Freedom and Prosperity

Where personal freedom exists, the ingenuity and creativity of people spawns great prosperity.  This is the foundation of the natural advancement of the human condition.

There seems to be an infinite number of ways in which we humans measure the condition of our existence and the construct of these measurements or the manner in which they are employed depends upon the lens in which the observer chooses to see their world or the world of the person or people they are observing. I believe it to be a natural tendency for our cultural paradigm, our experiences and our internal biases to impair our vision with a sort of ethnocentric fog that prevents us from truly understanding or empathizing with the plight of others because we are viewing their world from within our own world.  At an intellectual level I generally believe we can sense or  perceive the struggles or predicaments of others, but we do not truly feel their joy or their anguish with the same level of consciousness.  As an example, I would suggest that it impossible for someone from the middle class in the United States to feel or suffer the level of despair that accompanies the deprivation that we see experienced by people in the Sudan or Haiti any more than Sudanese or Haitian person would know how it feels to have all the food, clothing and security that a life in Middle America affords to its inhabitants.

It is within this context that I want to explore the connection between freedom and properity.

To those of us who were born in the United States, our concept of freedom is mostly encapsulated in the history and the mythology of the birth of our country. I use the term mythology not to suggest that the birthing story of our nation was or is completely myth, but simply to indicate that there are many narratives and stories about our nation’s birth, many of which are not born in fact, but were created or embellished (Paul Revere’s Ride comes to mind) to convey the essence or the spirit of the movement that led to the creation of a nation from a collection of loosely affiliated colonies of Peoples who, for the most part, immigrated to this land in search of some form of freedom be it economic, religious, personal (fleeing incarceration), or simply the freedom to explore.  For most of the people in this country, freedom and liberty are intricately woven into the tapestry of our national identity.

Of the many defining attributes of this sense of freedom one of the more important is economic freedom.  There is no generally accepted definition of economic freedom, but I believe the essence of this freedom is the conditions where people are free to produce, trade and consume any goods and service without the use of force, fraud or theft and to do so under the rule of law and where law exists, where private property rights are honored and practiced, and where there is freedom of contract.  These are essential parts of economic freedom and, while there are no entirely free markets our planet, the market that exists in the U.S. is considered by most to be one of the more free and open; and therefore, the most prosperous (despite a great deal of hand wringing and fear mongering by politicians, the U.S. remains the largest manufacturer in the World and the largest consumer, even though our population is 300 million compared to 1.3 billion in China).

Freer markets are the best way to promote economic growth and create opportunity for all. Property rights, rule of law and sound money are necessary core conditions for prosperity. As a result, nations with freer markets have stronger economies and with stronger economies come higher per capita GDPs, better standards of living, infrastructure, employment, and political stability.  In fact, close study of prosperous countries reveals that political and civil liberties are simultaneously expanded when economies are largely market-based and substantially free.  When graft, corruption and fraud are the predominate attributes of a country’s, region’s or city’s economic apparatus, prosperity cannot infuse the lives of the residents and only those people willing to exploit others thrive economically.

It would be a satisfying experience to sit here and write that there exists a market that is totally free and devoid of corruption or exploitation and functioning at such a high degree of fairness and balance that all participants are feasting on the fruit of prosperity.  As with all things human, we come up short more often than not and empathy cedes to fear of loss and greed leads to exploitation and manipulation. Ironically, do to others as you would want others to do to you is a commonly recognized principle that is a highly desired human trait and a core tenet of every major world religion, yet not a universally practiced maxim even by those who would otherwise consider themselves highly honorable.   The evidence of this can be seen throughout the World as individuals,  possessing innately virtuous  personal moral and ethical behaviors, allow their moral compass to dither and to sit quietly while their government exercises some form of Machiavellian prerogative and exploits a group of people or another country for the supposed greater good.  Or worse, they knowingly participate in Orwellian Groupthink aware that the end does not justify the means, but going along to get along or looking the other way to avoid responsibility or guilt.

