By DAVID MOON, Moon Capital Management
Despite the recent softening in the US economy and an outright recession in
parts of the world, our generation enjoys an unprecedented level of mainstream
prosperity. Our grandparents' could not have imagined our current levels
of wealth and riches. But among a sea of prosperity, there are deserts of
economic desperation. In every economy, there are people who, for all
sorts of reasons, have not participated in our increases in living
standards. People are hungry, unemployed, underemployed and often
forgotten. I have an idea about how to improve these peoples' lots in
life: let's have a protest rally, turn over a few cars and destroy a bunch of
businesses - where, incidentally, people work and earn a living. If,
instead, you are concerned about global warming, what might you do? Set
fire to some cars and garbage dumpsters and toss a few firebombs around.
That's exactly what I think when I see protesters like those at last week's
G8 meeting in Genoa, Italy.
What do these protestors do for a living? Are they students? Or are
they professional protestors, in search of something to be against? Go to
some exotic location, toss a few rocks at cops, get on television, then go home
and tell yourself and your buddies you are fighting for the plight of the
world's underserved. So what if someone loses his life in the
process? What difference does it make if some guy stupid enough to locate
his business in the path of your protest loses his livelihood? These
protestors are on the side of the underprivileged, so they think their actions
are excusable, regardless.
The protestors in Italy objected to increased cross-border economic
relationships ('globalization,' they call it) and the inherently evil nature of
the capitalism that is responsible for all of world's wealth. These kids
just don't like how that wealth is distributed. One group of protestors
attacked a prison in Genoa, shattering windows and tossing Molotov cocktails
into the facility. I assume the protestors knew that the prisoners in that
jail were personally responsible for child labor laws in China.
Non-violent protestors in Italy carried banners that read, 'People, Not
Profit.' How do you think people pay their bills, build houses and feed
their families? With profits. Without profit and its powerful
motivational forces, we would live in poverty. Of course, this would
diminish the relative difference between the wealthy and the poor; without
profit, we would all be poor. Many of these idealists envision a society
where some oversight group (the central government or politburo, perhaps)
allocates wealth and resources in a fair and equitable manner, making sure that
no one hoards an unfair share of a region's riches.
There is one major flaw with this type of system, however. Without the
great wealth that narrowly accrues to that small group who successfully pursues
profit, there is no increased output to share. Without profit, we would
eat the berries and nuts we could gather from the trees in our backyard.
But with profit motive, businesses like Microsoft ease the lives of million of
people in the world, making us more productive and increasing our quality of
life. So what if Bill Gates makes a few hundred billion dollars in the
process? It is not his fault that I don't have his money.
The flawed premise of the Genoa protestors is the notion that wealth is
fixed. If wealth was fixed, the only way someone could accumulate great
riches would be by taking them from someone else. But wealth is not a zero
sum game. In fact, wealth is contagious. New wealth is more likely
to occur near existing wealth. Economic isolationists think global trading
allows wealthy countries to steal from poorer nations, but the opposite actually
happens. Free trade allows people to benefit from their own strengths,
trading those strengths for something they want from a wealthier trading
partner. That seems to work a bit better than burning cars and throwing
bricks through windows.
David Moon is president of Moon Capital Management, a
Knoxville-based investment management firm. This article
originally appeared in the News Sentinel (Knoxville, TN).