A New Age of Capitalism
By John Greenwald
) The first and highest form of the state and of the government and of the law is that in which there prevails most widely the ancient saying, that "Friends have all things in common."
-- Plato, Laws
Again, how immeasurably greater is the pleasure, when a man feels a thing to be his own . . .
-- Aristotle, Politics
From the time of the ancient Greeks, philosophers, politicians and just plain folk have debated the best form of society and the proper role of the state in the lives of its people. For more than a century, advocates of collective ownership and strong government control of the economy have marched under the banner of socialism. Those who champion private property, individual initiative and the pursuit of profit are in the capitalist camp.
A decade ago, socialism seemed to be on the ascendancy, despite some severe cracks in its facade. In Bombay and Bangkok, in Lima and Lusaka, governments were nationalizing industries and imposing ever growing and restrictive regulations on private companies. The rising tide of socialism threatened to become a tidal wave. Among superpowers, the Communist Soviet Union appeared to be gaining in international prestige and influence, while the capitalist U.S. seemed to be declining. Racked by oil crises, recession and an inflationary fever that soared to double digits, the free-enterprise system faced a doubtful, some said downright perilous, future.
All that has dramatically changed in the 1980s, as capitalism has become the spirit of the age. More and more countries are turning to free enterprise as the last, best hope for faster economic and social development. Fetters are being taken off industry. Entrepreneurship, the business of starting up companies, is in vogue. "If capitalism means allowing markets to work, then we are seeing some dramatic examples around the world," says David Henderson, chief economist for the Organization for Economic Cooperation and Development.
In the Third World, even socialist countries like India have increasingly turned to private enterprise in the search for more production and jobs. In Latin America, debt-plagued Argentina, which owes $51 billion to foreign creditors, is striving to dismantle some of the stifling legacy of state enterprise created by former Dictator Juan Peron. Communist nations are making efforts too. In Eastern Europe, small but thriving outposts of free enterprise continue to exist amid the suffocating state presence. Half the wurst and baked goods in East Berlin come from the private sector.
"The new philosophy can be seen very clearly across the spectrum of industrial nations," said Alan Greenspan, a New York City economic consultant, at a meeting last week of TIME's three Boards of Economists (see following story). In its latest economic outlook, the OECD noted that the state's share of the economy in 19 West European countries has begun falling for the first time since World War II. Public outlays accounted for 50.6% of gross domestic product in 1984, vs. 51.1% the year before. Even Scandinavia, where the welfare state achieved its fullest flowering, has caught the spirit. Says Nils Lundgren, chief economist of PK Banken, Sweden's largest bank: "Deregulation, market solutions and free enterprise are the order of the day."
Republican Congressman Jack Kemp happily says, "Capitalism is not a dirty word anymore." Actually, that is not quite right. In much of the world, the term still conjures up images of 19th century sweatshops and colonialism. In fact, socialism's elusive promise of economic equality retains a powerful appeal in many parts of the world, and its current malaise does not mean that it could not make a comeback.
But no matter whether leaders call it private enterprise or free enterprise or privatization, the policy they are advocating today is basically capitalism. The most fundamental distinction between socialism and capitalism is that capitalism looks to the individual to be the main actor in economic life, while socialism looks to the state to play that role. Today more and more countries are looking to the individual, while fewer and fewer think the state can provide all the answers to economic problems.
The resurgence of capitalism is rewriting the world's political lexicons. Social Democratic leaders across Western Europe are increasingly pro-business. Says Herbert Giersch, director of the Institute of World Economics at the University of Kiel, West Germany: "The European Commission, even under a socialist president, is pushing toward a decontrol of the capital market, a breakdown of the airline cartel and reform of agriculture policy."
The shift toward free enterprise could have an impact on global politics. India and other countries, especially in the developing world, once considered the Soviet Union as a model for economic modernization. But now they are looking west to the U.S. or east to Japan, Hong Kong and South Korea.
The reason that private enterprise is on the rise is clear. While capitalist nations, including the U.S. and the emerging countries of Asia, have been highly successful at creating wealth, socialism has largely proved an economic drag. Says Peter Berger, a sociologist at Boston University: "Socialist societies have been dramatically outperformed by any number of successful capitalist countries, especially in Asia."
Capitalism's promise, by contrast, is the creation of a more robust economic life, and the record of delivery is good. "Private enterprise is now the universal belief," says Bernardo Villegas, chief economist for the Center for Research and Communication in the Philippines. Leaders in Africa, Asia and Latin America are increasingly turning to free markets to develop impoverished economies and catch up with the rest of the world.
