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Take a bow, capitalism — nearly 1 billion people have been taken out of extreme poverty in 20 years, thanks to markets

AEIdeas

From an editorial in the current edition of The Economist, “Towards the End of Poverty“:

The world’s achievement in the field of poverty reduction is, by almost any measure, impressive. Although many of the original Millennium Development Goals (MDGs) —such as cutting maternal mortality by three-quarters and child mortality by two-thirds—will not be met, the aim of halving global poverty between 1990 and 2015 was achieved five years early.

The MDGs may have helped marginally, by creating a yardstick for measuring progress, and by focusing minds on the evil of poverty. Most of the credit, however, must go to capitalism and free trade, for they enable economies to grow—and it was growth, principally, that has eased destitution.

The world now knows how to reduce poverty. A lot of targeted policies—basic social safety nets and cash-transfer schemes help. So does binning policies like fuel subsidies to Indonesia’s middle class and China’s hukou household-registration system that boost inequality. But the biggest poverty-reduction measure of all is liberalizing 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). Both India and Africa are crowded with monopolies and restrictive practices.

Many Westerners have reacted to recession by seeking to constrain markets and roll globalization back in their own countries, and they want to export these ideas to the developing world, too. It does not need such advice. It is doing quite nicely, largely thanks to the same economic principles that helped the developed world grow rich and could pull the poorest of the poor out of destitution.

Discussion (13 comments)

  1. LarryG says:

    here’s an interesting website that attempts to quantify the issues in this post:

    http://info.worldbank.org/etools/wti/1a.asp

    the US ranks about 10th… most of the top countries are industrialized…

    but I’m not clear on how the worlds poor are helped if they live in countries with restrictive policies.

    Also.. regardless of trade policy – for a given country, for given individuals…. isn’t productivity an important aspect of becoming “richer”?

    1. Emil says:

      LarryG: “but I’m not clear on how the worlds poor are helped if they live in countries with restrictive policies”

      Obviously because they were even more restrictive before… You know like the difference between a directional change and the status at a given point in time.

      “Also.. regardless of trade policy – for a given country, for given individuals…. isn’t productivity an important aspect of becoming “richer”?”

      Yes, of course. Productivity is helped by comparative advantages which are helped by trade and liberalisation.

  2. juandos says:

    A socialist rag that panders the fraud of global warming is hardly a credible source of information IMO…

    1. Trey says:

      The Economist is clearly straddling the fence. Remember how this was received at WUWT?

      http://wattsupwiththat.com/2013/03/27/a-sea-change-on-climate-sensitivity-at-the-economist/

      You and I know that AGW is WAY over-hyped. This is just another example of The Economist and other news media benefiting from the back and forth over CC — it’s a “problem” that sells. I try to tune/filter it out, but it’s hard.

  3. givemefreedom says:

    Somewhere, someplace, Milton Friedman is reading the Economist with a big smile on his face!

    “Well first of all, tell me: Is there some society you know that doesn’t run on greed? You think Russia doesn’t run on greed? You think China doesn’t run on greed? What is greed? Of course, none of us are greedy, it’s only the other fellow who’s greedy. The world runs on individuals pursuing their separate interests. The great achievements of civilization have not come from government bureaus. Einstein didn’t construct his theory under order from a bureaucrat. Henry Ford didn’t revolutionize the automobile industry that way. In the only cases in which the masses have escaped from the kind of grinding poverty you’re talking about, the only cases in recorded history, are where they have had capitalism and largely free trade. If you want to know where the masses are worse off, worst off, it’s exactly in the kinds of societies that depart from that. So that the record of history is absolutely crystal clear, that there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by the free-enterprise system.”
    ― Milton Friedman

    1. Seattle Sam says:

      It depends on your time horizon. If you only care about the short run, it’s possible to make the case that “the masses” are better off with a government that is able to confiscate resources from the highly productive. It’s like killing the goose to harvest the golden eggs. You might have a lot more eggs for your next breakfast, but after that there are none.
      Unfortunately history also shows that people have very, very short time horizons.

      1. Methinks says:

        So few people can think beyond step one. Step one: steal the eggs, ignore costs. Step 2: too busy eating eggs.

        1. Givemefreedom says:

          They can never make the leap to step 3: where did all the eggs go?

          1. Methinks says:

            When they get there it’s the rich people who stole them. If there are no rich people, then the politicians will come up with a scapegoat: the Chinese! The Americans! The Japanese (for those old enough to remember the Big Scare in the 80′).

    2. Ann_W says:

      <3 Milton Friedman

  4. LD says:

    Unfortunately, billions of tax dollars were given out as corporate welfare to some of the largest corporations in the world. Your article lacks specifics to back up your claims.

    1. Ron H. says:

      LD: “Unfortunately, billions of tax dollars were given out as corporate welfare to some of the largest corporations in the world.

      Your article comment lacks specifics to back up your claims.

      The article is an editorial, the opinion of an editor of a periodical publication, not a scholarly, peer reviewed paper requiring copious end notes and references.

      While I don’t disagree with what you wrote, it’s not clear what relevance that has to the pleasant news that a smaller percentage of the world’s population lives in poverty due to capitalism and markets.

  5. Wayne Schlagel says:

    Data?
    Sure, there’s a huge flood of crap indicating, for instance, things like trade numbers.
    But any assessments of people’s actual QUALITY of life?
    Or is this bamboozle by floodgate?
    Otherwise, I must be forced to conclude that this is a propaganda piece, and that capitalism has NOT achieved what you claim.
    And from what I observe of the trends here in the U.S., it has not.

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