Capital comforts: with all the recent scandals, corporations have left themselves wide open to harsh criticism, but their development and growth has provided us with a high standard of living along the way. (Capitalism And Business Growth).

Critics of capitalism say it's an economic system based on greed and selfishness. They are firmly convinced that the only motive the capitalist has or has ever had is the accumulation of more capital and perhaps the exercise of power: the goal of all businesses is the making of the highest profits at the lowest cost to the owner, and the environment,

the community, the health and safety of workers are only considered when it is required by government regulations. That's not to say there aren't decent human beings in capitalist ranks, but more socialist-leaning groups think the system promotes the rise of the most ruthless, cunning, avaricious, self-seeking individuals, lacking in sympathy and compassion. Well, okay, the system has its flaws, but critics of capitalism are not without critics themselves.

Capitalism is not about money, say its defenders; it's about freedom and human creativity, and intellectual and material wealth are consequences of the system. Economic freedom leads to growth, they say, and growth means jobs and greater prosperity for everyone. They see the move toward economic freedom that has swept through the communist and developing worlds over the past decades as a recognition on the part of national leaders that their state-dominated systems have failed. And one youthful writer, Aaron Lukas at the Washington, D.C. Cato Institute, believes that most young people don't hate corporations, as the anti-globalization protesters would suggest. In fact, he says "many of us either work in one, know someone who does, or even own stock in one. Corporations are nothing more than voluntary associations of people who are trying to achieve some common business goal. So the 'evil, sinister, greedy corporation' mantra doesn't jibe with our life experiences ..."

There's no question that the whole idea of making and distributing goods for profit has had some amazing results, not the least of which were the voyages of discovery. They were based on the simple notion of expanding markets, which goes back hundreds of years to the Arabic cultures of the seventh century.

Medieval Europeans thought it was a fine idea, and from the 1300s, they started to expand their mercantile practices to distant worlds too.

Capitalism became a way of thinking as well as an economic process of production, distribution, and profit. It championed the individual and encompassed the idea that people should be free to pursue their own interests, and that by doing so the interests of society as a whole would be served. Capitalism meant progress, which would lead to wealth, not just of individuals, but of nations. To capitalists the very meaning of human life is productive labour.

When the communist world collapsed in 1989, free-market capitalism was left supreme. The competitive nature of the system promises big rewards to those who are successful. The process creates efficiency, innovation, and better-quality products and services. As businesses expanded, so did their markets, and now it has reached global proportions.

Globalization has opened market capitalism to the world, creating millions of jobs and masses of affordable goods for consumers. A 2000 article in Business Week pointed out that globalization "has brought ... a transfer of nearly $2 trillion from rich countries to poor through equity, bond investments, and commercial loans. It's helped topple dictators by making information available in once-sheltered societies. And now, the Internet is poised to narrow the gulf that separates rich nations from poor even further in the decade to come."

In his 2001 book, In Defence of Global Capitalism, Swedish author Johan Norberg does what one reviewer called a heavyweight demolition job on anti-capitalist ideas. A citizen of one of the most liberal and socially conscious countries on Earth, the author argues that global capitalism can help the people of the Third Word. Mr. Norberg writes that it can deliver them from, "an existence in abject poverty, in filth, ignorance and impotence, always wondering where the next meal is coming from and whether the water you have walked so many miles to collect is lethal or fit to drink." Mr. Norberg is passionate about the "terrible evil" of poverty, and he sees capitalism as a source of human liberty.

He sings the praises of free trade, and maintains that capitalism is in the process of creating a better world. With plenty of facts to support his arguments, he shows that the spread of capitalism in the last several decades has lowered poverty rates and created opportunities for people all over the world. Living standards and life expectancy have risen--average life expectancy in the developing countries has risen from 46 to 64 years over the past 40 years. World hunger, infant mortality, and inequality have diminished--infant mortality has fallen from 18% to 8% since 1950, and the proportion of people who go hungry fell by more than half since 1970, from 37% to 18%. Literacy has risen dramatically--the proportion of illiterates has fallen from 70% to about 25% since 1950. More people than ever--3.5 billion, about 60% of the world's population--live in democratic states.

These gains are all because of the economic and technological development that has occurred as a result of free-market policies. There are, he says, clear connections between the degree of economic freedom in a country and its prosperity. "The most liberal countries have poverty levels which are 60% lower than in the least liberal countries."

Supporters of global capitalism have plenty of reasons for their views. Some of them are:

* Globalization speeds up the spread of new technologies, allowing poor countries to import technology rather than bear the cost of expensive, up-front research and development;

* Nations that have been able to cut poverty because of the increased wealth created by trade are then able to turn their attention to other important social issues and environmental protection;

* Many poor countries lack infrastructure such as ports, high-ways, telecommunications, and power generation, and the lack of such facilities holds back development. Openness to trade allows multinational companies to provide an infrastructure of what could be called "enabling services," such as telecommunications, insurance, accounting, and banking.

That's not to say that capitalism is perfect. Anti-globalization protesters continue to point out the weaknesses in the system. No one can ignore the fact that some multinationals have contributed to labour, environmental, and human-rights abuses as they pursue profits around the world. And, even many capitalists agree that the flaws need to be addressed if the system isn't going to destroy itself.

As Business Week puts it, a new view is taking hold that trade and capital, "are still essential to achieving strong, sustainable growth, and to reduce poverty. But it acknowledges that multinationals--which account for the bulk of direct crossborder investment and one-third of trade--have social responsibilities in nations where the rule of law is weak. And it dispenses with the erroneous notion that open markets will magically produce prosperity in all conditions ... Before trade and foreign capital can translate into sustainable growth, governments first must deliver political stability, sound economic management, and educated workers."