Western Europe's heavily state-influenced economies provide perhaps the clearest example among industrialized countries that more government control does not promote faster development. "Europe has been growing desperately slowly," says Jean-Claude Trichet, chief of staff of France's Ministry of Economy, Finance and Privatization. The Continent has been slow to adapt or innovate as economic events moved rapidly, a condition that was dubbed Eurosclerosis. Its experience with high-technology projects, like the Anglo- French Concorde supersonic jet and the national French computer program, have been costly disappointments.
In the decade after the 1973 oil shock, the U.S. created 16 million new jobs and Japan added 6 million. Yet Western Europe had practically no growth in its work force. Unemployment, which as recently as 1971 averaged 3% in European Community countries, is around 12%. The area's economies expanded just 5.6% between 1979 and 1984, vs. 10.4% for the U.S. and 21.7% for Japan.
In the Third World, the failure of socialism and state ownership is evidenced by years of recession, rampant inflation and an abundance of horror stories about grossly mismanaged government industries. In Argentina, residents may have to wait 20 years for the state communications monopoly to install their phones, and the charge for such "service" can reach $2,000. In Mexico, the government lost some $500 million during the past four years on the nationalized Fundidora de Monterrey steel mill and finally shut it down in May. The mill had once thrived in private hands.
/ Given the obvious shortcomings of socialist ownership and planning, why did so many countries rush to adopt socialism? The answer in many ways lies in the history of early capitalism. As the Industrial Revolution gathered force in the early 19th century, employees were treated as harshly as machines and made to work under wretched and frequently dangerous conditions. In the U.S., eight-year-old children could be pressed into factory service for 14-hour days. But this cruelty failed to insulate capitalism from sudden business slumps. Between 1873 and 1929, a series of economic panics, crashes and depressions showed the system's flaws. Notes Author Peter Drucker: "In the Panic of 1873, the modern welfare state was born. A hundred years later it had run its course."
The founder of today's socialism and the most powerful critic of capitalism was, of course, Karl Marx. The 19th century German thinker predicted that free enterprise would be overthrown and replaced by a socialist state, where workers rather than profit-seeking businessmen would run the economy. Socialism would then evolve into Communism, a utopian condition in which the state would cease to exist. Marx won many followers among people who genuinely thought that a planned and controlled economy would provide a better living for everyone than the chaos and slumps of capitalism. A superb pamphleteer, Marx summed up his ideal in the famous phrase "From each according to his abilities, to each according to his needs." The Marxist vision inspired movements as militant and dogmatic as Soviet Communism and as mild and welfare-oriented as the Democratic Socialist parties of Western Europe.
It was the Great Depression and World War II, though, that set the stage for the advance of socialism. More and more people demanded reforms to curb capitalism's worst abuses and remove the vicissitudes of unbridled economic life. Antitrust laws were used to break up cartels, and statutes regulating working conditions were written in the books of almost every country. Unions grew strong and won numerous benefits for their members. In the U.S., the New Deal created a plethora of programs as varied as public works projects and the Social Security system. In Europe, governments after World War II went even further. They created free medical care, protected workers from being fired and set up so many other programs that the term cradle-to-grave security was coined.
The war effort boosted state control and planning. The victorious British had marshaled their might in a total war effort by making the private sector a virtual arm of the government. They thus became used to the state's telling the private sector what to produce, and this continued after the war. When the fighting stopped, most of Europe lay in ruins, and the government began directing postwar reconstruction. The British steel industry and Renault, France's largest automaker, were among the ventures nationalized.
The Third World's turn to socialism arose in large part as a reaction to colonial rule. Even today capitalism is considered part of a hated past. "Capitalism is regarded as an ideological word and is not acceptable," says a Western diplomat stationed in Africa. When newly independent countries adopted socialism in the 1960s, they were in effect rebelling against what they saw as the economic system of departing colonial masters.
In addition, many founding fathers from newly independent countries had been educated in the West, absorbing then trendy socialist ideas at influential institutions like the London School of Economics. Wrote Edward Shils, a University of Chicago sociologist: "The spread of socialistic ideas was aided by the large-scale migration of Asian and African intellectuals to Europe for further study and professional training." Once in power, they applied what they had learned.