We are, after all, human, which is to say flawed, and yet, when people realize that by helping others we are helping ourselves there can be a synergistic balance where everyone can join in the prosperity that a free market provides consistent with their gifts and their willingness to contribute their efforts.  In  1776, Adam Smith, in his work, ” An Inquiry into the Nature and Causes of the Wealth of Nations”, recognized that most of us want the best for ourselves and within a system of just laws, we will cooperate with others to help ourselves and this cooperation helps others as well. He understood that the natural forces of self-interest and freedom combine to “create a tide that will lift all boats”. Freedom unleashes individual effort and creativity because free individuals protected by just laws create prosperous and inventive societies. Free individuals and free markets create the wealth of individuals and nations, while simultaneously raising the standard of living of poor citizens.

Adam Smith believed that a “system of natural liberty and justice” combined with free trade would make almost every member of society prosperous if they were interested in doing their part consistent with their abilities.  Adam Smith believed that liberty meant not only freedom of speech and religion, but freedom to earn a living, freedom from burdensome taxes and trade restrictions, freedom from excessive government regulations, and the freedom to own and use property to create a new business or own an existing business. He believed in the creative power of hundreds of millions of individual decisions under the rule of just law creating the power and prosperity of free markets.

These are the bedrock principles that have led to the best economic system humans have yet devised labeled capitalism.  Adam Smith did not write about capitalism or capitalists, but about free economies (capitalism was identified as an economic system in 1792, fifteen or so years after Adam Smith wrote his famous treatise) and the “invisible hand” to describe how effective economies worked and how the efforts of millions of hands and the wisdom of many free minds, not utopias or centrally run economies by governments, lead to prosperous economies.

We can look around the World and see where economic freedom exists and where it does not – the markers are clear and unambiguous.  The test before us is how to bring all of the freedoms enjoyed by the most prosperous Peoples of the World to those who are oppressed, marginalized and exploited.   This is a difficult challenge that will require a willingness to think about the World in new and different ways.  We have new technologies that are being deployed on a global scale, there are fresh and innovative forms of commerce, new geo-political realities and a human-to-human connectedness that has never been possible before.  We are renewing our covenant with Mother Earth and Father Sky and are seeking to heal the damage we have done and are doing to our home planet.  Humankind exudes all of this creativity and energy, yet poverty, oppression, corruption, and apathy still can be found in all societies.  When these  shackles are removed, people flourish and prosperity follows.

In the past decade or so, the World has become connected in ways that still marvel most today.  Telecommunications and air travel are making it possible to communicate,  both electronically and in person, like never before and this connectivity is changing the world in ways that we are just now starting to grasp and to understand.  It almost seems a cliché or glib to say the World is getting smaller, but it is.  We can now, in real-time, watch civil unrest unfold on CNN or the BBC on our smart phones, reading Facebook or Twitter feeds from people engaged in the unrest and we can watch dictators and oppressors be brought down in days after their regimes have been in power for decades.  Social media are bringing transparency and lucidity to the plight of the disenfranchised and discriminated of the World.  No longer do we have to rely solely on the news media or governments to inform of us the happenings in the World. We can hear and see for ourselves, unfiltered, and we get this access from the very people who are living the experiences through their courage and aspiration to tell their stories, for themselves.

The World is growing smaller every day and commerce permeates nearly every part of the globe, but for most people on this planet,  freedom and prosperity are but conceptual mirages that cannot be reached as the path to these human rights is blocked by exploitation, corruption, and oppression created by governments, multi-national corporations, cartels, syndicates, juntas and other groups of individuals that use various forms of power to take advantage of and exploit the resources (all forms of capital including human) needed to feed the appetite of the world economic engine.  We cannot simply impose our notion of freedom on other Peoples, especially by coercion and force.  The best way to help the less fortunate among us in the world is to practice Compassionate Capitalism.  In future posts, I will explore the nature of this form of capitalism and show how it is possible for all Peoples to be given an equal chance to enjoy prosperity without eliminating the essential elements of capitalism: competition, innovation, intellectual property rights, freer markets, and the rule of law.

In the 1987 movie, Wall Street, the antagonist, Gordan Gekko, a corporate raider, during a stock holder meeting for the fictitious company Teldar Paper, utters a phrase that has come to symbolize many of the excesses in the 1980s, ” Greed, for lack of a better word, is good.” For many people, greed is a fundamental element of capitalism and carries a very negative conotation. This has been earned and deserved.  For a Compassionate Capitalist, however, the only type of greed that is good is the desire for all Peoples of this World to have freedom of speech, freedom of worship, freedom from want and the freedom from fear.

