Filed under: Capitalism, Developing Nations, Economy, Foreign Policy, Freedom, Heartwarming, The United States | Tags: Free Trade & Globalization, Let's Hear It For Capitalism, World Poverty
“It’s the greatest achievement
in human history,
and one you probably
never heard about.”
Extreme poverty in the world fell to 15% in 2011, from 36% in 1990. The credit goes to the spread of capitalism. The past 25 years have witnessed the greatest reduction in global poverty in the history of the world. An 80% reduction in world poverty in only 36 years.
The World Bank reported on Oct. 9 that the share of the world population living in extreme poverty had fallen to 15% in 2011 from 36% in 1990. Earlier this year, the International Labor Office reported that the number of workers in the world earning less than $1.25 a day has fallen to 375 million 2013 from 811 million in 1991. …
The reduction in world poverty has attracted little attention because it runs against the narrative pushed by those hostile to capitalism. The Michael Moores of the world portray capitalism as a degrading system in which the rich get richer and the poor get poorer. Yet thanks to growth in the developing world, world-wide income inequality—measured across countries and individual people—is falling, not rising, as Branco Milanovic of City University of New York and other researchers have shown.
So what accounts for that? “It was globalization, free trade, the boom in international entrepreneurship. In short, it was the free enterprise system, American style, which is our gift to the world.”
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American Elephants 
Yes, a good-news story. But one could hardly claim that it was was “the free-enterprise system, American style,” that was responsible for most of the reduction in poverty. More like state-capitalism, Chinese style (and Thai, Indian, Brazilian, and Nigerian style).
China itself counts for a huge weight in any average world figures. Those figures would look different if China was not included in the figures.
Part of the rapid drop from the mid 1970s through the mid 1980s also represents a major transfer in wealth (through higher oil prices) from mainly industrial importing nations to (at the time) mainly developing exporting nations.
I’m not disparaging the free-enterprise system, just pointing out that it is less prevalent than we like to think. In much of the world, states play a heavy hand in directing enterprise, either through state ownership, cronyism, or subsidies for national champions, usually combined with protectionism. You often criticize European countries for not being sufficiently economically free, but they are paragons of free and open markets compared with most developing countries.
Globalisation and freer trade — namely, developed countries like the United States reducing their import barriers, thereby allowing market access to developing-country exporters — have certainly played an important role in lifting countries out of poverty.
But the question that really needs to be asked is the counterfactual: how much faster would poverty have been reduced (and incomes of the least well off increased) if developing countries had been quicker in truly embracing a free-enterprise system, and not just certain elements of it?
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Comment by Subsidy Eye November 16, 2014 @ 9:22 amIt is not a pristine picture, of course. What would the picture be if, say, all of Africa had just reasonably honest heads of state, freely elected, and wanting to be revered in their country for helping the country to grow. It is not a perfect world, but shouldn’t we praise the accomplishments?
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Comment by The Elephant's Child November 16, 2014 @ 3:00 pm[…] in world poverty in only 36 years. Globalization, free trade, international entrepreneurship. The free enterprise system, American style which is our gift to the world. This is not the first time some greenie has blurted […]
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Pingback by Bernie Sanders Misguided and Really Dumb Ideas | American Elephants October 20, 2015 @ 8:23 pm[…] in only 36 years. Globalization, Free markets, free trade, international entrepreneurship. The free enterprise system, American style, which is our gift to the world. This is not the first time some greenie has […]
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Pingback by President Trump Withdraws From the Paris Climate Accords | American Elephants June 1, 2017 @ 10:10 pm[…] in only 36 years. Globalization, Free markets, free trade, international entrepreneurship. The free enterprise system, American style, which is our gift to the world. This is not the first time some greenie has […]
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Pingback by President Trump Withdraws From the Paris Climate Accords | American Elephants June 1, 2017 @ 10:10 pm