Clearly, the idea that capitalism goes hand in hand with social marginalization doesn’t really fit reality.

The myth that capitalism only rewards the rich

By Nima Sanandaji
It is a common critique that capitalism is a great system for filling the pockets of the already rich, but that this prosperity comes at the expense of common people. Nima Sanandaji uses data from the Human Development Index to show how most capitalist countries combine prosperity with good social outcomes. The idea that capitalism goes hand in hand with social marginalization doesn’t fit reality.


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• The myth that capitalism only rewards the rich
• The most capitalist countries combine prosperity with good social outcomes
• The idea that capitalism goes hand in hand with social marginalization doesn’t fit reality

Capitalism is a great system – for filling the pockets of the already rich. But this prosperity comes at the expense of common people, who struggle hard to afford basic services such as health care in the unforgiving market system. This is a common critique against economic freedom. During the 19th and 20th century leftist intellectuals would still argue that socialism and state planning could create greater prosperity than markets. Reality proved these ideas wrong – big time. It is today quite evident, even for those who would ideologically wish otherwise, that free markets are best at fostering innovation and growth. So the critique against markets has changed. Today it is more along the line: well, yes, capitalism creates prosperity, but only for a small handful. If you are an ordinary guy who wants to live a long and healthy life, avoid capitalist countries which are all about the survival of the fittest. However, even this theory struggles in the face of reality.

To find out if markets really translate to poor social outcomes, let’s look at the United Kingdom. According to the Index of Economic Freedom, the country has the 13th freest economy in the world. Since the UK is amongst the more market oriented countries we should expect – assuming the socialist critique to be true – that the country has appalling levels of human progress. To test this theory, we can turn to the Human Development Index. This United Nations project has for long examined how good countries fare in terms of equality, educational opportunities, health and other welfare measures. A quick glance at the latest data shows that the UK is a country with a high rate of human development – more preciselyranked at 14th place internationally. This means that the UK is a place where the great majority live long and prosperous lives, with widespread access to health, education and social services. Good social outcomes and capitalism is, at the very least, not an impossible mix.

Perhaps this is not surprising, since the UK combines free markets with a relatively large welfare state. Places which have a higher economic freedom ranking that the UK tend to have much slimmer welfare states. What happens if we instead of the UK look at the 5 most capitalist places on the planet? According to the Index of Economic Freedom four former UK colonies are the most market oriented places in the world, namely: Hong Kong, Singapore, New Zealand and Australia. In fifth place comes Switzerland. These free-market Meccas have low levels of taxation and correspondingly limited frame of public services offered to citizens. Of course, societies with small welfare services can ill afford generous social security and other social goods such as universal health care. Surely the most capitalist places on the planet fit the leftist critique, having systems that rewards the rich and the rich only?

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