Godspeed

Mike

© 2012 Michael L. Henderson. All rights reserved.

Do not go where the path may lead. Go instead where there is no path and leave a trail. – Ralph Waldo Emerson

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A Bar Too Far

Since learning of the widespread use of child slavery in the harvesting of cocoa in Western Africa, I’ve not been able to eat chocolate and I have to say that when I see anything made of chocolate, in my mind’s eye, I picture a 12 year old boy (same age as Jesse our Son) in a tree with a machete chopping cocoa pods and dropping them to the ground from Sun up to Sun down. These children are not being allowed to be kids, not getting an education, and worst of all, they’re not being loved – they’re just being used. And for this, we enjoy cheaper chocolate products and the chocolate producers enjoy lower production costs. Of course, not all chocolate is produced with an element of slave labor, but since the producers will not disclose the source of their cocoa, one is left to indict the entire supply chain of cocoa.

This is not an example of compassionate capitalism.

In this post, I’m singling out Hershey’s. This may not seem fair to them, but they are one of the largest users of cocoa as a raw material in the World, so, in my mind, this gives them a leadership position and a responsibility to use their influence and power as significant procurer of cocoa to ensure their industry is acting ethically and morally.

Recently, as a result of renewed focus on the use of child slavery for the harvesting of cocoa in Western Africa, the source of 65% of the World’s cocoa production, Hershey’s made an announcement that they were committing $10 million dollars over five years to “expand and accelerate programs to improve cocoa communities by investing in West Africa and continuing to work with experts in agriculture, community development and government to achieve progress with cocoa farmers and their families”. (Please see Link 1 below)

Many organizations advocating the elimination of slave labor applauded Hershey’s action several stating that Hershey’s announcement was a step in the right direction and that it sends the right message saying that it was a good start. (Please see Link 2 below) If you read the linked information and study their Websites, I think you’ll come away as I did thinking these organizations whimped out a bit.

Hershey’s Press Release below is worth careful study with a critical, discerning eye. In this post, I could pick apart the corporate public relations and Orwellian doublespeak sprinkled through the first 15 paragraphs of the press release, but the real moral indictment and co-conspiracy is buried in paragraph 16 of the release in the following statement: “In addition to the initiatives announced today, Hershey is a founding member of a public-private partnership involving the global cocoa and chocolate industry and theU.S. Department of Labor. The partnership has created a new Framework of Action to significantly reduce the worst forms of child labor in Ghana and the Ivory Coast by 2020.”

Significantly reduce the “worst forms of child labor” by 2020. Say what? Come again? Reduce (not eliminate) the worst forms (not all forms) of child labor over the next eight years! I would challenge anyone to suggest that this is an acceptable goal or even remotely moral or ethical.

Does Hershey’s have the resources to eliminate slavery this from their supply chain?

Let’s look at some of Hershey’s numbers:

  • 2010 Sales – $5,671,009,000
  • 2010 Net Profit – $509,799,000 9% profit (a fair profit, but ample to help the industry to fund a program to eradicate the need for slave labor)
  • $10 million over the next five years or $2,000,00 per year
  • $2M of $5.7B = .035267% (this is not 3% of total revenue, it’s .035% of revenue)
  • They have on-hand $884M in Cash or cash equivalents

If we added the other producers into these numbers, we would quickly deduce that the industry as the financial resources to develop a comprehensive program to eliminate all forms of slavery in their supply chain and to do so quickly, they simply lack the will or haven’t been properly motivated.

Hersey’s actions and commitment to the integrity and morality of their supply chain is not an example of compassionate capitalism. And to be fair, Hershey is not alone as most of the chocolate producers of the World are complicit in this as well, along with our own Federal government and the governments of Ghana and the Ivory Coast, among others.

We, too, the consumers of products that use raw materials harvested by or are manufactured by human beings enslaved or indentured, also are not practicing compassionate capitalism.

We need to change this and we can before the current child slaves become adult slaves in 2020.

We must tell the companies that produce chocolate products that we want to buy only products that are made of ingredients that are harvested by people who are treated with respect, paid a fair wage and treated with dignity. We need to also tell them that we will not be buying any of their products until they can demonstrate that the cocoa and other ingredients used in their products are purchased from sources that do not use any form of human slavery.

