All posts filed under: Economics

Socialism is worse than capitalism—you want a welfare state

The rise to prominence of Jeremy Corbyn and Bernie Sanders has seen a return of ‘socialism’ to the vernacular. The political movements behind these two men have frequently sought to associate popular welfare policies, notably universal health care, with socialism. Both of them seem to be suffering from a degree of conceptual confusion between socialism and the modern welfare state. This is ironic because it is precisely the socialist as opposed to welfarist elements of their respective platforms, like rent control in Corbyn’s case and trade restrictions in Sander’s case, that are unpopular. A second irony, one that is not lost on left-leaning economists, is that free markets, the antithesis of socialism, are necessary for providing the funding for a modern welfare state. What is the distinction between socialism and the modern welfare state? One way to think about it is in terms of market intervention vs. post- and pre-market intervention. Market interventions are those that distort prices and inhibit their ability to communicate the opportunity cost of a good. A pertinent example is rent …

How Capitalism and Globalization Have Made the World a Better Place

Throughout this week, the hashtag #ResistCapitalism was trending on Twitter. Using this hashtag, activists have aired their grievances against an economic system which they deem to be destructive, unfair, and immoral. In their view, the growth of global capitalism experienced over the last few decades has been only detrimental to human well-being. Indeed, since the early 1990s, global capitalism has lapsed into “its most savage form,” according to progressive populist Naomi Klein. In fact, the expansion of capitalism and freer international trade has coincided with an era of slow economic growth, high unemployment, increased child labor, skyrocketing inequality, and grinding poverty. Just kidding, that’s not what happened at all. In fact, as the world has become more capitalist and more globalized, the quality of life for the average person, and especially for the average poor person, has increased substantially. In 1990, 37% of the global population lived on less than $1.90 per day. By 2012, that number had been reduced to 12.8%, and in 2015 it was under 10%. The source of this progress isn’t …