among the images I summon are sweatshops, the 1%, boycotts, child labor and executive caricatures like Mr. Burns.
To combat these images, we create pithy “alternatives” to appease our concerns, frontloading the questionable concepts with nicer adjectives. Small business. Social enterprise. Local business. These clarifiers are good, but when it comes to alleviating poverty, they are tinsel and ornaments. The free market is our tree. When we add clarifiers, the danger can be that we miss the impact of plain ol’ business. Vibrant commerce–in even its most ordinary varieties–is the engine that lifts the poor out of extreme poverty.
By overwhelming margins, free market capitalism has enabled more people to escape poverty than any system in the history of the world. Yale University and The Brookings Institution released a staggering study to join the chorus of research validating this claim: In 1981, 52% of the world’s population was unable to provide for their basic needs like housing and food, living below the “extreme poverty line.” By the end of 2011, just 30 years later, that percentage plummeted to 15%.
Yale and Brookings state the chief reasons for the unprecedented drop are “the rise of globalization, the spread of capitalism and the improving quality of economic governance.” This is the “potent combination” behind the plunging poverty levels. It doesn’t mean the 85% of us above this line are living large—attending college, taking vacations and the like—but it does mean we won’t die from inexcusable and preventable causes like starvation and diarrhea. It makes me wonder: How can we respond to this with indifference or scorn? Why aren’t we shouting this from the rooftops?
Entrepreneurship is not a white lamb, however. Let’s not forget the despots who enslave little girls and trade them across borders like they are bags of grain. These unfathomably evil traffickers are, well, entrepreneurs. As are the drug runners. And we don’t have to look far to know economic prosperity doesn’t alone prosper. And it is in this human brokenness–certainly not unique to any economic system–where immense opportunity lies for the Church, people like Rick who actively war against these evils.
Like all of us, I love to share a good entrepreneur story and I’ve shared many this year, some here and a few at Christianity Today’s exciting This is Our City project. I’ve shared these stories—from pigs to bike helmets—because they are worthy of it, stories replete with bold risks, profound justice and stirring impact.
My grandpa loved people well and it showed in the way he ran his business. Ethan Rietema and Steve Van Diest upend the mattress industry by providing a restful buying experience. Reyna overcame blindness to start a business that now provides for her family. Brian saves lives by selling solar lamps to hundreds of thousands of families around the world. Steve Hill and Jim Howey breathe dignity into what appears to be an ordinary warehouse. These leaders—on construction sites, shop floors and in strip malls—take the mission of God forward. They are not our extras. They are not supporting actors relegated to check-writing and church volunteerism. They are members of Christ’s body, tasked with very important jobs to do.
These remarks are adapted from a talk I gave in Washington, D.C. at Entrepreneurship in the Developing World, an event hosted by the American Enterprise Institute: Video | Polished Transcript. The event was a response to Bono’s recent “humbling” observations about the role of entrepreneurship and capitalism in helping the poverty-stricken communities of the developing world.
Chris,
I love your heart, and appreciate your thoughts on business and mission. Growing up with a family that owned a small business, going to b-school, and now helping to release entrepreneurs in urban neighborhoods, I’m no business-hater. I do, however, find this post a little one-sided in its message.
I appreciated the article from Yale University about globalization dramatically influencing global poverty levels. It would be beneficial to have even more research on what actually affected poverty levels… they speak broadly about globalization and the influence of capitalism, and the article also talks about other factors like: “diversification into novel export markets from cut flowers to call centers; spread of new technologies, in particular rapid adoption of cell phones; increased public and private investment in infrastructure; the cessation of a number of conflicts and improved political stability…” which would all be fascinating to hear more about. This is great news when our own country is continually submerged in negative and often fearful financial news.
While countering negative responses to the business sector is helpful and right within the body of Christ (Luther was a great help here…) at this point in history I think we also need to look at the overall picture and influence of the systems, both on the poor and the rich. Continuing to look at the gap between the wealthy and the poor, quality of life for all, distribution of resources, and impact on the environment must be in our conversations as well. And while complicated, I think conversations about what materialism exported across the globe has done to families, communities, and overal moral health (but that is a broad subject I just threw out there, I recognize.)
And while there is dispute about the validity of this quote from good ol’ Abe Lincoln (weren’t we talking about him recently?), I still think it articulates an important concern: “I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. . . . corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed.”
So… from your last few paragraphs, I am gathering what got you most excited this past year is how business are being used for great good, and energizing the body of Christ to utilize all sorts of gifts, skills and experience. That is something to be heartily celebrated, and I think micro-finance and small businesses are at the center of it (as evidenced by all your examples… not one a multi-national corporation). While they may be tinsel (and by that it sounds like you mean mere decoration) I think they could be more like new growth… giving us a glimpse of what a new forest could look like one day.
For me, the jury is still out (or really close to bringing back a conviction) for multi-national corporations and what you called “Big Business”. We would do well to define that further for clarification, but for every good example of a MNC that has great business practices and fair working conditions, it seems that there are twenty examples of companies with ruinous environment practices and unjust working conditions.