We will have to accept that chocolate products will cost more to make and they will cost more to buy. I would think that producers could share the cost increase by absorbing 50% of the increase and passing 50% of the increase on to the consumer – the price of chocolate products would go up for us and the producer’s profits would go down. Compassionate capitalism is not going to be easy and or cheap.

If anyone is interested in obtaining a list of the names of the largest corporations involved in the use of cocoa and the name of their CEO, please reply via a post and I’ll e-mail the list to you.

Someone must speak for these children, we should with our purchasing decisions and our voices.

Godspeed,

Mike

© 2012 Michael L. Henderson. All rights reserved.

Link 1 – Hershey’s Press Release: http://www.thehersheycompany.com/newsroom/news-release.aspx?id=1653877

Link 2 – CNN News Release – http://thecnnfreedomproject.blogs.cnn.com/2012/01/31/hershey-pledges-10-million-to-improve-west-african-cocoa-farming-fight-child-labor/

Link 3 – Hershey’s Annual Report for 2011 – http://www.hersheys.com/assets/pdfs/hersheycompany/TheHersheyCompany_10K_20120217.pdf

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Back in the Blogging Ether

So, a few weeks ago I had this tremendous idea; I would add my voice to the Internet ether by launching a blog.  Thanks to WordPress, I was able to quickly and easily create and publish this blog and I rifled off a three or four posts within a couple of days.  Then, with even more ease than the creation phase, I promptly stopped posting. I‘m sure I broke one the fundamental law of blogging – start, then promptly stop.

Well, life got in the road. Specifically, a trip to Costa Rica on business and a weekend get-a-way with my wife to San Diego.  I drafted several posts along the way, but never finished them off.

So, over the next few days I plan to get caught up.  I’m working on an update to my previous post regarding child slavery in Western Africa associated with cocoa harvesting.  I’m preparing a series of posts that introduce 10 economic concepts that one should understand if one is to make sense of the World along with 10 economic fallacies that roll off the lips of politicians and those who don’t really understand how things work.  Along the way, Corbyn, our brilliant and talented son, who is an economics major at the University of Utah (Go Utes!) is going to make a guest post arguing for the normalization of trade with Cuba.

Thanks for stopping by and please check back soon.  Better yet, sign-up to follow this blog and every there is a post, you’ll receive an e-mail letting you know that I’ve found my way back to the keyboard.

Warmest regards,

Mike

© 2012 Michael L. Henderson. All rights reserved.

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200 children died while I wrote this post….

I’m always amazed at the ingenuity of humans.  I’m also amazed at our ability to allow our fellow humans to suffer.

I’m writing this post on a laptop computer that has more computing power than what was used to get Neil Armstrong, Buzz Aldrin and Michael Collins to the Moon and back in 1969.  I’m flying in a Boeing 757-200 with the 178 other passengers at 35,000 feet scooting along at 457 knots just passing over Tampa Bay on my way to San Jose, Costa Rica.  I know this because I’m logged into the Wi-Fi network on the plane that is connected to the Internet and I’m tracking the flight on FlightAware.com. We’re going to land at 9:04pm CST , 14 minutes late after traveling 1701 miles. The program tells me the air routes planned, the gate we left in Atlanta and the gate we’ll arrive at in san Jose, the duration of the flight and eerily, and I mean REALLY eerily, the website also sports an advertising box scrolling at the bottom of the screen with various selections of products I was looking at for a gift for Corbyn’s upcoming 21st birthday.

So where am I going with this?  The tecnology I just mentioned is just one example of what we can dream and what we can do when we’re motivated, yet, by the time I finish this post, upload it the blog, send it to Facebook more than 200 children in the World will have died of mal-nourishment.  A staggering 6 million children die of hunger every year (this number doesn’t include adults or the elderly).  To put this into perspective, 33 states in the U.S. have populations of 6 million or less.

We can solve this problem.  In future posts, I’ll provide information about how this problem is not one of food production, but of food distribution and what we can do to errardicate hunger.  Humankind does not lack the ingunity or intelligence to feed all the people of the world, we lack the resolve.  That is what needs to change.

