Capitalism, wealth and poverty of nations

Rarely a fortnight passes without someone phoning to seek an opinion on a current issue in the economic and history of Malawi. Some questions I find easier to answer than others.

Last week, the voice of a female announcer of one of the private radio stations sought my reaction to those who say Malawians made a mistake to demand independence before the British had fully developed this country. See the poverty of the country, all because independence was given to us too soon. I was flabbergasted as I recalled the Israelis whom Moses had led out of the house of bondage in Egypt. They lamented in the Sinai desert that Moses had made them leave the flesh pots of Egypt for the uncertain manna of the desert.

I told the lady announcer that those who say such things did not exist during the colonial days and that is why they are not able to see that despite the poverty around us, the country has undergone tremendous transformation.

Whenever people ask me if independence has been worthwhile in economic terms, I have advised them to compare Malawian photos of the pre-independence days and those of today. They will find that most people are better dressed today, many live in better houses, the physical and social infrastructure testify to the evolution that has taken place.

Malawi is one of the poorest countries not because independence has brought stagnation but because in comparison with other countries, they have undergone tremendous transformation. This is why they are richer.

“What advice then can you give so that Malawi should be wealthy like other countries?” This was the journalist’s supplementary question. At the time of gaining independence Singapore, Mauritius and Taiwan were not wealthier than Malawi. In fact, their natural resources were less abundant.

Now that they are far wealthier we should send out experts there to go and find out what they did to attain such industrial revolution.

Not that I believe the answers we would get from there would be complete. Singapore legendary first Prime Minister was asked by the French president on his visit to Paris why Singapore had succeeded where other developing countries had failed. Lee Kuan Yew said Singapore’s success was due to frugal habits which make them save more than other people. Lee concludes his account in his autobiography by saying the French president did not think he had given a full explanation behind Singapore’s success story.

Development is multifaceted. One thing that is certain about the wealth of the nations is that those countries which have followed the capitalist system have done better than those which have followed other models. This is borne out by the fact that even those countries which still boast of being socialist or communist have borrowed capitalist methods.

The capitalist system is recognised by its institutions which are;

(a)    Private property. Every individual or body corporate may own factors of production such as land and factories.

(b)   The profit motive. People organise businesses for the purpose of making profits. Churchill put this with a measure of irony. “The socialist say they hate profits, but I hate losses.”

(c)    The price system. Prices of products guide businesspeople what to produce or make. Those goods whose prices are rising encourage investors than those goods whose prices are falling.

(d)   Freedom of enterprise. Everybody is free to engage in any lawful business.

(e)   Competition. A lot of production occurs because there is competition between producers and sellers. Monopolies are discouraged because they tend to frustrate maximum output.

(f)     Individualism. Capitalism respects the aspirations of an individual. The State does not control all aspect of a person’s life. Capitalism and democracy co-exist.

(g)   Consumer sovereignty. Consumers are free to buy and consume what they prefer. The State does not compel them to spend their money on what they do not like.

(h)   Protestant work ethic. The teachings of Jeas Calvin and Martin Luther King concerning hard work and thrift are reflected in the capitalist spirit.