Protesters in Italy and elsewhere haven't a clue to creating change

By DAVID MOON, Moon Capital Management
July 29, 2001

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).

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