NCPA - National Center for Policy Analysis

CRONIES AGAINST CAPITALISM

May 23, 2008

Capitalism, when combined with a relatively small government, is a well-established ticket to improved standards of living.  However, many countries continue to oppose capitalism.  The resistance of many countries to adopt capitalist economic systems has puzzled economists for decades, says Kevin A. Hassett, a senior fellow and the director of economic policy studies at the American Enterprise Institute. 

In a recent study, economists Alberto Alesina, Edward Glaeser and Bruce Sacerdote found that pre-existing social attitudes toward luck may be the crucial determinant of the political path of a society.  The authors uncovered a striking difference between American and European attitudes towards the poor:

  • If you ask Americans whether they believe the poor are lazy, 60 percent agree.
  • However, if you ask Europeans, only 26 percent say yes.

Historically, large welfare states have emerged in countries where citizens generally believe that luck determines income.  According to the authors: 

  • If bad behavior (or laziness) is viewed as a source of poverty, then the welfare state is small.
  • America has avoided the fate of Europe because its citizens disproportionately believe that luck is not that important a determinant of one's circumstances, but hard work is.
  • If Americans are predisposed to believe that high incomes are generally merited, then they will be resistant to change.
  • However, when capitalists succeed because of bribery and corruption, citizens become less convinced that the income distribution reflects merit, and are more willing to redistribute.

It takes more than luck to maintain a free society.  If America is to avoid acquiring a welfare state the size of Europe's, the rule of law must be vigorously defended and the corrupt must be adequately punished, says Hassett.

Source: Kevin A. Hassett, "Cronies Against Capitalism," American Enterprise Institute/National Review, March 24, 2008.

For text:

http://www.aei.org/article/27735

 

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