All told, the decades immediately after World War II were something of a golden age for socialism. As countries extended their sway over business, Economists Joseph Schumpeter and Friedrich von Hayek darkly warned of an irreversible global turning away from capitalism. Schumpeter argued, "Socialism of a very sober type would almost automatically come into being." Hayek predicted that the rejection of free enterprise would create dictatorships everywhere.
By the late 1970s, however, all the varied roads to socialism were converging on dead ends. "Most governments were seeking to reduce the public, and expand the market, sectors of their economies," writes Historian Paul Johnson in his chronicle, Modern Times. The retreat was foretold by a swing in intellectual fashion. It began with the 1970 publication of Jean-Francois Revel's Without Marx or Jesus, which praised U.S. society as open and pragmatic and rejected socialism as a dogma that had failed.
In Paris, members of the New Philosophers movement were powerfully impressed by Alexander Solzhenitsyn's voluminous account, published in the mid-1970s, of the appalling Soviet Gulag camps for political prisoners. The period brought the spectacle of Communist Leader Pol Pot's genocide of perhaps 3 million Cambodians. Writer Bernard-Henri Levy blamed Marxism for Communist atrocities, and the charge resonated among French thinkers. Although their disillusionment was intellectual, it helped set the stage for Europe's economic shift half a decade later.
At about this same time, the once promising welfare state began running into trouble on two fronts. The first was simply cost. Programs established when economies were growing rapidly in the '50s and '60s were difficult to pay for when business hit several years of slumps in the '70s and '80s. In addition, it soon became clear that the welfare state was having a serious effect on worker incentive and individual initiative. If high taxes and generous social benefits meant that a person got just about the same rewards whether he worked hard or did little, there was less reason to do more. Says the Philippines' Villegas: "The social safety net can become a hammock."
Much of the world's interest in capitalism is due to the recent success of the American economy in creating jobs. "The global return to market economics is very much inspired by events here," says Robert Hormats, a Goldman Sachs vice president who served three Administrations as a senior economics official. "Perhaps the most lasting legacy of the Reagan years will be that they restored faith in the effectiveness of markets." While a large part of the world outside Asia has been stuck in a swamp of stagnation, the U.S. has seemed dynamic and growing. New industries such as microcomputers and fiber optics were expanding rapidly in the U.S., and young entrepreneurs like Apple Computer's Steve Jobs became folk heroes not just in the U.S. but abroad. Many foreign leaders, including France's Francois Mitterrand and Chinese Vice Premier Li Peng, trekked to California's Silicon Valley to study a future that seemed to work. A best seller in France was Guy Sorman's The Conservative Revolution in America. Lee Iacocca's autobiography became an international best seller, and has been translated into 15 languages.
To be sure, countries are making greater use of capitalism in their own ways. When it comes to selling state-owned companies, Britain has led the way. "The British example is important for the world," says John Redwood, a former Thatcher aide. Since 1979, the Conservative government has raised , $11.25 billion by unloading all or part of 18 nationalized firms. Jaguar, the famed carmaker, and Sealink U.K., the cross-Channel ferry firm, are now in private hands. So is majority control of British Telecom and British Aerospace. Scheduled for the block are British Airways, the British Airports Authority and part of the Rover Group, the maker of Austin Rover and Land Rover vehicles. "They're lined up like airplanes at Heathrow," says Madsen Pirie, head of the Adam Smith Institute, a London think tank.
Thatcher, though, is hardly a shoo-in in the next general election, which must be held by June 1988. Her Conservatives trail the rival Labor Party by 6% in public opinion polls. Thatcher's problem is that she does not have enough to show for her privatization experiment. A 13.1% unemployment rate has put 3.2 million Britons out of work. Thatcher's hope for political survival rests on creating more jobs and reducing tax burdens.
France is loosening its system of dirigisme, or state direction of business, which goes back to the 17th century and Jean Baptiste Colbert, the minister to Louis XIV. Socialist President Francois Mitterrand nationalized 39 banks and five major industries soon after taking office in 1981. He changed course later, but not before the political damage had been done. Last March a right-wing coalition that promised to denationalize companies and promote business won control of the National Assembly. Now Mitterrand and Prime Minister Jacques Chirac are locked in a struggle over terms for selling off state-owned corporations. A particularly heated battle has raged over Chirac's efforts to sell TF1, France's oldest and largest national TV channel. Strikes and marches have protested the transaction, and a poll found that 56% of those questioned were against the deal.
