What’s Going Right

We are definitely going through some tough times right now. America is in the middle of a lost decade (or more) caused by the onset of the Obama Era. The Western European welfare state has plunged into permanent crisis. Chinese and Russian “state capitalism” is having its own problems. India’s free-market reforms have stalled out (though they may get going again).

So is it still relevant to talk about “what went right?” Well, of course it is. It’s worth keeping in mind, especially during difficult times like this, that the enormous positive social forces unleashed by capitalism and the Industrial Revolution are so big, so transformative, that they don’t get stopped cold by something so small as the re-election of Barack Obama.

In fact, we should be talking about what’s going right—the positive developments that are continuing despite some of the current retrograde motion in the US and Europe.

At Forbes, Jerry Bowyer interviews Reagan-era intelligence official Herbert E. Meyer (whom he credits for predicting the Soviet Union’s downfall) about the current big global trends. Here is Bowyer’s summary of Meyer’s response.

When you stand back from all the yelling and the screaming…you can see what I believe is the most important trend in the word…the world is emerging from poverty fast. This is the biggest under-reported news story in the world.

By 1980 or 1990 about two billion human beings were out of poverty, since then another half billion have crossed the line out of poverty; a lot of them in India and China. In the last six years 20 million Brazilians have emerged. When you put all these numbers together…each year between fifty and one hundred million human beings are leaving poverty behind.

If we can continue this trend within our lifetimes, and certainly within our children’s lifetimes, the overwhelming majority of human beings will no longer be poor. This is the biggest thing that’s happened in the entire world.

By the way, it’s going to be a five-billion-person middle class. This will become the most powerful force in the world. Their demand for our goods and services will set off an economic boom…I believe that we’re heading for not just a sonic boom, but maybe a supersonic boom.

It’s not just Meyer making this observation. The Economist notes the developing world’s transition “from Mao to Moët in one generation.”

Britain, where the industrial revolution began, took 150 years to double its income per head. America took 30. China and India have pulled off the same feat in a fraction of the time and on a larger scale. The result is an explosion in the number of people who can afford middle-class luxuries, such as a nice home and a good start for their children….

[D]espite the threat of bubbles and hard landings, the new middle class is the future. The Boston Consulting Group (BCG) predicts that there will be nearly a billion middle-class Chinese and Indians—some 320m households—by 2020. McKinsey & Co, another consultancy, points out that consumption tends to follow an ‘S’ curve. When people’s income hits a certain point, demand for consumer goods surges….

Western companies ask: how can we appeal to the new kings and queens of consumerism?

We’ve all heard about the rise of places like China and India. But there is another story that you might not be expecting. Africa’s “great economic leap.”

“What’s happening in business on the continent will reshape everything people know or thought they knew about Africa,” said Rosa Whitaker, longtime Africa business expert and CEO of the Whitaker Group consultancy. “It’s very real, and Americans will connect with Africa in fundamentally different ways than in the past.”…

Africa is growing, Africa is modernizing, Africa is the next consumer market, and Africa’s influence is rising.

From New York to Davos, business discussions echo with references to Africa’s astounding economic growth. While most of the globe is still reeling from the great recession, Africa is booming. It had six of 10 of the world’s fastest-growing economies of the decade to 2010 and is projected to claim seven of 10 to 2015, outpacing the entire Asian region. “Compared to dismal rates in the rest of the world, Africa’s growth is exceptional,” said Gustavo Galindo, a portfolio manager with Russell Investments. “It surprises me many US investors don’t realize the opportunities this creates, with some African stocks gaining 15 percent to 20 percent returns.”…

In Freetown, Sierra Leone, traditional market traders who previously practiced under-the-mattress banking are getting their first ATM cards and small-business loans. With 80 percent of sub-Saharan Africa’s adult population unbanked, its financial-services sector is projected to grow 40 percent by 2020. In mobile phones Africa has now overtaken Europe in the number of connections and the US in number of users. Apple is expanding shops for iPhone sales across the continent to meet demand of a mobile market predicted to reach more than a billion users by 2020.