Godspeed.

Mike (currently 35,000 feet above the Florida Everglades)

© 2012 Michael L. Henderson. All rights reserved.

Posted in Hunger | 5 Comments

Is capitalism dead in the 21st century?

© 2012 Richard Quest, CNN Anchor and Correspondent

Davos, Switzerland (CNN) – With the world still shaking from the global economic earthquake, and suffering daily aftershocks from Europe, it is not surprising that the topic at Davos is whether capitalism is dead.

On the opening day, the main debate focused on the question: “Is 20th century capitalism failing 21st century society?”

It’s not hard to see why. Former White House economist Nouriel Roubini reminded us that today we are “back to the inequality of 1929 and the Great Depression.” High unemployment and the failure of wages to keep pace with living costs are resulting in widespread unrest against elites.

In the eyes of many workers, and especially young people, the business community “has lost its moral compass,” trade union leader Sharan Burrow pointed out in today’s debate. “We must redesign the model. We must reset it,” she urged.

Klaus Schwab, founder of the World Economic Forum, is in no doubt that capitalism is “outdated,” and that talent, not capital, should be the main driver of economies.

So far there seems to be a view that capitalism may be the worst form of economy – except for all the others.

Saying that the system needs fixing is the starting point. Leaders like Muhtar Kent, CEO and chairman of Coca Cola, are spending a lot of time here thinking about what might come next. He believes that a new model based around a triangle of government, companies and society is the way forward. But hang on. Didn’t we used to call that the “stakeholder economy” in the 1980s? Wasn’t the very idea of “stakeholder” designed to broaden the reach of those under the tent? Make more people feel included?

Many like Kent, who employs more than 700,000 people, believe that there has to be a more inclusive form of capitalism. But there are still far too many narrow-minded executives that don’t truly want to make the fundamental changes.

As the failure of capitalism over the past decade shows us, it’s all lip service unless major action is implemented.

While the shift in economic power to the East is undeniable (OK, John Defterios, but that doesn’t mean the West is down and out…) no-one should think these emerging markets are great paragons of new model capitalism, spreading wealth and benefits.

There may well be a rising middle class in the BRICS economies, but poverty, disease and a lack of social welfare still abound there. To say nothing of corruption, and a lack of corporate transparency in many cases.

Earlier in the week, I called this “Davos Do Little” because of the complexities faced in solving the pressing euro crises. I am coming to the view that this might be a good thing.

Since they can’t waste too much time trying to do what they can’t, they are at last willing to talk about what might come next. Now, can someone please tell me what a new model of capitalism might look like? And crucially, how we prevent it becoming just a re-fashioned version of the old?

Richard Quest

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Support Child Slavery – Eat a Chocolate Bar

I can’t think of anyone I’ve ever met that didn’t like some form of chocolate. I know there are people who do not like chocolate or have some form of allergy that prevents them from enjoying even the smallest morsel, but I have not met one of these unfortunate souls. Of course, we know that there are many people throughout the world who can’t afford to buy even one bar, a thought that crosses my mind from time-to-time when I’m standing and marveling at the variety and number of options available at the local grocery store.

Fifteen or so years ago when I first came to work with several Mexican maquiladoras (a Mexican manufacturing operation in which a factory imports materials and equipment on a duty-free and tariff-free basis for assembly, processing, or manufacturing and then re-exports the assembled, processed, or manufactured product, sometimes back to the raw materials’ country of origin) I was surprised to learn that many maquiladoras provided bonuses to their factory labor in the form of Snickers bars.  Why?  Chocolate is expensive in Mexico (for Mexicans!) and, at the time, a delicacy, so it was prized and receipt of this in lieu of money was a benefit to the typical factory worker because the government would tax their bonus if paid in pesos, but not if the bonus was paid in Snickers bars.

The focus of this post, however, is the supply chain used in 70% of the world’s chocolate and how this raw material is harvested and distributed to many of the world’s most prominent chocolate producers.  Like me, I’m sure most of you would be shocked to learn that the basic raw material and the method of harvest is heavily dependent on child slave labor in the Ivory Coast. UNICEF estimates that nearly a half-million children work on farms across Ivory Coast, which produces nearly 40% of the world’s supply of cocoa. The agency says hundreds of thousands of children, many of them trafficked across borders, are engaged in the worst forms of child labor.

