Propelling Prosperity and Human Flourishing: Contributions of Free Market Scholars to Economic Development Literature
Senyo Adjibolosoo, Point Loma Nazarene University
I acknowledge the generosity of the George Edward Durell Foundation for the financial support to attend and participate in this Forum. I am thankful to the anonymous scholars who reviewed and selected abstracts for the session. Above all, I am very grateful to Mrs. Anita Folsom—without whose stellar input each year this forum will not evince its excellent structure and character.
While less-developed countries (LDCs) desire to improve governance and development and aim simultaneously at propelling human flourishing, they face the certainty of perennial hunger, starvation, poor sanitation, environmental squalor, diverse deadly disease epidemics, decay in existing physical infrastructure, and the certainty of crippling feelings of entrenched hopelessness and failure. These problems are not the result of a lack of development assistance; the naked truth is that trillions of dollars of development assistance come from developed countries (DCs) to LDCs. The repetition of ineffective and non-free-market-based plans, policies, projects, and programs only perpetuate more debilitating waves of failure. To deal with LDCs’ economic nonperformance, scholars of free market economics are well poised to contribute to the revamping of the existing bankrupted economic development literature. Through their research, proponents of free market principles must help LDCs understand that it is the veritable symbiotic interactions between the principles of the free market economy, the factors of production, and the positive qualities of the human factor that propel improvements in democratic governance, ongoing economic growth, human-centered development, human flourishing, improved quality of life, and longevity. The view presented in this paper is that the foundational source of the problems facing LDCs is the lack of a well-developed, positive human factor. When any people’s commitment to succeed in their development effort is wholly positioned within the framework of free market economic principles with a clear understanding that citizens who are affluent in the positive qualities of the human factor are necessary to the design, implementation, leadership, management, and monitoring of progress, they will attain and sustain the main objectives of their plans, policies, projects, and programs (i.e., the 4Ps Portfolios) in the long term.
It is interesting to see the amount of financial, effort, energy, and time (FEET) resources we spend in order to do what we believe necessary to help the people of LDCs transform their lives for the better. We have always thought we possess an excellent understanding and interpretation of the problems and challenges that face LDCs; yet, as Karl Marx once observed, philosophers have only interpreted the world. What is left is to change it. Unfortunately, we neither know nor understand what stands between poor people’s desire to be free and filled with sustenance and the stark reality of suffering (Edwards, 1989). This observation raises two pertinent questions:
- Do we sincerely believe that we fully know what stalls the development of LDCs and how to remove these obstacles to empower their desires, commitment, and willingness to engage in 4Ps Portfolios that work?
- Are we aware of the exact role principle-centered living plays in any attempt to lead and work with others to make the developing world a better place for its inhabitants?
Centuries of cluelessness have misled and forced us down empty rabbit trails and our basic human challenge still remains: we must learn and engage in principle-centered lifestyle choices. If we are to provide a better and more principled leadership than all other assuming individuals, we must embrace the dictates of the universal principles and live them out through our attitudes, behaviors, and actions.
1.1. Human Flourishing: Its Meaning
When any people’s commitment to succeed in their development effort is wholly positioned within the framework of free market economic principles with a clear understanding that citizens who are affluent in the positive qualities of the human factor are necessary to the design, implementation, leadership, management, and monitoring of progress, they will attain and sustain the main objectives of their plans, policies, projects, and programs (i.e., the 4Ps Portfolios). The symbiotic interaction between the principles of the free market economic system and the quality of the human factor initiates and propels ongoing economic growth, human-centered development, improved quality of life, human flourishing, and longevity in communities that are open to the efficient expenditure of their scarce FEET resources toward the creation of the required highways for success in development programming.
Anyone who is sincerely interested in the efficiency of free market economic forces will begin with the following questions:
- What makes free market economies work efficiently?
- What determines the worth of goods and services in free marketplaces?
- How is the produced wealth of goods and services distributed among those who participate in the functioning of the free market economy?
- To what extent do the procedures and techniques applied to the distribution of the produced wealth of goods and services portray fairness to everyone who contributes to the production process?
- Are there procedures that can either minimize or remove the perennial tensions between those who own the means of production and those who put these means to work for the primary purpose of creating wealth?
- If such formulae for distributing the wealth created in the free market economic system do exist, what roles do they play in fueling and expanding or starving and destroying labor force enthusiasm, efficiency, and productivity growth?
- In what ways can the bottleneck created by employees feeling cheated by the profit-sharing arrangements championed by entrepreneurs and business owners be removed to allow the free market economic forces to function at their optimal capacity most of the time?
- Why is labor force productivity higher in certain countries (i.e., the DCs) than others (i.e., the LDCs), given the simultaneously cooperating factors?
- In what ways can this difference be either minimized or removed completely?
- Regardless the answers to these questions, what is the key role that laissez-faire economists play in transforming the existing economic development literature and exorcising it of its barrenness to pave the way for democratic governance, economic growth, human-centered development, human flourishing, improved quality of life, and longevity?
To provide meaningful and policy-inducing answers to these questions it is imperative to gain a better comprehension of the concept of human flourishing. First, however, it is important to become familiar with hot deserts and the oases they harbor. Most of these deserts are well known to have oases, havens of water and great fertility known for their greenness and ability to provide fresh water to people and animals. They support intensive forms of agriculture and animal husbandry. Plants that are indigenous to oases, such as the oil palm tree, the date palm, and the Borassus Palm or the Palmyra Palm are well watered and productive, and their branches and leaves are green throughout the whole year. The Borassus Palm tree is a genus of six species of fan palms. They are native to the tropical areas of Africa, Asia, and New Guinea. Like the cedars of Lebanon, these desert and/or tropical plants thrive without measure and any incapacitation. When there is sufficient water and the required nutrients of the soil are freely available to them, they flourish without limitation and their seeds continue to blossom from one generation to another. However, if denied water and soil nutrients, they will neither reproduce as profusely as they do nor will they survive for too long.
