James Peron, president of the Moorfield Storey Institute and author of several books, including Exploding Population Myths and The Liberal Tide, is a contributing author for the Free Market Foundation.
The views expressed in the article are the author's and not necessarily shared by the members of the Foundation.
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This article was first published on BizNews.com on 29 November 2022
Markets are not games where only one can win
I once received a rebuttal to a piece I wrote about economics. Much of it wasn’t precisely clear to me but one obvious point was the author’s view regarding how she thought markets operated.
She compared economics to the board game of Monopoly, asserting there can only be one winner when all is said and done. I understood her point but was baffled as to why she thought a global market with billions of people could possibly exist if only one person was the winner and everyone else lost.
Perhaps, instead of one person, she meant one group, one nation or some single collective body. Regardless of what she meant her point was markets limit winners and expand the number of losers.
However, given the general rise in income levels I'm unsure where she gets her information. As is so typical she made assertions but cited no sources.
The problem is most actual authorities on the topic say both extreme poverty and famine have dramatically declined. There isn’t much validity in comparing the intricacies of life to a simplistic board game; designed so only one person can win.
Regularly I see ads for people in my area offering all sorts of items they own for sale. Buyers see an item they want, at a price they think reasonable, and buy it. If they didn’t think it reasonable, they wouldn’t make the exchange. The seller is happy, and the buyer is happy. Both won by their own estimations.
I once had a university professor, in a religious ethics class, who was on a rampage about the evils of markets. He even had a mandatory board game designed to prove his point that we students were required to play. Each of us represented a nation and the game was rigged so any one nation winning always came at the expense of everyone else. In the game there were no mutually beneficial trades. When one nation won the others collapsed into famine and death.
One clear refutation to this theory of markets leading to poverty, famine and death is that all three have declined with globalisation, instead of increasing. The more trade in the real world the less poverty, famine and death we find.
We should note the Covid virus kills people, which also kills prosperity, but in spite of that extreme poverty has continued to fall, albeit at a slower pace after a one year rise. The New York Times last December reported:
By 2015, the share of the world’s population living in extreme poverty fell to 12 percent from 36 percent in 1990, a steep decline in just two and a half decades. During a single generation, more than a billion people around the world climbed out of extreme poverty....
The World Bank said the impact of the virus “led to 97 million more people being in poverty in 2020 than 2019.“ This took severe poverty levels back to what they were in 2015. But they said 2021 poverty rates should resume the downward trend again.
When it came to life expectancy before Covid we found people globally were living longer lives, not shorter ones. The World Health Organization said, “Globally, life expectancy has increased by more than 6 years between 2000 and 2019 – from 66.8 years in 2000 to 73.4 years in 2019.”
From the 1950s till recently much of the world liberalised their economies, relying more on private initiative and less on politically controlled markets and life expectancy increased. Our World in Data put global life expectancy in 1950 at 45.7 years. By 2019, with liberalisation, it rose to 72.6 years. South Africa, while it liberalised in some ways – such as the abolition of apartheid era regulations, also stubbornly refused liberalisation in massive swaths of the economy – Telkom, SAA, Transnet, and Eskom, for example. In 1950 South Africa’s life expectancy was 43.6 years, lagging the world by just 2.1 years, but in 2019 global life expectancy was 72.6 years while in South Africa it was 64.1 years; the life expectancy gap grew from 2.1 years to 8.5 years.
Bad policies resulted in making South Africa less prosperous and with less prosperity life expectancy – while growing – grew much more slowly.
In the actual world, if a trade is voluntary, it isn’t made unless it is mutually beneficial. There can be involuntary trades but those require the use of political coercion to force participants in the exchange to act against their own interests. But that isn’t a free, or depoliticized market; it’s what politicians impose.
Games are invented to create a winner, while depoliticized markets tend to benefit all participants. It's not a sprint where the first across the line wins. Its purpose is getting as many people across the line as possible and who gets there first isn't as important as getting the other participants to the finish line.