That’s right, slave labor and child slave labor at that!

As part of CNN’s Freedom Project, a team of investigative reporters examined the source of the primary raw material of chocolate and produced a series of documentaries and articles that can be found at http://thecnnfreedomproject.blogs.cnn.com/.  I encourage you to watch and read the material available at this website.

So what can we do?  As consumers of the products we have enormous power, but the source of that power is in numbers.  To a company, one consumer speaking out is only a whimper, but thousands or tens of thousands or millions of people speaking out is compelling and when these people speak with their pocket book; now that sends a message.

We can support the Fair Trade Initiatives and demand that our products and their raw materials are produced by companies that adhere to the standards and practices that assure basic human rights. http://www.fairtrade.net/

Some companies have reacted, but only after the atrocity was exposed (again).  http://thecnnfreedomproject.blogs.cnn.com/2012/01/31/hershey-pledges-10-million-to-improve-west-african-cocoa-farming-fight-child-labor/

What we do as consumers will end this practice.  What will you do?

Godspeed,

Mike

© 2012 Michael L. Henderson. All rights reserved.

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Crony capitalism is very different from the market economy

Column by John Kay, The Financial Times

Sixty years of division of the Korean peninsula has created two states with very different standards of living in one country. The Korean example is pathological. The division of Germany resulted in two states, both functional in economic terms, but one far richer. The less noticed comparison between the modern economic histories of Finland and Estonia had the same outcome.

There are few controlled experiments in economics, but these are as close as we get, and the results were clear. They were also unexpected. Hard though it is to believe today, in the 1960s many serious commentators on left and right believed that Russian economic progress threatened western hegemony. Those on the left were naively credulous and those on the right victims of paranoid fantasies.

A perhaps apocryphal story tells of a Russian visitor, impressed by the laden shelves in US supermarkets. He asked: “So who is in charge of the supply of bread to New York?” The market economy’s answer – that not only is no one in charge, but it is a criminal offence for anyone to seek that position – is surprising. In the words of the economists Kenneth Arrow and Frank Hahn, “the immediate common sense answer to the question ‘what will an economy motivated by individual greed and controlled by a very large number of different agents look like?’ is probably ‘there will be chaos’.” Our intuition is that a centrally planned allocation of resources will be more efficient than an uncoordinated one. In a market economy, that error constantly leads us to overestimate the economic advantages, and longevity, of large companies.

Our intuitions about the merits of scale and centralisation are generally wrong, partly because a price system can co-ordinate the decentralised decisions of many small companies and households well. Adam Smith’s insight about the invisible hand is often interpreted in this way and modern mathematical economists have established that proposition more precisely. But if co-ordination were the only strength of the market economy, a computer could do that job equally well. Computers are very good at processing information.

But the prices and entrepreneurs of the market economy are much better at eliciting the information, on preferences and products, needed to make the calculations. Prices, and entrepreneurs, manage the market’s process of discovery. A functioning market economy allows endless small-scale experimentation. When such experiments succeed, they are quickly imitated: when they fail, as experiments usually do, they are abandoned. Centralised economies, lacking this disciplined pluralism, experimented too rarely: when they did, they typically implemented on too large a scale. They often lacked honest feedback on performance. Subordinates had good reason to tell the great leader what he wanted to hear. We see the same mechanisms at work in our large corporations.

But what of profit? North Korea is hardly free of the profit motive. The Kim dynasty and the cliques around it may profess disdain for capitalism, but they understand the goal of personal enrichment as well as any Wall Street Master of the Universe. The difference between North Korea and the US is not that one society offers more scope for greed than the other. In both countries, as in many others, there are greedy people and many who are not, and those who are greedy are disproportionately represented in the controlling elite. The difference lies in the channels of greed – the degree to which the quest for profit is directed towards the creation of new wealth rather than the appropriation of wealth already created by other people.

A successful market economy emphasises the former and restricts the latter through rules and institutions, in a structure that has evolved slowly and requires constant defence against those who would use economic and political power to subvert it. Success or failure in that endeavour is the central explanation for why some societies are rich and others poor. Crony capitalism is very different from the market economy.

© 2012 John Kay, The Financial Times

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