Like these desert and/or tropical plants, human flourishing is the growing, burgeoning, or blooming of any individual whose positive human factor qualities are developed sufficiently to expand his or her capabilities in order to enhance personal wealth and propel ongoing thriving among all others from far and near. The human factor is the
spectrum of personality characteristics and other dimensions of human performance that enable social, economic, and political institutions to function and remain functional over time. Such dimensions sustain the workings and application of the rule of law, political harmony, a disciplined labor force, just legal systems, respect for human dignity and the sanctity of life, social welfare, and so on. As is often the case, no social, economic, or political institution can function effectively without being upheld by a network of committed persons who stand firmly by them. Such persons must strongly believe in and continually affirm the ideals of society. (Adjibolosoo, 1995, p. 33)
Contrary to popularly-held orthodox and heterodox opinions about the sources of free market efficiency, no economic system, whether capitalist, socialist, communist, or even any mixed system, will ever reach its optimal potential performance in the presence of severe human factor decay. Effectively dissected and analyzed,
Severe human factor decay is a syndrome evident in a person’s expression of lifestyle choices that are reflective of negative personality traits. It trumps the personal desire for virtuousness and promotes a lifestyle rooted in bad attitudes, behaviors, and actions. Severe human factor decay is the primary root cause of the human condition. Any act of social injustice is a perfect replica of the images of severe human factor decay… Severe human factor decay is a natural outflow of the negative qualities of the human factor. It is a serious hindrance to the establishment of harmony and peace. It is a staunch enemy to productivity growth. Its austerity paralyzes the engine—positive human factor—that makes the social institutions function and remain functional over time. It stalls the wheels of the vehicles of family, government, education, economy, law, and religion. [It misleads scientist of any persuasion to either fabricate or obscure or reject that to either support an avowed perspective or reject others. In other words it perpetuates and propels the fabrication of data to serve and promote one’s own interests]. It initiates and propels the uses and abuses of science and technological progress. It is the sole factor that lies at the heart of the practice of identity theft, sexual harassment, spousal/child abuse, and corruption in its diverse forms in any communities. Severe human factor decay damages the lives of citizens and denies them the ability to attain their human potential and sustain higher productivity levels. It renders these people unproductive. Their attitudes and behavioral practices are more destructive than constructive. (Adjibolosoo, 2012, pp. 103-104)
The inability to deal precisely with severe human factor decay limits people’s opportunities to overcome challenges to the effective functioning of their social institutions. In any free enterprise economic system, institutional arrangements are aimed at the indirect regulation of the expressions of people’s attitudes, behaviors, and actions in various marketplaces (Adjibolosoo, 1998a, 1998b).
The currents of human flourishing in any individual rich in the positive qualities of the human factor guide others too to do well and move toward the heights of personal development and productivity. The flowering of the economic ventures and business activities of any one person creates opportunities for others around them to grow and thrive in wealth creation just as date palms and oil palm trees thrive even in the harsh desert and/or tropical environment. Within this community the thriving of those affluent in the elements of the Quadrangle of Hope (love, grace, compassion, and forgiveness) compels others to engage in income-generating economic and/or business activities. These activities foster profuse community advancement (Adjibolosoo, Unpublished).
The flourishing of personal diligence, which is subjugated to the universal principles that underscore the functioning of the free market economic system, promotes community-wide prosperity through a sustained wealth-creation process. The indwelling engine, the positive qualities of the human factor, sparks, fuels, and oils the mechanism that advances human flourishing. The degree of human flourishing in any society requires community-wide desire for growth in knowledge, understanding, and wisdom. Interactions among the people create opportunities for them to become more involved in activities and processes that transform knowledge into wisdom through understanding. As wisdom increases, people engage in business activities in great concentrations. They also learn to live prudently, loving peace and tranquility and eschewing opportunities to express anger, hatred, vindictiveness, strife, and egregious transgressions. Their sharp and willing minds are constantly exposed to opportunities for personal transformation in consonance with the dictates of the universal principles. Their hearts are formed daily in principle-centeredness. Their minds are spiritually discerning and morally thoughtful. Their tongues are bridled, controlled, and spare them from unpleasant and arduous altercations that would lead to debilitating attitudes, behaviors, and actions. Sadly, though, these are not necessarily true in any community that is filled with people or groups of individuals who are filthy intelligent and/or brilliant and yet are bankrupt of deeper spiritual insights and are abject poor in the qualities of the moral virtues.
For as long as the scale of the combined human factor qualities tips more on the positive side (i.e., lifestyles informed by the moral virtues), people hardly ever embroil themselves in illegal or immoral practices of gift-giving and gift-taking that pervert community-wide freedom, good judgment, and principle-centered justice. In any world where human flourishing has already ensued and is ongoing, attitudes, behaviors, and actions are aimed at self-interest pursuits that are subject to the dictates of the universal principles. Within this environment instances of leadership-managerial-subordinate corruption (i.e., misappropriation, misapplication, and mismanagement) are diminished. As a result, people’s knowledge and experiences of principle-centered freedom, judgment, and justice fuel their commitment to create and keep wealth. Ultimately, the prudent use of a community’s created wealth leads to increased human flourishing because citizens understand that the only way to sustain their wealth and improvements in democratic governance, economic growth, human-centered development, human flourishing, higher quality of life, and longevity is to not only want to increase their own private wealth at all costs, but also take into account the relevance of the dictates of the universal principles underscoring the free market economic system and the quality of the human factor.