My dad and I are having an ongoing … we’ll call it a “conversation”… about the role of government. In a recent birthday card (yes, a birthday card:) he called government “an insatiable beast”. While I would more readily use that discriptor for multi-national corporation, I really think that’s unhelpful in either conversation. Government and the business sector will always be with us. They will always be central to our global community. They are, in essence, value-neutral. We, as Christians, should neither idolize them, nor outright condemn them, and we should be actively working to see God’s Kingdom come more fully through both.
Sarah – I love that you took the time to compose such a thoughtful response. Thank you for this. Your right in many ways that this is not the complete story. In 600 words, it’s tough to fully tackle any subject, let alone one addressing the small topic of the nature of our economic systems. You said a lot …but I’ll just respond with a few comments:
1. I’m not endorsing corporate cronyism. In fact, corporate cronyism corrodes the free enterprise system and is harmful to the poor and to entrepreneurship. In essence, where cronyism is at play, it stifles innovation and competition (pillars in the free enterprise system). There is less cronyism within our system than within a failing economy like the Democratic Republic of Congo (where the presidents’ friends & family hold the power in every industry), but it exists. Not all big businesses are bad guys, however. And I would strongly question your 20:1 ratio!
2. One of the best ways to judge an economic system, in my view, is by examining whether or not it directly results in millions dying or millions not dying. The last great economic experiment has been proven to be the former (http://www.hup.harvard.edu/catalog.php?isbn=9780674076082). This system has proven to be the latter (as evidenced by Yale/Brookings). So, while I do think judging a system requires nuance, I think Bono is right on this one (http://vimeo.com/53945169).
3. My post was one-sided, namely because I believe it’s a side that’s rarely shared. The balance of our news, from cable and the pulpit, is one-sided. It would be easy to believe, based on what we hear, that poverty is increasing around the world, for example …or that more people are dying preventable deaths than ever before. In my work at HOPE, I hear these assumptions all the time. But the truth is, the exact opposite is true. And when folks like Yale, Brookings and Bono begin affirming it, I think it’s worth taking notice. The headline of the Yale/Brookings study says it all: “With Little Notice, Globalization Reduced Poverty”
4. I didn’t mean to disparage or cheapen social enterprise (heck, I’ve spent my whole career working in that industry!), but rather illustrate that the adjectives themselves are like “tinsel”. But much regular enterprise–like the companies I profiled–are quite social. And when taken together with the whole system…have thwarted billions (literally) of senseless deaths.
Thanks again for the comments. Let’s discuss more next time we’re together!
Chris, love this discussion and hope to see more like it. If/when I start blogging, I hope to write frequently on this topic as I desire to get feedback/input from several perspectives to enhance my own learning/understanding.
I am grappling, myself, with how much capitalism and consumerism has changed the face of poverty in places like China – perhaps more so than all of the poverty alleviation efforts done by nonprofits (many I have been involved in over the years) and governments combined. That said, I would caution that we take a deeper historic look and also reserve future analysis before attributing such success to free market/capitalism.
Historic look: Interesting you mention DRC. The history of colonialism (carving up of Africa by Europe) in the name of commerce was surely very one-sided not to mention the influence external governments (U.S. included) had in the politics/disintegration of the DRC at independence. As you note, the history of slavery/human trafficking often is tied to the expansion of trade/markets and surely contributed to the economic growth of recipient countries (like the U.S.). Finally, it seems that many MNCs today are benefiting (perhaps some even contributing towards) the cronyism/corruption found today in the DRC. Most electronic equipment made by today’s biggest MNCs use parts/pieces that come from the DRC. Perhaps these companies can be called upon to do more to ensure the poor people of DRC (especially the children – who often work the mines) benefit from their country’s abundant mineral resources.
Future Perspective: I am amazed at how technology is changing our lives. I also feel that the environment has suffered immensely since the rapid expansion of MNCs and capitalism. Whether or not MNCs or high population growth or government inaction is to blame, we may be judged by history to have raped the ability of future generations to enjoy our world by pursuing the kind of economic growth we have during the past 200 years. In other words, perhaps our consumption of the world’s resources at 2-3 times the earth’s carrying/reproductive capacity for so many years will be something that haunts our world for thousands of years to follow. My hope is that capitalism and growth in truly free trade policies** will enable us to thwart any major negative impact our environmental use/abuse has on this earth – but only time will tell. Therefore, while I am hopeful about the role capitalism is playing and can play in economic growth, I believe final judgment must be reserved until 200 years from now to see how our long-term earth manages our current rapid growth.
Finally, I believe that both big government and big business desperately need and feed off of each other. The bigger businesses get, the more they need big governments (and big militaries) to protect their interests, keep their monopolies (and high salaries/financial returns), and prevent competition from cheaper alternatives. Both big government and big business hurt smaller companies and individual communities – but, overall, they may do more to alleviate poverty and raise people’s incomes. Thus, they may create more consumers of material goods – but at the expense of more autonomy/freedom and quality of life. I think China is facing some of these issues as their economic growth has done the most to raise millions of people out of poverty.