In Italy, former Prime Minister Bettino Craxi, a Socialist, created a capitalist renaissance that appears likely to last. During the three-year rule of Craxi, whose government fell last month, the country's mood had changed. Says Arrigo Levi, one of the country's best-known journalists: "There is a new belief in market forces, in private enterprise, in the value of work itself, and that has been accompanied by a crumbling away of the idea that the state owes you a living."
One of the clearest indications has been the transformation of IRI, a vast state-run conglomerate that dates back to Mussolini. The 1,079 firms in IRI's portfolio include Alfa Romeo, Alitalia airline and Banca Commerciale Italiana, the country's second-largest bank. While this leviathan was losing nearly $2 billion a year, previous governments had been reluctant to touch it. Craxi encouraged IRI's new president, Romano Prodi, to take bold action. He promptly laid off 47,000 unionized workers and raised more than $3 billion by selling all or part of 35 companies and other holdings.
Outside Europe, India has made the most dramatic shift of any non-Communist nation. Since the country's independence in 1947, socialism has been an accepted part of India's political and economic system. Now the subcontinent has begun to embrace free enterprise too. The change is largely the work of Prime Minister Rajiv Gandhi, who took office in 1984 after the assassination of his mother Indira Gandhi. Rajiv has presided over a liberalization program that has slashed taxes and produced more than 80 decrees loosening or abolishing business restrictions. Despite foot-dragging by India's entrenched army of bureaucrats, overjoyed managers have responded by rushing to securities markets to raise cash for investments.
Much of the money came from the Bombay Stock Exchange, which is now a feverish financial center. On weekdays, hundreds of sweating, shoving and shouting traders fill an entire floor, recording transactions in soiled and curled-up note pads with leaky ball-point pens. As they jostle through the crowd in search of buyers or sellers, the action often becomes so intense that fights break out. For all that, the exchange has been one of the top performers in the world during the past two years. Prices have doubled since Rajiv Gandhi took office, and new stocks are regularly listed for trading.
Gandhi's moves have put the Indian business community in an upbeat and feisty mood. The Tata Group, a sprawling giant whose operations include steel mills, power plants and truck manufacturing, spent some $85 million a year on new plant and equipment during the regulation-choked 1970s. Now Tata invests nearly $300 million annually.
Many poverty-torn African nations are slowly turning to free enterprise in hopes of spurring growth. In an extraordinary plea for help last May before the U.N., the Organization of African Unity acknowledged that the "positive role of the private sector is to be encouraged." That is just a beginning. In Nigeria, President Ibrahim Babangida plans to sell the government's stake in more than 160 companies, including hotels, breweries and appliance makers. In Kenya, ailing state-owned monopolies are finally being permitted to fail so that their operations can be taken over by private firms. Uplands Bacon, the longtime king of Kenya's pork-processing industry, went bankrupt after a new private company began devouring its business. The Ivory Coast has liquidated its national trading company along with unprofitable rice and hotel operations. Even Tanzania, once the leading advocate of socialism on the continent, is cautiously eyeing the capitalist road. Before he retired last year, President Julius Nyerere conceded that his system of African socialism, or ujamaa, had failed, largely because Tanzanians resisted collectivization. Nearly two decades of state control have left the country with $3.5 billion of foreign debt, an average annual GNP growth rate of just .9%, and a per capita income of $240. Faced with such woes, Finance Minister Cleopa Msuya promises to boost food production by letting private companies invest in commercial farms. To attract businessmen to the export trade, he is lifting controls that have kept them out. President Ali Hassan Mwinyi has warned Tanzania's 430 government-owned firms that they will have to survive without subsidies.
A continent away, Argentina is taking a hard look at its bloated public sector. Under the nine-year rule of Juan Peron in the 1940s and '50s, the country nationalized airlines, railroads, communications firms and dozens of other other industries. Now President Raul Alfonsin is trying to cut that heritage back. His Radical Party is preparing legislation that would allow Alfonsin to privatize 748 wholly or partly state-owned firms. Excluded would be 15 or so giant albatrosses like Aerolineas Argentinas, the flagship carrier that is losing about $1 million a day. Argentina has so far managed to raise only $4.6 million by selling a travel agency, an industrial pipe manufacturer and a ceramics factory. Says Norberto Bertaina, state secretary of development promotion: "In the past, everybody talked about privatization, but nobody did anything. At least we have privatized something."
