Free Markets and the South Pacific

by seangljacobs

Why free markets and capitalism are good for the South Pacific

Too often in the South Pacific we hear free markets being described as ‘predatory’ and as an enemy of everyday people.  Capitalism is seen as driving greed and benefiting only ‘elites’ or those with political or economic connections.

But amid these perceptions it is worth stepping back and examining, realistically, some of the benefits of the free market system in the South Pacific.  This can be done by considering three broad points.

Firstly, self-interest is part of human nature.  The desire to think, to choose, to be industrious, and to acquire skill and opportunity are what drives people to do better for themselves and their families.  Some call this ‘greed’ but ‘self-interest’ is more suitable because it includes decent people seeking to earn a living.  Like it or not, the world revolves on individuals pursing their separate interests.

How many of us would call undertaking an apprenticeship in Honiara, or studying at the University of the South Pacific, or sweeping floors in Port Moresby as ‘greedy’?  Trying to earn a living by virtue alone is unlikely to get you far.  Successful economies teach a basic lesson – the only way to prosper or become wealthy in a free market is to produce something that someone else wants or needs.  People across the region are not always trying to ‘pull a fast one’ on each other but pursuing self-interest through jobs, business or commercial activity that, at the end of the day, amounts to a public good.

In the 18th century, Adam Smith – a Scottish moral philosopher – made the observation that: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”  This applies as much to 18th century Britain as it does to any South Pacific nation today.

Secondly, capitalism generally serves people much better than government.  In Papua New Guinea (PNG), for example, it is not the government putting up mobile phone towers or providing internet access – it is companies operating under a free market system.  It is not the government that collates and prints copies of Stella Magazine but professional editors and printers.  Nor are governments across the region running supermarkets or selling fruit and vegetables.

It is precisely the services run by government that perform most poorly.  Despite some privatisation of state owned companies beginning in the 1980s, many services in the South Pacific are still administered by governments and, as a result, have high prices and are unexposed to competition.  Without competition, prices stay high.  And it is poor people who suffer most from high prices, or when roads are so bad that produce or medicines cannot be moved between towns.

Thirdly, throughout history, capitalism and free trade are the only mechanisms that have consistently pulled masses out of grinding poverty.  It is exactly the places with little or no capitalism and free trade that are the poorest.  China is an excellent example of free markets corroding misery.  Since re-opening its economy to the outside world in the early 1980s, three hundred million people are estimated to have been pulled out of poverty.  China achieved this not by turning its back on free markets but removing closed-door economic policies that kept millions jammed in economic stagnation.

Signs suggest that people in the South Pacific are becoming more conversant with and demanding more from the free market.  In Port Moresby, for example, shipping ports are so busy trying to get goods into the country that containers cannot be processed quickly enough.  Although not quite at the same tempo as PNG, other Pacific economies are still posting growth rates.

Cheaper goods and services from freer trade benefit all people, not just the wealthy.  The less people spend on goods and services the more they can spend on other priorities like school uniforms or medicine.  Again, it is those with the least money that suffer when the choice and cost of goods is limited and more expensive.

If there is a clear message to the next generation in the South Pacific it is to get comfortable with self-interest, look to acquire skill and contribute to the economy.  A free market system rewards skill and persistence, but also helps to reduce poverty.  While free markets and capitalism are certainly not unblemished, they provide the best chance of working for everyone and not always a favoured few.