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Saturday, November 14, 2009
 
 
ARTICLES  &  COMMENTARY
Reagan the Poverty-Slayer
 
What world leader was history's greatest champion of the poor? The data overwhelmingly favor a single candidate: Ronald Reagan.
 

Comparisons of great leaders of the past can provide political junkies with the kind of pleasure that sports fans experience when debating the relative merits of current and past athletes. Could Gale Sayers have succeeded in today's NFL? Was Babe Ruth a better hitter than Barry Bonds? Could Bill Clinton have won the Second World War?

In sports, such discussions often turn on interesting data that shed light on the unappreciated merits of past greats. My favorite example is the remarkable punting ability of Hall of Fame quarterback Sammy Baugh, who in 1940 set the all-time single-season record for average punting distance (51.4 yards).

Political discussions can turn on the data as well. With the risks of such speculation in mind, here's an interesting question: What world leader was history's greatest champion of the poor? The data overwhelmingly favor a single candidate: Ronald Reagan. The red line in the accompanying graph plots the percentage of the world's population that subsists on less than one dollar per day, a widely accepted measure of extreme poverty. The proportion of the world's population living in extreme poverty has plummeted since 1980. Going from percentages to head counts, the numbers are staggering. In 1970, for example, about 1.3 billion people lived in poverty. By 1981, the number had climbed to 1.5 billion. But by 2001, that number dropped to 1.1 billion, even as world population had increased.

It is not just the absolute income of the poor that has improved; their relative share of resources has increased as well. Looking farther back into history, it is possible to cobble together from the literature a measure of income inequality going back to around 1800, and the data present a similar, striking story. World income inequality generally increased from 1800 to about 1980; since then, it has dropped steadily--for the first time in recorded history.

Why have the poor done so much better? An extensive study by Columbia University economist Xavier Sala-i-Martin suggests a simple but convincing story: Formerly Communist and socialist countries recognized the benefits of free markets and loosened their harsh redistributive policies. This market liberalization is reflected in the Fraser Institute's Economic Freedom of the World Report, which measures the degree to which policies and institutions support personal choice, voluntary exchange, competition, and private-property rights. From 1981 to 2001, the worldwide average economic-freedom score rose from 5.1 (out of 10) to 6.5. This increase in economic freedom, the blue line, led to the astonishing economic growth that has made almost everyone, especially the poor, better off. Just think of the change in circumstances over the past 20 years for the typical resident of China, India, or the former Soviet Union.

There is little doubt that the leading proponent of this transformation was Ronald Reagan. Without him, the U.S. itself would likely still be shackled by punitive tax rates and Kafkaesque regulation. Instead, freedom has advanced at home and spread abroad. By promoting free markets, Reagan freed more from poverty than anyone else in history.

He championed the poor even better than Sammy Baugh punted.

Kevin A. Hassett is a resident scholar and the director of economic policy studies at AEI.