Those of us who have championed capitalism and free markets have had a tough go of it in an era of financial meltdowns, Occupy Wall Street and the snarky fella at the end of the bar who persistently bloviates that the rich keep getting richer while the poor keep getting poorer, free trade is a bust and soon we’ll resort to eating our young and elderly.
Giving lie to this last is a recent report from The Economist that the global poverty rate has shrunk 50 percent in the past two decades: "[T]he world has lately been making extraordinary progress in lifting people out of extreme poverty. Between 1990 and 2010, their number fell by half as a share of the total population in developing countries, from 43% to 21% — a reduction of almost 1 billion people."
And to what does the esteemed publication attribute this astonishing figure? Certainly a loosening of governmental interventions in the marketplace, but definitely not government programs to assist the poor. Was it Bono? Bill Gates? Tax credits for Hollywood? As it turns out, none of the above. Instead, it was good old capitalism: "[T]he biggest poverty-reduction measure of all is liberalising markets to let poor people get richer. That means freeing trade between countries (Africa is still cruelly punished by tariffs) and within them (China’s real great leap forward occurred because it allowed private business to grow)."
So, as The Economist proclaims in a pithy subhead: "Take a Bow, Capitalism."
Indeed. While acknowledging that lifting the remainder of the world's poorest — including those in the United States — continues to be a daunting task, the magazine rebukes the empty words of politicians and bureaucrats in a blog post: "Presidents and prime ministers in the West have made grandiloquent speeches about making poverty history for fifty years. In 2000 the United Nations announced a series of eight Millennium Development Goals to reduce poverty, improve health and so on. The impact of such initiatives has been marginal at best."
Almost all of the fall in the poverty rate should be attributed to economic growth. Fast-growing economies in the developing world have done most of the work. Between 1981 and 2001 China lifted 680m people out of poverty. Since 2000, the acceleration of growth in developing countries has cut the numbers in extreme poverty outside China by 280m. How that growth is distributed matters too. In a country where income inequality is high, each percentage point of GDP growth will do less work than the same growth would in a more equal place.
Having accomplished this amazing feat in a mere couple of decades is nothing short of astounding. But what of the remaining 1 billion children, women and men barely subsisting in their respective neck of the woods, leading lives of misery and destitution? For them, The Economist presents a cheerily optimistic scenario:
If developing countries maintain the impressive growth they have managed since 2000; if the poorest countries are not left behind by faster-growing middle-income ones; and if inequality does not widen so that the rich lap up all the cream of growth — then developing countries would cut extreme poverty from 16% of their populations now to 3% by 2030. That would reduce the absolute numbers by 1 billion. If growth is a little faster and income more equal, extreme poverty could fall to just 1.5% — as near to zero as is realistically possible. The number of the destitute would then be about 100m, most of them in intractable countries in Africa. Misery’s billions would be consigned to the annals of history.
Even The Economist admits that’s a whole lotta "ifs." But not unattainable if free-market advocates such as the Mackinac Center and its sister think tanks throughout the world continue their amazing work to educate legislators and the public at large that freedom and capitalism are a sum-total benefit for everyone — and not just the wealthy.
Free-market and small-government advocates are entitled to a little respite to bask in the wonderment of halving the world’s poverty rate. As well are the entrepreneurs and businesses that put up the capital and supplied the jobs that made such significant gains in poverty reduction a reality.
But let’s not take too much time patting ourselves on the back. There’s much left to do to stifle the loudmouth pontificating at the end of the bar. Let’s all roll up our sleeves and get back to work. There are still a billion people out there who need our help.
Permission to reprint this blog post in whole or in part is hereby granted, provided that the author (or authors) and the Mackinac Center for Public Policy are properly cited.
Permission to reprint any comments below is granted only for those comments written by Mackinac Center policy staff.