Human flourishing depends on the people’s acceptance of, reverence for, and willingness to live in obedience to the dictates of universal principles that underscore the functioning of the laissez-faire economic system. However, when debased physical and/or sensual desires control individual decisions the people lose sight of the road signs guiding them toward human flourishing, derailing their advancement. The vehicle of human flourishing is subsequently starved of its main sources of fuel and energy: positive human factor qualities and the people’s reverence for the principles of the laissez-faire economic system.
1.2. Ongoing Devastation in the LDCs
One of the most mind-boggling realities of our modern world is the ongoing devastation in LDCs. The regime of starvation, environmental degradation, squalor, disease, and diverse afflictions is perennial in the LDCs. Though some will wonder about the sources of economic underdevelopment and enduring suffering in LDCs for the sole purpose of witch-hunting or casting blame on DCs, the failures evident in LDCs are not necessarily the results of a lack of international development assistance. As is well known, trillions of development assistance dollars leave the shores of developed nations for LDCs every second of each day (see OECD). However, LDCs seem surprisingly unable to improve their quality of life despite the development assistance they receive annually from diverse sources (See Table 1).
Aid Disbursements to Countries and Regions (DAC2a)
Again, when a people’s commitment to succeed in their development effort is wholly positioned within the framework of free market economic principles with an understanding that citizens who are affluent in the positive qualities of the human factor are necessary to the design, implementation, leadership, management, and the monitoring of progress, they will attain and sustain the main objectives of their 4Ps Portfolios in the long term. Contrarily, for as long as any people’s commitment to economic growth and sustained human-centered development is not fully positioned within the principles of the laissez-faire economic system and the framework of human factor theory, the expenditure of their scarce FEET resources on development activities will misfire.
The next section of this paper presents certain orthodox economic ideas and proposals about the key requirement to initiate and propel economic prosperity and human flourishing in LDCs. In Section 3, pertinent observations regarding the orthodox solution set are highlighted. Section 4 articulates the significance of the quality of the human factor to ongoing economic growth, sustained human-centered development, human flourishing, improved quality of life, and longevity, highlighting the visible hand of government during certain periods of time in the economy. Section 5 concentrates on the role of interested and committed scholars of the free market economy in revamping and reenergizing the existing debilitating literature on development economics. Finally, Section 6 presents the summary, conclusions, and recommendations for public policy.
2. The Orthodox Solution Set
This section focuses on a selection of the authoritative foundational presuppositions of economic theorizing and their implications for the efficiency of the free market economy (see Adjibolosoo, 2012, pp. 39-50). When the leaders of the LDCs and their external charitable donors (humanitarian) and governmental providers are unsuccessful in dealing with the problems of economic underdevelopment they are ignorant of what actually makes the free market economic system work well. In free enterprise economic theorizing, explicitly spelled-out assumptions include the existence of relatively stable institutions, efficient financial markets (Fitzgerald, 2006), sound or principle-centered work ethic (i.e., the moral virtues) and social ethos, unhindered pursuit of self-interests, the rationality of human behavior, full information, and/or perfect foresight (Adjibolosoo, 2012, pp. 41-49; 1999, pp. 9-24; Coase, 1998 and 1991; and Demsetz, H. 1969). Below is a list of the key institutions of the laissez-faire economic system and examples of its associated useful action steps.
2.1. Key Institutions of Laissez-Faire Economic Systems
- Established and fully functioning of Rule of Law
- The existence of private property rights (i.e., laws) [See Lueck, 2008 and Demsetz, 1967].
- Well-defined/assigned property rights
- Efficient financial markets/institutions
- Efficacious enforcement of private property rights
2.2. Examples of Desirable Action Steps in Laissez-Faire Economic Systems
- Promoting free market principles
- Advocating for and preserving individual freedom
- Expediting and preserving good judgment and justice
- Empowering people—self-help and self-sufficiency
- Moving from aid to production and wealth creation
- Grooming innovative and creative thinkers
- Creating opportunities and conducive environment
- Pursuing unbridled self-interests
- Enjoying the fruits of one’s labor and other kinds of investment
- Providing access to opportunities and resources
- Annihilating or minimizing corruption in its diverse forms
From the perspective of classical economists or classical political economists, neoclassical (utilitarian-based marginal theory) economists, orthodox or mainstream economists, various economists believe the existence and optimal operation of diverse institutions is sine qua non to the efficiency of the economic system. Classical liberal economics emerged through the scholarship of Anders Chydenius (1729–1803), whose work, The National Gain (1765), made the case for and promoted the freedom of trade and industry. Chydenius also discussed the symbiotic interactions between people and the economy in any society. His work preceded Adam Smith’s The Wealth of Nations (1776) and provided a great foundation for the principles of liberalism. Chydenius maintained that through democracy, equality, and deep respect for and preservation of human rights, certain people stand an excellent chance of attaining sustained progress and happiness (See also Ambrose, 1995, on issues of democracy).
