Author: CRT Admin

Ten years ago, some Peruvian farmers started growing blueberries for export.  They wanted to compete with growers in Chili for “profits.”  Imported berries sold in the U.S. in the cold months when they don’t grow there command high prices.

In 2013, Peruvians earned about $17 million in sales.  In 2023, their income from exporting blueberries was $1.7 billion.  A lot of Peruvian families and workers were better off.  Today, Peru exports more than its competitors, reports The Economist:

Innovation made this happen.  Shades of Adam Smith and creating the pin factory to make more pins and sell them for lower prices so that users of pins, those who wore the clothes they made, factory workers and factory owners, all saw a rise in their well-being.

Peruvians took from inventors in the U.S. new varieties of blueberries which did not need chilly winters and which could thrive on Peru’s coast.  By 1922, the yield of the typical Peruvian blueberry field was nearly double the global average, giving Peruvian growers and their customers a cost advantage.

The provision of public goods also lifted production and private wealth creation – tax breaks and irrigation megaprojects to bring coastal desert land into cultivation.

But as often happens with free markets, competitors join the party.  “Colombia, Morocco, everyone is growing blueberries now,” said one farmer in Peru.

Perhaps the stickiest objection to capitalism is that it produces – maybe for some, even thrives – on inequality.  The rich get richer and the poor stay poor.

A recent comment in The Economist complained that “The poor among us have stopped catching up.”  The system has failed them: extreme poverty has barely fallen since 2015.  The magazine, however, does not blame capitalism for this failure of economic growth.  Rather, the magazine puts the blame on governments for shifting from markets to industrial policy and trade restrictions.  It seems constricting markets puts the brakes on wealth creation – just as Adam Smith pointed out 249 years ago.  Indices of economic freedom have been largely flat in most of Africa and South America.

In addition, other data has surfaced that points the finger away from capitalism to culture as the incubator of economic inequality.  It seems that individual behaviors contribute to individual outcomes in life.  As Smith assumed and German sociologist Max Weber made explicit, values drive behaviors and behaviors bring about outcomes.  Social and human capital accounts are the foundations for the creation of financial capital.

A simple example is the entrepreneur.  Starting a new business requires finance, but what are the conditions which permit obtaining monetary capital?  Usually, it is the intangibles – the reputation of the entrepreneur, the practicality of his or her business model, trust that consumers will buy the new product or service with ready money, availability of labor skill and quality of worker diligence, etc.

In a recent article, Professor Roland Fryer of Harvard argued that choosing your identity or living with an identity provided to you by family, community and history, determines much of what your life will be like.  “How you view your role in the world will affect your choices.”  He follows the innovative thinking of George Akerlof, a Nobel laureate, on the complexity of rational economic decision-making once identity perceptions and priorities are taken into account.  Individuals intend to gain from both material outcomes and actions that affirm their ego-identities.  “A corporate job might offer financial stability, but if it conflicts with an individual’s identity as an environmentalist or feminist, the mismatch can lead to dissatisfaction and underperformance.  Lab experiments have shown that people may opt for lower-paying jobs if it means greater congruence with their social group or might choose consumer goods that signal affiliation to a particular identity, despite higher costs.

Then, a recent study published by the National Bureau of Economic Research in the U.S. concluded that the more you work, the more you earn when the major determinant of total lifetime working hours is individual choice – values, again, driving behaviors and life outcomes.

Those who work more, earn more because they spend more time acquiring skills.

Thirdly, religion adds weight to the scales of human capital.  Pious students have higher grades, better attendance records and complete more years of college (The Economist, August 17, 2024, p. 19).  Religious communities tend to be learning communities.  They read together, engage in dialogue together and build all kinds of social skills.  I recall my more conservative Jewish friends in high school and college with all the hours they put into reading and debating the Talmud.

Within nuclear families, the more religious siblings perform better in school.

Doing better in school also happens with faithful atheists.

I have just learned from one of our fellows, Recep Senturk, dean of the College of Islamic Studies, Hamad Bin Khalifa University, Doha, that he is publishing an important new book on the topic of Adamiyyah.

Adamiyyah is a humanistic approach to application of Qur’anic teachings, an approach most needed at the present time.

Here is the pre-order flyer for his book:

You may recall from my report of our meetings at the Vatican in May that Recep spoke then about Adamiyyah at the Pontifical Institute for Arabic and Islamic Studies.  The audience was most impressed with and moved by his ideas.

I hope you will make time to buy his book and read it.

A recent CBS television program in the U.S. raised eyebrows and caused controversy within its culturally elite market segment.  Ta-Nehisi Coates was interviewed on his new book, which includes his vehement resentment of Jews in Israel.  Coates is African American, famous for his 2014 article in The Atlantic that America, because of its white racism and slavery, owes African Americans lots of money as reparations.  The CBS host – Tony Dokoupil – was not sympathetic in his questions to Coates and drew attention to Coates’ prejudice.

That put CBS in an awkward position of taking sides.  As the old movement song asked: “Which side are you on Boy, which Side are you on?  Do you march with Martin Luther King or do you “Tom” for Ross Barnett?”

Was CBS selling negative feelings about Israel and Jews or was it defending the cause of Israel as a Jewish homeland?  Hard to have it both ways.

But taking a side is selling a cultural product.

The interview led to dissension, recriminations and tensions in the CBS staff over what the company’s business should be, over what journalism is.  Really, the in-house debate was over the business model of CBS.  What is the product that CBS is selling – objectivity or emotions and prejudices?  What customer base do they seek to please?  Is that chosen product line profitable? What brand proposition does a company market when it associates itself with a cause or a lifestyle?  Is CBS selling news or entertainment?

One might argue that as long as CBS is meeting the needs of customers – a stakeholder constituency – it is a moral capitalist.  Or not?  What if its customers – like industrial polluters or individual drug users and alcoholics – generate negative impacts on society?  Some people’s values and beliefs make them despicable to others.

When values and lifestyles become products, business risks can rise, for not everyone likes every cultural or political value or personal lifestyle.  The business can follow its own values, but at an opportunity cost – it might make more money by selling the morality or the politics which are preferred by a different customer constituency.

But in closed societies, say theocracies or under intolerant authoritarian regimes that censor speech and seek to keep thinking straight and narrow, the choice of a business model is easier to come by: just do what the regime wants and don’t make waves by stirring up values and different opinions