Note that this is finally achieving what decades of foreign aid failed to do. In fact, Kenyan economist James Shikwati explains the failure of aid in a bracing interview in Der Spiegel.

SPIEGEL: Mr. Shikwati, the G8 summit at Gleneagles is about to beef up the development aid for Africa…

Shikwati: … for God’s sake, please just stop.

SPIEGEL: Stop? The industrialized nations of the West want to eliminate hunger and poverty.

Shikwati: Such intentions have been damaging our continent for the past 40 years. If the industrial nations really want to help the Africans, they should finally terminate this awful aid. The countries that have collected the most development aid are also the ones that are in the worst shape. Despite the billions that have poured in to Africa, the continent remains poor.

SPIEGEL: Do you have an explanation for this paradox?

Shikwati: Huge bureaucracies are financed (with the aid money), corruption and complacency are promoted, Africans are taught to be beggars and not to be independent. In addition, development aid weakens the local markets everywhere and dampens the spirit of entrepreneurship that we so desperately need. As absurd as it may sound: Development aid is one of the reasons for Africa’s problems. If the West were to cancel these payments, normal Africans wouldn’t even notice. Only the functionaries would be hard hit. Which is why they maintain that the world would stop turning without this development aid.

By the way, I know—because I monitor the “click-through” rates—that a lot of my subscribers don’t actually go read most of the articles I link to. You just read my excerpts and let it go at that. Which is fine, most of the time. I try to write in a way that allows readers to access as much or as little information as they like. But do yourself a favor and do go read these last two articles—the one on the rise of Africa and the Shikwati interview. The beginning of real progress in Africa is one of the few big things that is going right in the world at this moment, and you need to know about it.

All of this is producing some lessons that are being learned in surprising places. African aid activist Paul David Hewson—you know him by his stage name, Bono—recently attended a conference for African entrepreneurs and admitted that it was “a humbling thing…to learn the role of commerce.” He also concluded, correctly, that government corruption is the “biggest killer disease of them all…. It kills more kids than AIDs, TB, and malaria.” Which could lead him in an interesting direction if, like Shikwati, he inquires closely about what feeds this corruption.

The big point is that capitalism and the Industrial Revolution have only begun to transform the world. They have a lot more work to do. And while Third World leaders—from Africa to the United States Department of the Treasury—may do their best to obstruct progress, the positive forces at work are too big to be easily suppressed.


3 Responses to What’s Going Right

  1. Mike Harvey January 17, 2013 at 1:18 AM #

    Robert, you are an optimist, which is why I enjoy you’re articles so much. I’m sure many of your readers feel as I do, that the whole world needs the perspective you provide.

    Because, if one understands human history – and you’ve certainly helped me in that regard – one can hardly be anything but an optimist.That’s why I still say you should write the book –

    What Went Right?

  2. Michael Moran January 20, 2013 at 11:02 AM #

    While I like to be hopeful, I would argue the good news is the result of the Thatcher/Reagan revolution and the fact socialism and communism were discredited. The economic boom of the last 30 years has to be seen in that context. China is a simple example, as it was only after the abandoned communism in all but name that their economy grew and lifted hundreds of millions out of poverty. The other examples you cite were just late comers to the same party. But outside of America, does anyone expose the policies of Reagan/Thatcher. And in America it is only the GOP, and they just lost the last election. When the mainstream though is how capitalism must change, rather than how we free markets to better implement capitalism, I fear the next 30 years will not bring the progress of the last 30.

  3. Mike Harvey January 23, 2013 at 8:19 PM #

    We now have more voices and a more receptive audience than ever before in history; and we have more venues for sharing our philosophy. Perhaps the more encouraging fact, though, is – as Reagan said of the Soviets – the other side has a business model that literally can’t succeed. It may take thirty years to turn the tide politically, but I think that most Americans – like people everywhere, when given a real choice – prefer freedom to slavery. And, neither Reagan nor Thatcher were scheduled by the historians and prognosticators of their time.