The scholars of the Austrian School of Economics promote the concept of methodological individualism in their understanding of developments in economics. To them, the most powerful force is the price mechanism—the organizing power of the free market economic system. They promote the laissez-faire economic system. Some of the key scholars are Carl Menger, Eugen von Böhm-Bawerk, Ludwig von Mises, Friedrich Hayek, Friedrich von Wieser, Henry Hazlitt, Israel Kirzner, Murray Rothbard, Robert P. Murphy, Lew Rockwell, Peter Schiff, Marc Faber, Walter Block, Hans Hermann-Hoppe, Jesús Huerta de Soto, and Fritz Machlup. Scholars of the Chicago School of Economics pursue the laissez-faire economic system. Pioneers include Frank H. Knight, Jacob Viner, Milton Friedman, George Stigler, Harry Markowitz, Merton Miller, Robert Lucas, Jr., Eugene Fama, Myron Scholes, Gary Becker, Edward C. Prescott, and James Heckman.
It is during moments of diverse income-generating economic activities that people rub shoulders with each other daily. These interactions are, however, not without their own challenges. The difficulties inherent in the functioning of these institutions and their associated action steps create friction between individuals and among members of groups in the form of disagreements and disputes. Obviously, the primary sources of these disputes are people’s self-interest pursuits and expressions of their diverse human factor qualities in the various marketplaces. These disputes are adjudicated by those assigned the legal authority to do so; however, the processes of arbitration can stall the functioning of the economic engine when people pursue self-interests with little regard to existing norms, rules, and regulations.
Most activities aimed at unclogging the pathway of the forces of the laissez-faire economic system use scarce FEET resources. By channeling these resources into ascertaining institutional effectiveness, the optimal efficiency of free market economic forces is diminished. This empirical evidence underscores the centrality of the quality of the human factor to the optimality of the forces of the laissez-faire economic system (Adjibolosoo, 2012, 2010, 1999, and 1995). When people subjugate self-interests to principle-centeredness and pursue these self-interests without any overbearing institutional prohibitions, the free market economic forces work at their best. However, when rampant violations of institutional norms are neither apprehended nor penalized free market forces are rendered ineffective. For example, as many more people render the laws of the land nonfunctional, free market forces cower to greed, dispossession, and hostile takeovers. This result, an outcome of human inefficiencies, is the same for all other social institutions when people abandon the prescribed regulations.
According to classical and neoclassical economists, efficient financial markets and associated institutions must exist to support and propel the laissez-faire economic system. As most free market economists argue, LDCs cannot attain ongoing economic growth, sustained human-centered development, and human flourishing in the absence of the availability and efficiency of these institutions (De Soto, 2000). Arguably, therefore, the absence of efficient financial institutions derails the long-term effectiveness of free market forces (Laeven, Levine, & Michalopoulos, 2011; Group of Thirty, 2011; Beck, Levine, & Levkov, 2010; Obstfeld, 2007; Levine, 2005; Acemoglu, Johnson, & Robinson, 2005; Fitzgerald, 2006; Levine, 2001; Levine & Zervos, 1998; King & Levine, 1993). As a result, economic and all other innovative business practices do not support vital entrepreneurial activities and productive practices. Activities and productive practices that suffer gravely include invention, innovation, leadership effectiveness, efficient management, and a veritable wealth creation process. The absence of efficacious financial markets and other relevant accompanying institutions spells doom for local as well as national economies.
Free market economic forces are most effective in specific environmental settings where principle-centered work ethic and social ethos thrive. In the absence of principle-centered work ethic, positively propelling social ethos, and unparalleled reverence for the democratic rights and privileges of every community member regardless of race, religion, gender, or political ideological leanings, it is impossible for the laissez-faire economic system to sustain optimal market efficiency. Classical and neoclassical economists argue that the unbounded pursuit of self-interest leads to wealth creation and its maximization. As such, when free market forces are left disencumbered, people chase their own self-interests to the best of their abilities even when it leads to violating existing institutional arrangements. As is frequently argued among free market economists, these individuals initiate and propel the progress of their own gains and in so doing unintentionally foster the interests of other community members. The net benefits spread to all others who also participate in the free market economy (Adjibolosoo, 2012).
Free market economists assume that businesspeople act rationally to expedite their own success by making it possible for consumers to achieve, expand, and sustain their goal of utility maximization. Acts of consumer utility maximization indirectly facilitate the producers’ ongoing profit maximization objectives. However, according to Adam Smith (1776), the “invisible hand” guides people in the pursuit of their own self-interests without getting in the way of others who seek similar goals. The invisible hand is the free market mechanism that leads people to promote community welfare in the laissez-faire economic system that functions via the forces of competition (i.e., demand and supply). Viewed in this light, the aggregation of individual pursuits within the laissez-faire economic system, when carried out within the confines of principle-centeredness, promotes, propels, and sustains the combined wealth creation processes in countries where free market economic forces are supported by these conditions.
Though not explicitly stated in any of his writing a critical analysis of Smith’s philosophical perspectives on the functioning of the laissez-faire economic system reveals his belief in the inherent goodness of people. In The Wealth of Nations (1776 (2005), Chapter II, p. 364) Smith writes, “By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it… It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard for their own interest.” As a strong proponent of individual freedom, Smith argues that the essence of the system of natural liberty is that every individual must be left alone to pursue his or her desired self-interests in beneficial ways as long as they do not violate the laws of justice (See also Quesnay, 1756-1776 and the Physiocrats). From the Smithian perspective, therefore, this practice is deemed to enhance, propel, and secure the wealth of nations.
Neoclassical economists presuppose that economic agents operating in free market economies possess full information and make good decisions. As the argument goes, access to full information in addition to the set of the existing fixed rules guides people to pursue the goals of utility as well as profit maximization with few limitations. It is only in those cases when full information does not exist that actors in free market economies face conditions of imperfect information and uncertainty (See Poulson, 1994). These people integrate new information into their decision-making processes and choices when it becomes available to them.