Free enterprise has a way of sprouting in even the harshest ground. In Peru, a burgeoning "informal sector" has grown up alongside state-owned companies. Says Hernando De Soto, director of the Institute for Freedom and Democracy, a Lima research group: "The informal sector is laying the basis for capitalism." Workshops in Lima shantytowns produce shoes, bicycles, blankets and virtually anything else that can be sold by the tens of thousands of street vendors who throng the capital's pavements. The thriving alternate economy accounts for more than a third of Peru's annual production.
The foundation of private enterprise is already firmly established in the countries along the Pacific Rim, which has been the world's fastest-growing region in the past ten years. Their prosperity is based on a unique mixture of planning and enterprise sometimes called Confucian capitalism. Says Edward Chen, director of the Center of Asian Studies at the University of Hong Kong, about newly industrialized Taiwan, South Korea and Singapore: "The government always leaves some room for the private sector to excel and to compete and to get a reasonable rate of profit." Stressing education, hard work and social harmony, state and business sectors have cooperated to produce the exports that fuel development.
Another important factor behind the rapid growth of these countries is their openness to the world. Perhaps more than other nations, they have realized that in a world of instant communication, countries have no place to hide. This morning's news from London is the basis for a business decision in Hong Kong this afternoon. Money flows around the world as a blip on a computer screen. These countries know they must find ways to compete effectively in the global marketplace; the alternative is stagnation. Rather than closing themselves in and trying to be self-sufficient, they have aggressively gone after a world market and become players in a global economy.
The Pacific Rim countries are also selling off state enterprises. Singapore sold a minority interest in its national carrier, Singapore Airlines, last November, and Taiwan is considering offering stock in state steel, chemical, shipbuilding and construction operations. "The time has come for privatization," says Y.Y. Wang, vice chairman of Taiwan's Commission on National Corporations. In Japan, the government is selling majority control of Nippon Telegraph & Telephone in order to open the telecommunications market to newcomers. Japanese National Railways is next in line.
The tumultuous Philippines, East Asia's poorest country, has the most ambitious free-enterprise plans. President Corazon Aquino is pressing for a "second revolution" to rebuild her impoverished and embattled country, which faces Communist insurgents at home and political maneuvers launched by ousted President Ferdinand Marcos from abroad. A Cabinet program calls for the government to withdraw from economic activities "to allow private business to become the prime mover of growth." Scheduled for sale are more than $6 billion worth of assets in idled companies, many of them abandoned to bankruptcy by Marcos or his cronies. Also to be sold are tens of millions of dollars in sugar, coconut and banana plantations that Marcos or his friends controlled.
On the opposite side of the South China Sea, Deng Xiaoping is pursuing his own second revolution in which ideological distinctions between capitalism and socialism take second place to results. As Deng has said, "It doesn't matter whether the cat is black or white, it is a good cat as long as it catches mice." Capitalism is rapidly spreading from China's farms to its cities. Like Lima, Peking swarms with private vendors offering everything from soft drinks to socks. The hawkers cluster in 600 free markets in Peking and 61,000 throughout China. In the northeastern city of Shenyang, the government leases factories to individual managers, who can earn up to $19,000 a year, or nearly 60 times the average worker's wage. Another pilot program allows workers at some 20 Shenyang plants to buy shares in the facilities and earn cash profits.
Hungary is another Communist state where profit can be a virtue. The country's thriving cooperative system leaves some 650,000 farm workers relatively free to make business decisions and to absorb losses or pocket gains. Leader Janos Kadar encourages small private ventures, with results that can be seen across the country. Virtually every Hungarian town boasts restaurants with tempting food and smooth service, clothes stores with high- fashion wear and bustling streets filled with numerous shops.
Profits, of course, have never been out of fashion in North America. Yet now there is greater interest in the private sector. Canadian Prime Minister Brian Mulroney last year sold De Havilland Aircraft to Boeing for $113 million and was promptly attacked for making the deal at "fire-sale" prices. Retorted the Conservative leader: "I don't believe that government should do what private industry can do better." Mulroney may next take offers for Air Canada, the national airline, and may even entertain bids for Canada Post, the country's mail service.
Under the Reagan Administration, Washington has curbed the Government's , role by cutting taxes and reducing regulation. While the White House proposed a 1982 program to shed weather satellites, surplus land and other federal holdings, the effort quickly bogged down amid a public outcry. The Administration hopes to raise $8.5 billion next year by selling power authorities, airports and energy reserves. Privatization has been far more successful at the state and local level, where governments have been able to spin off transportation, sanitation and other services.