** As you know from previous discussions, I would hope that every free market advocate would also strongly advocate for the elimination of all borders such that just as goods and capital can today flow mostly free around the world, a truly free market would also allow for all labor to freely move wherever people wanted to for jobs, safety, security, preferred form of government, health, education, etc. Unfortunately, I’ve found too many free marketers only seek greater access to resources/goods/capital while also advocating that people not be able to freely move to whatever country they prefer.
To me any barrier/border represents a restriction to free trade and a desire to “protect” some form of advantage in market dynamics. Along with the free movement of labor, I would advocate for a low but standardized rate of tax for business/trade in every country of the world – so that MNCs that have the power and resources to practice transfer pricing as a tax-minimization effort would have to compete with all other (local) businesses on a level playing field.
Rob –
As always, thoughtful and engaging comments. I should also say that while I happen to agree with Yale/Brookings, it was their study (and the many reinforcing studies) that “attributed such success to free market/capitalism.” I’m still processing all this myself ..and am absolutely open to pushback and disagreement on their analysis. A few thoughts:
1. I agree with you re: taxation, labor, immigration. I’m not sure if I somehow suggested otherwise, but I absolutely affirm that free markets need to be, well, free. And when they aren’t, you end up with some sort of protectionism, which has been proven to be particularly damaging to vulnerable people.
2. I think it’s important to separate “capitalism” and “consumerism.” The addiction to stuff is not unique to any one economic system. Just because people are poorer under a system like Communism …does not mean they are less greedy are desirous of consuming things. They just don’t have any money, so the consumerism is perhaps less visible. I know in my travels to very poor places, consumerism absolutely exists …but the vigor is for American-made tee-shirts, rather than the latest tech gadget or sports car.
3. I agree fully that MNCs and Big Business can be detrimental to the poor. There is absolutely no denying this. But, as we’re seeing in China & India, as the middle class grows, so does accountability. Dangerous working conditions and child labor become unacceptable. It’s why doing business in China is becoming more and more expensive (and that’s a good thing!). As a pragmatist, I examine the free market system and find it, on the whole, much more favorable for vulnerable people than its tested alternatives.
4. To me, the Foxconn scandal–and others like it–are illuminative of the future. While the actual scandal was largely fabricated (http://bit.ly/Tbi729), it proves to me that nobody is immune. With cell phone cameras and the surge in transparency because of citizen activists, abuse and malpractice is increasingly uncovered. The Economist did a feature on Foxconn a few days ago (http://bit.ly/TbfXzL), illuminating how they’ve changed policies.
5. Re: earth 200 years from now: This is a tough one for me. You’re right. We don’t know fully how our actions today will play out in 2200. And we have to balance concern for the vulnerable today with the concerns of the vulnerable tomorrow. On this point, I’m very much intrigued by the Kuznets Curve. Are you familiar with this (http://bit.ly/TbfXzL)? In short, Kuznets illuminates that as we’ve seen in the US …environmental degradation works on a curve. At it’s worst in the height of industrialization, but eventually, standards are put in place (increasing the cost of labor) and environmental degradation decreases. If you look at air quality from 1940 to 2012 (both outside and inside warehouses) in our country–as one of many data points–it’s clear that the Kuznets curve has legs.
Thanks for the comments, Rob. I appreciate our shared concern for vulnerable people. And I believe we can continue to sharpen one another in the ways we try to serve them.
Thank you, Chris, for your thoughtful reply. I also am searching and trying to figure out what is right and true and what to advocate for and rail against. I am still learning so much and want to better understand what is making a positive difference and what is neutral and what is negatively impacting the vulnerable people we both care deeply about. Let me quickly respond to your five points.
1. Glad we agree. If we can advocate for the elimination of all borders/immigration restrictions in every country of the world, I believe the free market will be much freer – and more efficient – but might not be something MNCs will advocate or support – since it might eliminate one of their greatest competitive advantages in the current global economy.
2. Also agree – to a degree – but consumption must include what governments consume – and what we consume of the world’s resources as a nation is much greater than our population should allow. In fact, I believe people are worried about the rise of the middle class in China and India precisely because if they consume at the levels of the average middle class U.S. citizen, the earth’s resources can not sustain such consumption.
3. Totally agree with this point – and often repeat it myself – I love how economic growth produces greater transparency and accountability. It will be interesting to see how China’s government responds to increasing economic growth among its citizens.
4. Again, agree – and another test will come when we see if the people in India get better government services and the people in China get greater democracy as their economies continue to grow.
5. Yes, I am familiar with Kuznets curve – and think it is interesting. In fact, it is in the textbook I use in my class and we’ve discussed the pros and cons related to this curve. One thing to note is that as economies grow – and environmental standards improve locally – one must also question whether (due to free trade) the biggest companies can move their bad environmental practices to other countries without penalty. In other words, if these companies move their polluting manufacturing plants to countries where labor and environmental laws are more lax, they can claim to meet their home country standards while still polluting the world’s environment. That said, as the free market also brings greater media transparency around the globe – then such abuses can be brought to light and public pressure (and government restrictions) can be brought to force to make these companies change their practices. Pros and cons, for sure.
Love to continue to learn and sharpen one another!