2.3. Observations Regarding Certain Underlying Assumptions
Most free market proponents are unaware of that which actually establishes the true foundational pillars and the propelling conditions under which free market forces perform at their best. It is this ignorance that has misled the proponents of the free market economic system for almost three centuries. Sadly, these individuals serve as global consultants and advisors to the leaders of DCs as well as LDCs. Few of these leaders recognize that they were provided with misleading counsel about how to deal with their perennial economic underdevelopment. The outcomes of the implementation of their prescribed solutions are many more experiences of strangulating failures and feelings of hopelessness.
The gross lack of a deeper understanding of the human factor and its significance to socioeconomic development creates a propelling springboard for scholarly failure in modern economic theorizing. It is the basis for the emerging prescriptions for tackling the problems of underdevelopment in LDCs. This lack of cognizance is evident in the key sweeping generalizations economists make about that which fosters the efficiency of the laissez-faire economic system. Arguably, therefore, free market forces are overburdened with system-wide hemorrhaging, paralysis, and malfunctioning because of severe human factor decay. Severe human factor decay is a reflection of habitual practices that are bankrupt of principle-centeredness, and it manifests itself in painfully destructive ways. When a person’s core of inner being is infested by severe human factor decay, he or she experiences total moral and spiritual rottenness within. It underscores and promotes attitudes, behaviors, and actions that are reflective of insidious selfishness and destructiveness both in the individual and in the community. Severe human factor decay produces and sustains levels of systemic corruption that make it one of the worst and most devious roadblocks to the efficiency of any economic system.
3.1. Institutions are Necessary But Not Sufficient for Human Flourishing
Highly respected leaders in the field have argued wrongly that for as long as personal self-interests are served in economic model building there is no need to worry whether the assumptions made are valid. Some economists embrace the assumption that virtue has no place in establishing and ensuring free market efficiency. This belief is poignantly expressed in the words of Steven Horwitz: “The great virtue of the free market is that it requires so little virtue to work effectively.” Horwitz draws his perspective from Professor Milton Friedman, who notes:
The great virtue of a free market system is that it does not care what color people are; it does not care what their religion is; it only cares whether they can produce something you want to buy. It is the most effective system we have discovered to enable people who hate one another to deal with one another and help one another…There is one and only one social responsibility of business–to use it[s] resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud (Friedman, 1962, Chapter 8. See also this URL.).
The general belief of most scholars, students, and proponents of the free enterprise economic system is that when the key institutions and their associated action steps (listed in sections 2.1 and 2.2) are in existence, the natural outflows include financial prosperity and human flourishing. Regardless how meaningful this claim sounds the human factor theorist’s perspective is that without those who are rich in the positive qualities of the human factor, none of the institutions or their associated actions will work as efficiently as claimed.
Under the leadership and management of people who are rich in the positive qualities of the human factor, free market economic forces experience conducive and propelling human factor-based circumstances that ignite, fuel, and sustain higher productivity, ongoing economic growth, sustained human-centered development, human flourishing, improved quality of life, and longevity. Hernando De Soto’s book, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else (2000), is a brilliant and refreshing read on the successes of capitalism in the West and its failures elsewhere in the world. Yet a more thorough rereading leads a human factor theorist to make certain judgments of the book never heard before. De Soto’s analysis of capitalism, though brilliant, insightful, and convincing to people who share his perspective, is dead wrong and misleading! De Soto is oblivious to the fact that people, rather than systems and/or institutions, make things work or fail in the West or anywhere else.
As noted earlier, institutions and systems are inanimate, without life, will, commitment, willingness, knowledge, understanding, or the capability to achieve anything in and of themselves. Instead, any existing institutions and systems assume the life and character of the people who design, create, implement, lead, manage, and run them. These systems and institutions are therefore only as good as the acquired human factor qualities of those who create, lead, and manage them. It thus stands to reason that if one must treat De Soto’s conclusions seriously and use them to help LDCs, one must understand the degree to which the quality of the human factor impacts the efficiency of the capitalist.
Though every group of people has its own systems and institutions, not all of them are successful. The difference in success is not necessarily the availability of capitalism and related institutions and practices, as De Soto concludes. Instead, it is the primary state of the quality of the human factor of the group that accounts for the differing performances of capitalism in any nation state or community. Those who fail to understand this push fruitlessly for capitalist-based programs as the panacea for progress in LDCs. Time and time again they fail miserably in their prescriptions of the 4Ps Portfolios and the nature or mode of the expenditure of the people’s scarce FEET resources.
As a human factor theorist, I agree with Adam Smith’s conclusions regarding the economy and its efficiency in his book, The Theory of Moral Sentiments (1959). Authentic economics is never devoid of the moral underpinnings of human attitudes, behaviors, and actions. Its building blocks are drawn from the normative and positive spheres of human life (Adjibolosoo, 2012). The unhindered pursuits of self-interests in the free market economic system, ceteris paribus, grow and sustain the wealth of nations only when the players are principle-centered (Smith, 1759 and 1776). When this assumption is not binding in the laissez-faire economic system, it will not achieve and sustain its goals. It is only under conditions that improve the quality of the human factor that those who serve in democratic and social institutions are successful in enhancing efficiency and productivity growth in the various marketplaces.
With these realities in perspective one may ask, “In what ways can free market economists lead the charge to alter the perennial failures of the 4Ps Portfolios in LDCs?” Let us now turn our attention to the discussion on free market efficiency in LDCs to provide human factor-based answers to the observations and questions presented in Sections 2 and 3 of this paper.
