Arthur Brooks, President of the American Enterprise Institute discusses actions to achieve Inclusive Capitalism

Arthur C. Brooks
President, American Enterprise Institute

I can still remember my first glimpse of real poverty. One day as a young boy I was flipping through National Geographic and came across a heartbreaking photo of a malnourished African child. He had flies on his face and a distended belly. I had never seen poverty like that before. Certainly, by today's standards, my childhood neighborhood in Seattle was working class. But compared to the condition of that young boy - who appeared to be about my age - our Seattle neighborhood seemed like Beverly Hills.

That image has been imprinted on my mind ever since. For decades, I would pause and wonder what happened to that boy. What happens to desperately poor people like him?

Many years and several graduate degrees in economics later, I know the answer. Desolate poverty still exists in our world, of course, but it has fallen dramatically since I was a kid. To be specific, the percentage of the world living on a dollar a day has fallen by an astonishing eighty percent since 1970. Let's put this in perspective. When I was a kid, more than one in four people around the world lived on a dollar per day or less. Today, that fraction has fallen to just about one in twenty. Without a doubt, this is one of the greatest humanitarian victories in the history of mankind.

What brought this miracle about? It wasn't primarily US foreign aid, the brilliant insights of technicians at the International Monetary Fund, or expansive government redistribution. It was the five pillars of free enterprise: globalization, free trade, property rights, the rule of law, and entrepreneurship.

But paradoxically, while American values have done so much to combat poverty around the world, we Americans have less reason to celebrate. To be sure, poor Americans have made some advances since the 1970s. In absolute terms, of course, poor Americans have higher standards of living than poor people in the developing world. But when we benchmark our relative success in defeating poverty, our progress has been utterly substandard. While free enterprise has been lifting people up around the globe, the poverty rate in the United States remains virtually unchanged. Life in poverty here has become less miserable, but it has not become meaningfully more escapable.

Consider the current state of the American economy. On paper, it seems clear that the economy is recovering, slowly but surely, from the financial crisis and subsequent recession.

But we know that most of the recovery was driven by a surge in capital markets. And since the top ten percent of the income distribution owns four-fifths of all stocks and mutual funds, this 'recovery' almost exclusively benefited wealthy Americans. Meanwhile, the number of Americans on food stamps - a reasonably good rough metric for the proportion of the country at or around subsistence - has increased from 33 million to 47 million since 2009.

What's going on here? Has capitalism run its course? Has it morphed into simply being a tool for the wealthy to build their fortunes? Is it now incapable of lifting up the masses?

The amazing record of free enterprise plainly rejects this interpretation. Declining opportunity and stagnant mobility for our most vulnerable brothers and sisters do not reflect an excess of competitive capitalism, but rather a drought of free enterprise where it is needed most. Democratic capitalism done right is the greatest force for opportunity in the history of our species. Our calling is not to clamp down on it and minimize it, but rather to expand it, thereby making capitalism more inclusive and more available for those who are being left behind.

How can we accomplish this? How can we promote free enterprise for those who need it the most? As the president of a think tank, I can tell you firsthand that countless exceptional scholars within our movement are inventing and refining fantastic policy ideas to advance free enterprise and make it more inclusive. I lack the time and the space to list them all here. But, with humility, I offer one recommendation. I challenge everyone to undertake an examination of conscience. Every night, as you put aside your tasks and reflect back on the day, ask yourself: "Has all of my work today benefitted those with less power than me?"

If we advocates of free enterprise cannot honestly answer "yes," then we have a great deal of soul-searching to do. But if we can, then let us fight on all the more boldly. Many in the world are desperately hungry for the fruits of inclusive capitalism. They deserve lives rich with the meaning and deep satisfaction that only earned success can bring.

They need us to accept this challenge.