SUGGESTED ACTIVITIES:

1. Some observers say that capitalism has been confused with democracy, that the principles of democracy--such as free, fair and regular elections, freedom of expression and movement, and the right to private property--are separate from capitalism, which actually can manage quite well under nondemocratic governments. Find examples where this is the case and discuss what some describe as the myth that capitalism and freedom are synonymous.

2. In an article in The Globe and Mail, J. Richard Finlay, head of the Centre for Corporate & Public Governance in Toronto, wrote: "American capitalism has been one of that country's most important contributions to the advancement of civilization. But it needs watchful gatekeepers, honest sentries, canons of ethics, and the discipline of laws. It needs dynamic CEOs--and national leaders loyal to the investing public. Theodore (in the early 1900s) and Franklin Roosevelt (with the creation of America's first securities laws in the Depression in the 1930s) understood this in their time and found the tools needed to preserve the system." Research the Roosevelts and report on the effects of their programs.

3. One opponent of capitalism describes the system as barbaric, saying the current capitalist system is brutal, savage, and cruel: he sees chief executives as ruthless tyrants who loot and pillage "through strip-mining, deforestation, privatization and deregulation, currency speculation, and IMF-enforced (International Monetary Fund) repayments of onerous debt-loads." That's Ed Finn's opinion, as expressed a few years ago in the CCPA Monitor, the monthly newsletter published by the Canadian Centre for Policy Alternatives in Ottawa. As a result of such corporate devastation, Mr. Finn says "billions of people are doomed to poverty, hunger, and disease, and many thousands to premature death." Discuss.

4. Read Johan Norberg's book, In Defence of Global Capitalism, as well as Naomi Klein's, No Logo.

FACT FILE

In 2000, about 2.4 million people in Canada were self-employed, up from more than 1.8 million in 1990.

Small and medium-sized businesses are seen as major sources of job creation, technological innovation, and entrepreneurship.

Websites

The Fraser Institute--http://www.fraserinstitute.ca/

Global Capitalism--http://www.globalcapitalism.st/

The Global Compact--http: www.unglobalcompact.org/

RELATED ARTICLE: The Global Compact.

The United Nations Global Compact was launched officially in July 2000 to encourage business to uphold a set of core values in the areas of human rights, labour standards, and environmental practice.

It is a voluntary corporate citizenship initiative, involving governments, labour, civil society organizations, and the United Nations, as well as business: it challenges chief executive officers, and their boards, to adopt its principles as part of corporate strategy and day-to-day operations. Hundreds of companies from all regions of the world have become involved.

Harvard professor and former assistant secretary-general of the United Nations, John Ruggie, says the Global Compact came about as a result of "the realization that human rights and social progress were lagging behind economic growth to the point that the whole system was in danger of collapse."

"We were suffering from some contradictions at the global level," he says. "The rules allowed the market to go forward and corporations to grow but equally valid social objectives were lagging. You can't have a social system that favours only one segment of society and leaves the roots of its population behind. These social pillars are necessary to make the system sustainable."

RELATED ARTICLE: When big just won't do.

From a business point of view it's often easier to buy existing companies than build your own. Why expand your own business with new investment, new facilities, and new employees when you can simply buy out someone else? Free trade, deregulation, and the Internet have all made it harder to compete for consumers' dollars, so companies feel they need to swallow the competition to stay afloat.

In 1999, Canadian companies were involved in mergers and takeovers totalling $178 billion. At the same time, Statistics Canada reports that Canadian businesses spent only $163 billion on new real investment projects (including residential construction, commercial and industrial buildings, and machinery). The worldwide value of mergers and acquisitions rose by over a third from the previous year to more than $3.4 trillion U.S. in Europe, the value of deals more than doubled to $1.2 trillion.

Mergers might help the bottom line of companies, but they usually mean job losses, and foreign control too if you're on the selling end.

Not everyone thinks global-scale business is the wave of the future though. Some suggest that national or local firms are able to compete better than multinationals. The theory is that growth is only good up to a point--the point, or law, of diminishing returns--before rising costs, inefficiencies, and breakdowns start to drive up expenses. And sometimes, local producers understand the tastes of their customers better than any multinational firm ever could.

Globe and Mail columnist Gordon Pitts wrote in April 2002 that diversified companies are "trying to shake off the conglomerate stigma, which suggests a passive owner of a collection of unconnected assets." He uses Brascan Corp. as an example. The Canadian conglomerate's chief executive officer wanted to trim the company down to three lines of business (real estate, financial services, and power generation) to make the company "more focussed and more simplified." Mr. Pitts pointed out that Canadian Pacific Ltd. did the same, dividing itself into five smaller pieces.

RELATED ARTICLE: Thinking small.

Some CEOs would have you believe that a business has to be big to survive in the race toward globalization. However, that argument often is used to justify mergers or acquisitions that end up reducing competition in the domestic market. So says Marcel Cote in a 2001 issue of CA Magazine. Merged companies "often can raise prices or slash service and pass the cost of the acquisition on to its customers--a price that usually outweighs the benefits," he says. And, he asks whether Canada is better off with more global companies, be they banks, insurance companies, or airlines. His conclusion is not really: "... them are little or no real advantages in having a few big companies, as opposed to several mid-sized or smaller companies."

While Mr. Cote is not totally opposed to global companies, he says our economy doesn't necessarily need them to be healthy. In fact, he says, size is not always a good indicator of performance: "The bigger the company, the more complex its operations and the more difficulty it has in performing well. It's not surprising, then, that the average lifespan of many big companies is so short. Thirty of the 100 largest U.S. companies that were polled by Fortune (Magazine) in 1990 are now defunct. From the 1980 list, only 50 remain. It is hard for a company to be big and healthy at the same time.

"... having big companies should not be an end in itself. More important, we shouldn't give up competition for the illusion of being bigger."