4. The Significance of the Quality of the Human Factor
As noted previously, laissez-faire economists make several oversights, the first of which is lack of awareness of the primary source of the design, implementation, leadership, management, and functioning of their beloved institutions. Second, like their opponents, they fail to perceive that the institutions they endorse are inanimate but take on the life and character of those who design, implement, manage, and lead them. A third oversight is the failure to recognize that the efficiency of these institutions and many of their ancillary emerging organizations depends on the quality of the human factor of those who design, fashion, manage, and lead them. Fourth, these economists do not acknowledge that these institutions are only as effective as the human factor qualities of those who design, implement, lead, and manage them.
In light of these truths, for LDCs to see any sustained improvement it is imperative that every interested development assistance provider and scholar understands the primary source of the problems, challenges, and failures that poor people experience perennially. This requires a better understanding of the significance of the principles of free market economics and the symbiotic relationship between them and the qualities of the human factor. Although people in LDCs are interested in improving governance, the efficiency of business organizations, physical environment, and their quality of life, the expenditure of their scarce FEET resources has never yielded sustained improvements in their quality of life because of the failure of developing the positive qualities of the human factor.
4.1. Dimensions of the Human Factor
The development and deployment of every positive dimension of the human factor are critical for the efficiency of the 4Ps Portfolios and the success of any people’s activities. These dimensions are: spiritual capital, moral capital, aesthetic capital, human capital, human abilities, and human potential (see Figure 1 below). The failure to develop any of the six dimensions of the human factor is an excellent recipe for ceaseless failure in everything we do (Adjibolosoo, 1995a, 1995b, 1999, and 2005). To develop any of these dimensions of the human factor, one must become aware of their existence. To be ignorant of their existence is to gloss over their development; in general, this is the reality of billions of people on Planet Earth. Human ignorance about the unlimited possibilities and the reality of the human potential has denied not only certain communities the opportunities through which to offer their lives for the better but has also denied humanity the opportunity to transcend the challenges hamper us in the course of our daily activities.
Human factor theory is essential to our quest to successfully launch the economic vehicle of our desire for prosperity and human flourishing through the academic scholarship of free market scholars to ongoing economic growth, sustained human-centered development, and human flourishing in the LDCs. It is important to work toward the honing every aspect of the six dimensions of the human factor listed in Figure 1 above.
As long as 4Ps Portfolios are not positioned within the framework of human factor theory and the foundational principles of the free market economy, efforts to achieve and sustain good governance, protracted economic growth, human-centered development, and human flourishing will remain fruitless. Therefore, those keen on establishing democratic governance, improved quality of life, and longevity in LDCs must become more familiar with the relevance of effective free market institutions and the availability of a team of leaders and citizens who are affluent in the positive qualities of the human factor to lead the charge (See details in Figure 1).
Today, development programs and their accompanying activities are carried out in LDCs in the same manner as they have been in past decades. These programs ignore the significance of the quality of the human factor and the propelling principles of the free market economy. 20 Replicating inefficacious non-free-market-based 4Ps Portfolios without repositioning LDCs within the context of free market economic principles only leads to the perpetuation of past failures, for “If you continue to do what you have always done, you will continue to get what you have always gotten” (Unknown).
4.2. Transformational Development Education: Connecting the Heart and Mind
To me as a human factor theorist:
By transformational development education I imply the kind of education that provides a propelling academic environment within which the types of intellectual, spiritual, and moral activities pursued facilitate learning to equip the learners with knowledge, skills, and abilities to apply to problem solving. The learner is assisted to make use of what is taught and learned as well as honing the positive human factor qualities required to be patriotic citizens and honest and compassionate leaders. The primary object of everything done in this environment is to equip those who participate to develop the full dimensions of their human factor.
Working together to help LDCs make their 4Ps Portfolios work effectively, we must delve deeper into understanding the degree to which the quality of our individual and combined human factor impacts economic performance. Human factor theory and its centrality to any kinds of progress are the most significant missing spokes in the wheels of economic theorizing and planning, policy formulation, project design, and program implementation. Until the proponents of the free market economy better understand the true role the quality of the human factor plays in people’s performance in the various institutions, organizations, and systems we fashion to attain and sustain free market efficiency, we will not understand the true engine of the laissez-faire economic system.
What people of LDCs require today to make a long-term turnaround is a transformational development education program designed to produce citizens whose hearts are renewed and whose minds are transformed (See Figures 2 and 3 below).
Figure 2: Connecting the Heart and Mind
A sick heart is weak, unable to express the gallery of emotions locked within it, and unable to provide great directions to the individual for his or her daily living. Similarly, a crowded and clouded mind is unable to reflect thoroughly on incoming information and thus cannot support the individual’s decision-making process. Further, it is unable to connect to and interact effectively with the heart because of the great and limiting wall or chasm between them (See Figure 2). An individual whose heart and mind are sick is unable to form a live conscience that is capable of distinguishing between right and wrong. Such an individual cannot serve as a powerful agent and magnate of change in any community. Community members whose minds and hearts are sound in spiritual capital, moral capital, and the other dimensions of the human factor are capable of nation building (See details in Figure 1). They are capable of creating the environment in which others will succeed beyond measure in their chosen professions. The only kind of education program whose custodians are capable of initiating and sustaining economic progress, wealth creation, and human flourishing is transformational development education (See Figure 3 below).