Just as nations have swung in recent years from state intervention to free enterprise, they could as easily shift back. The change could take place especially if the world economy turns down sharply or private-enterprise reforms do not pay off as quickly as promised. "While there does not appear to be any indication of a reversal in the shift toward capitalism," says Economist Alan Greenspan, "it would be a mistake to presume that the change is irreversible."
Any faltering of the world economy could encourage nations to turn once again to socialism, which always has a strong idealistic appeal. People have been attracted to the concept of an egalitarian society at least since Plato, who held that "it would be well that every man should come to the colony having all things equal." In practice, of course, socialism falls far short of the promise. Privileged classes always grow up, and some people -- bureaucrats or party officials -- invariably do better than the rest.
Capitalism could be undermined by its own supporters. Many industrial nations are already failing to fulfill their public commitment to freer markets when it comes to international trade. The U.S., Europe and Japan have all raised barriers against imports to protect their home industries. "Trade interventionism runs directly counter to what governments are trying to achieve through other policies," says OECD Economist Henderson.
Any social movement with as vast an impact as the comeback of capitalism naturally faces strong resistance from those who hold power or influence. In West Germany, Finance Minister Gerhard Stoltenberg has managed to put a 20% share of Volkswagen up for sale, but union objections and a welfare-state tradition threaten further moves. "There is tremendous opposition against introducing greater flexibility," says Stoltenberg. The very thought of capitalism can galvanize opposition from those with government power and jobs. In Buenos Aires, some 4,000 members of the Argentine Workers Association demonstrated last month against privatization plans.
Entrenched bureaucrats can put up obstacles at every turn. Says Manuel Tanoira, who resigned after eight months as Argentina's privatization chief: "There are enough statists encrusted in the administration to blunt any efforts to break up their domains." In Tanzania, middle-level bureaucrats have for six years blocked the privatization of the National Milling Corp., a cereal-marketing concern.
In India, nearly 40 years of socialism have spun a protective cocoon around industries that might otherwise have failed. Gandhi's reforms may well mean that unprofitable factories will have to be closed, bankrupt companies liquidated and myriad workers made jobless. Asks F.A. Mehta, a Bombay executive: "Are Indian politicians really ready to face hundreds of thousands of unemployed people begging to know where they can immediately get a new job?" Roy Laishley, editor of the Africa Economic Digest, puts it bluntly: "Privatization all boils down to redistributing power from one set of individuals to another, and people will fight to retain what they have."
Yet the concentration of power in the hands of the few is precisely what has held many nations back. By wielding strong control over their economies, socialist states leave scant room for innovation, enterprise or experimentation. In a recent book, How the West Grew Rich, Authors Nathan Rosenberg and L.E. Birdzell Jr. write that the explanation for Western Europe's economic growth starting in the Middle Ages was the increasing dispersal of power in society. They conclude that this achievement "stemmed from a relaxation, or a weakening, of political and religious controls, giving other departments of social life the opportunity to experiment with change. Growth is, of course, a form of change, and growth is impossible when change is not permitted."
The world is simply too varied, and nations too tightly bound together, for even the most knowing leaders to control everything effectively. That is as true for government officials in advanced nations, with their panoplies of statistics and computer printouts, as it is for bureaucrats of Third World countries where information may be limited and technical resources few. "It used to seem to me that the drift of all Western countries was toward something like socialism," says Economist Robert Heilbroner, a leading socialist thinker. "But now, when I reflect on what is happening in the / 1980s, it is not so clear. There is a sense of a return to the market, because the task of planning in a modern economy is so complex."
The most productive figure in history is the individual trying to improve his status. Whether he is an Asian peasant tilling his land or an American businessman building a company, the profit incentive is a powerful force. Capitalism is not a neat, orderly system. The street vendors of Lima or Peking or New York City, some basic examples of capitalism, are more chaotic than the orderly but often empty stores in so many socialist states. Capitalism's unruliness means that it will always be subject to swings of boom and bust. The system, however, presents the constant opportunity for profit and for improvement of the individual's lot. Countries that want to develop quickly or stay abreast in a rapidly changing economic world are finding themselves drawn to free enterprise, which lets people loose so that they can lose their economic shackles.
With reporting by David Aikman/Washington, Christopher Redman/ Paris and Frederick Ungeheuer/New York