The primary task of custodians of transformational development education is to be aware that if the transformation of the mind and renewal of the human heart are to be successful, those in charge of doing so must distinguish between mere schooling and true education. The main difference between these concepts, when viewed from the human factor perspective, is that while schooling is essentially about filling the mind with academic knowledge and skills (i.e., the acquisition of human capital—one of the six dimensions of the human factor listed in Figure 1), education is impregnating the mind with academic knowledge and skills (i.e., developing the human capital) and simultaneously connecting it to the heart (i.e., developing the positive human factor qualities). Transformational development education is about nurturing the whole being in the universal principles that underscore the efficiency of the free market economic system, thus repositioning people to better understand and take more seriously the relevance of moral virtues to economic efficiency and successful wealth creation through economic activities.
As revealed in Figure 3 above, custodians of transformational development education (TDE) concentrate the curriculum on nurturing the whole being: body (the material substance of a human being), soul (mind, emotions, and will), and spirit (the animating part of any human being). To achieve the simultaneous transformation of the mind and heart, TDE is aimed at developing the positive spheres of the human factor. The best starting point of TDE in any person’s life is the first six years of life. Those people who fail to provide TDE to their infants, children, youth, and adults jeopardize their own long term future.
By grooming others in the six dimensions of the human factor, we can produce honest and compassionate leaders, managers, and employees who will commit to living and leading others according to the law of natural liberty. In this way, we all stand a better chance of successfully unleashing the forces that trigger, propel, and sustain human flourishing. Working in concert with selected core skills, the primary output of TDE, the positive qualities of the human factor, will reposition community members to transform their living conditions for the better. The core skills and principles of TDE are presented in the following two sub-sections 4.5 and 4.6.
4.5. Core Skills
a. Critical Thinking: Application of acquired knowledge to reasoning and making sound judgment. This involves thorough preparation to think successfully on one’s feet.
b. Problem Solving: Articulating solutions to problems prevalent in the social institutions and their associated programs: family, economic, political, educational, religious, legal, scientific, technological problems of everyday life.
c. Effective Resource Management: Application of skills and knowledge to make the most efficient and effective use of financial, effort, energy, and time (FEET) resources.
d. Effective Communication: Being able to read, write, and speak with great comprehension and successfully articulate ideas, thoughts, and problems.
e. Intelligence in Interpersonal Relations Skills: Affability, good moral sense, team skills, and the ability to relate to people from diverse cultural backgrounds.
4.6. Core Principles and Qualities
The most prominent virtues underscoring the principles of great significance to everyone involved with transformational development education programs aimed at attaining and sustaining human flourishing are:
- Defense of the sanctity and sacredness of human life
- Respect for human rights privileges and responsibilities
- Living lifestyles of honesty and integrity
- Trustworthiness and faithfulness
- A sense of justice and equality for all
- Love and caring as one pursues principle-centered judgment, justice, and happiness
- The Quadrangle of Hope: Love, Grace, Compassion, and Forgiveness
- Responsibility and accountability
- Selflessness and self-motivation
5.The Role of Free Market Scholars in Development
For any proponent of the free market economic system to make significant long-term contributions to economic development literature and exert tremendous positive impact on LDCs’ economic growth, sustained human-centered development, human flourishing, improved quality of life, and longevity, it is necessary to gain a deeper comprehension of the relevance of the human factor theory to positive changes in the development of these nations. Free market scholars must understand that human factor development is representative of the wisdom way of initiating, propelling, and sustaining economic progress in the LDCs. These scholars must therefore channel some of the scarce FEET resources into understanding, promoting, and engaging in activities aimed at transformational development education in LDCs.
The wisdom way of moving forward is about getting to wisdom through understanding of all kinds of knowledge, but especially knowledge of the divine. The wisdom way of free market efficiency is primarily about being aware of the centrality of the quality of the human factor in any attempts to improve personal performance, productivity growth, and economic development. It is exponentially propelling in that it does not depend solely on obtuse human knowledge and cultural practices; rather, it maintains that when virtue, knowledge, temperance, patience, godliness, brotherly kindness, and love are added to one’s belief system the individual is neither barren nor unfruitful for having fully surrendered to the divine knowledge, understanding, and wisdom. To neglect the blending of these qualities is to remain either myopic or controlled by too much mere human knowledge and forgetfulness.
Sadly, when this outcome is the reality of any people, they abandon the path of principle-centeredness and hew for themselves broken cisterns that cannot support their lives. Ultimately, such a people face an unending barrage of disappointment, anger, vindictiveness, helplessness, hopelessness, and fear. And for as long as their expenditure of scarce FEET resources does not lead to improvements in the quality of the human factor, it is impossible to ameliorate their performances in any social institutions in the long term. The commitment to the ongoing application of the human factor model is not for the timid or half-hearted. Slothfulness produces indecision and wastefulness. That is not the path of interest for the human factor theorist or any scholar of the laissez-faire economic system.
Dealing with the poor economic performance of LDCs is one area where scholars of the laissez-faire economic system are well poised to make long-term contributions to the revamping of existing literature on development economics. To succeed in this attempt, the scholarship of free market academicians must:
- Highlight the central role the positive human factor quality plays in sustaining free market institutions and guarantee the effectiveness of the associated 4Ps Portfolios;
- Be devoted to helping economic development theorists better understand the truth that it is only the veritable symbiotic interaction between the traditional factors of production (i.e., land, labor, capital, and entrepreneurship) and the quality of the human factor that propels improvements in democratic governance, ongoing economic growth, sustained human-centered development, human flourishing, and enhanced quality of life;
- Educate everyone interested or already involved in the 4Ps Portfolios of LDCs’ economic development programs that in the presence of severe human factor decay, the assumptions of orthodox economic theorizing, will forever mislead and remain meaningless;
- Remember that as far as the process of development planning is concerned, to establish a permanent foundational structure upon which further progress can be made by current and future LDC generations working as efficiently as members of any Olympic relay team is an imperative;
- Never forget that this foundation is considered propelling when its existence leads people to continuously and efficiently rev the engine of their vehicle of development to drive the process forward;
- Remain mindful that in terms of preparations for good governance and a fruitful process of development planning, the only true and powerful propellant of continuing advancement of family, political, economic, educational, legal, and religious institutions—including technological advancement, scientific progress, and improvements in organizations—is the positive human factor (Adjibolosoo, 2005); and
- Make everyone involved in the economic development process and relief work aware that the principles of the free market economy must be unleashed and left unhindered as the sole foundation of economic progress in LDCs.
In terms of making specific contributions toward the economic advancement of the citizens of LDCs, scholars of the laissez-faire economic system must know and propagate the following human factor-based axioms of economic growth and development:
- Economic growth, sustained human-centered development, and human flourishing will not occur in the absence of trust, integrity, and commitment—some of the positive qualities of the human factor—to discharge duties and responsibilities in a timely and principle-centered manner.
- The existence and efficient functioning of the elements personal trust, integrity, and commitment build hope and serve as a powerful rallying point around which people can establish social institutions and secure the foundation of their own communities.
- Systemic lack of trust, integrity, and commitment breeds discouragement and hopelessness, which in turn destroy social cohesion, leading to social decay, economic stagnation, strife, and political alienation. Ultimately, it cripples and disarms the laissez-faire economic system.
- In the long-term quick fix solutions and problem accommodation techniques or measures do not propel the economic growth and development process. Instead, they hinder and derail it.
- Sustained personal transformation and community advancement happen through ongoing improvements made to the quality of the human factor.
- The function of transformational development education is to teach critical, conceptual, analytic, creative, innovative, intensive, and extensive thinking. Intelligence combined with personal principle-centeredness and lifestyle choices provides an excellent foundation that supports and sustains the goal of true education. Though it is possible to initiate economic development through coercion, force, and subjugation it is impossible to preserve any initial gains achieved as a result of severe human factor decay in the long term; this is why most socialist revolutions fail in their quests to improve a people’s quality of life.
With these perspectives on the human factor-based agenda for human flourishing in LDCs, scholars of the laissez-faire economic system must neither rest nor ever fail to help others understand that unless the root of specific problems are discovered and precisely dealt with the pertinent challenges of underdevelopment will never be conquered and effectively subdued in the long term. It is therefore advisable to be aware that a people who desire to overcome problems of underdevelopment must concentrate on developing the positive qualities of the human factor. The absence of these qualities (e.g., true knowledge, trust, integrity, and commitment) creates an environment in which severe human factor decay thrives in the long term.
Above all, it is not the business of any laissez-faire economist to threaten to withhold financial support if the inhabitants of LDCs do not democratize, include women and children in policy making, uphold and preserve human rights, promote the rule of law, and/or honor civil liberties. This threat is evidence of a failure to understand the true engine of the laissez-faire economic system. Currently, though the hearts of people from the rich North may be in the right place I am not sure they are doing the right thing in their expenditure of scarce FEET resources to help the citizens of LDCs. It is therefore imperative that they check their own underlying motives, attitudes, behaviors, and actions by asking whether they are actually scratching the inhabitants of the LDCs where they itch.
Although people from the rich North contribute significantly to LDCs, that help is perennially misplaced and ineffective in intent and applications (Adjibolosoo, 1995, 1999). It is important that these contributors better understand the primary cause of the challenges LDCs face daily in order to reposition themselves to equip these people for long term success. Therefore, the primary task of proponents of free market economics from the rich North is to initiate and support transformational development education programs aimed at building a universally propelling foundation through which the positive qualities of the human factor can be developed. Through these programs citizens of LDCs will alter permanently their quality of life for the better.
It can hardly be denied that when a people’s commitment to succeed in their development effort is positioned within free market economic principles with the understanding that citizens who are affluent in the positive human factor qualities are required to design, implement, manage, and monitor progress, their 4Ps Portfolios succeed beyond expectations. This laudable outcome cannot be attained without the custodians of transformational development education programs. They must become convinced beyond any reasonable doubt that the transformational development education programs are sine qua non to success in community development efforts and nation-building activities.
If laissez-faire economists sincerely desire to turn around a sinking ship of economic growth and development to prevent its destruction, they must pause momentarily to consider LDCs’ existing education programs by taking a more critical and thorough look at their vision and mission statements. When they do this with great intentionality, prudence, and patience, economists will recognize that the 4Ps Portfolios they create, implement, and monitor in the human factor-based transformational development education programs will bring LDCs closer to their desired destinations and transform them into agents of economic growth and development—a people who successfully transmogrify acquired knowledge into wisdom through understanding.
As laissez-faire economists with principle-centered minds and hearts there is hope that we can succeed at resolving the problems LDCs face as we work together with them to make their social institutions more functional and efficient over time. One of the greatest challenges, however, is determining whether or not we are sincerely willing to work hand-in-hand on this journey with each other and the recipients of our gesture. This kind of collaboration has been understood and spoken about by great political leaders and others from diverse spheres of human endeavor, such as Mr. Lee Kuan Yew, Nelson Mandela, Mahatma Gandhi, Mother Teresa, and many others. As these great leaders have attested, regardless what we decide to do, it is important we always remember that the effectiveness we experience in the functioning of any cherished social institutions is a direct outcome of the positive quality of our individual and combined human factor qualities.
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