Capitalism kills poverty

“It’s the greatest achievement in human history, and one you probably never heard about,” trumpets Mark J. Perry at the American Enterprise Institute.  He knows exactly why you never heard about it: the achievement he refers to is a hundred-megaton left-wing narrative-killer.   To put it simply, the spread of capitalism around the world over the past 25 years has caused the fastest, deepest reduction in poverty in human history.


Perry cites a Wall Street Journal op-ed from Dartmouth economics professor Douglas Irwin to report the good news:

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.

Such stunning news seems to have escaped public notice, but it means something extraordinary: The past 25 years have witnessed the greatest reduction in global poverty in the history of the world.

To what should this be attributed? Official organizations noting the trend have tended to waffle, but let’s be blunt: The credit goes to the spread of capitalism. Over the past few decades, developing countries have embraced economic-policy reforms that have cleared the way for private enterprise.

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.


The president of the American Enterprise Institute, Arthur Brooks, joins the celebration: “I will state, assert and defend the statement that if you love the poor, if you are a good Samaritan, you must stand for the free enterprise system, and you must defend it, not just for ourselves but for people around the world.  It is the best anti-poverty measure ever invented.”

Irwin’s article recounts capitalist triumphs in South America, Africa, India, and yes, even China.  The introduction of a relatively small jolt of capitalist freedom was enough to produce astounding reductions in desperate poverty in these moribund statist economies.  Note well that these discussions of “capitalism” specifically distinguish it from corrupt corporatist partnerships and state-run industries, of the sort American liberals have grown quite enchanted with.  India, in particular, made gains by dismantling a license-crazed statist deathtrap that resembled end-stage Obamanomics, where even the smallest entrepreneurship could only be conducted in partnership with government bureaucrats.

No doubt the defensive American leftist would respond that a little capitalism is fine, but a mighty government run by wise, compassionate, highly-credentialed politicians is necessary to correct the excesses of capitalism and achieve an equitable distribution of wealth.  The sweet spot lies somewhere between petty bureaucrats lining their pockets with a cut of the lemonade-stand take, and a capitalist wasteland haunted by corporate predators, where the Little Guy might find himself throttled by an invisible hand at any moment.  The expansion of “income inequality” under President Obama’s policies should be medicine to cure the delusion of redistributed utopia.  Why did anyone ever believe that a bunch of politicians and their bureaucratic networks could do a better job of ensuring general prosperity than millions of people earning, spending, and investing their own money?  How much poverty could be cured, rather than simply made more bearable, by eliminating the gigantic overhead of our inefficient Ineptocracy and returning that money to the people?


Let us ask: why does capitalism kill poverty, especially the real, hardcore poverty that leaves people at the mercy of Nature?  (Is that a provocative way to define poverty?  I can’t think of a better one.  To be truly poor is to rise each morning with few assumptions about surviving the day to come, and no hope of moving your family further from the clutches of destructive natural forces, including hunger, disease, and environmental catastrophe.)  Irwin provides an answer by way of [mc_name name=’Rep. Adam Smith (D-WA)’ chamber=’house’ mcid=’S000510′ ]: “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things.”

“Peace, easy taxes, and a tolerable administration of justice” should be a flag everyone can rally around; that’s a broad and beautiful political platform, expressed with a tiny handful of well-chosen words.  The remarkable thing about capitalism – real, Smith-approved capitalism, not the corrupt garbage the Left orders us to be satisfied with, because we deserve no better – is that everything else in a society must be working fairly well to maintain it.  If your nation’s capitalist motor is humming smoothly, a great many social, legal, and political moving parts have been fitted together very well.


The private ownership of capital can only be realized with a government that administers justice and protects property rights, for example.  Compulsion is the antithesis of capitalism.  The duty of a just government is to keep the marketplace clear of compulsive forces, including the physical theft or destruction of property, violent crime that impedes free commerce, fraud that corrupts free choice with false information, and so forth.  The modern era, beginning with the transportation, communication, and manufacturing technologies that grew from the Industrial Revolution, have given us the challenge of being both interconnected and independent at the same time.  Independence is an easier phenomenon for the lone family tilling its plot of land to observe.  Compulsive force is easy for them to see.  Now we’re in touch with each other as never before, under the control of a State larger and more intrusive than any government that has ever presided over a nominally free people.  How do you measure your freedom now?  How much of what you earn is taken from you, in ways both obvious and incredibly subtle?

The private ownership of capital, in the absence of compulsion, means that free people shape their destinies through collaboration.  It’s not surprising such an explosion of productive activity alleviates poverty; in the Western world, poverty has been so thoroughly alleviated that we struggle to define it.  We can and should be more prosperous as a nation, and when that level of prosperity is achieved, such poverty as remains will be destroyed… not because people have certain things, but because they earned them, through cooperation embraced willingly, and transactions chosen voluntarily.  People have a knack for seeking each other out, when left free to discover and pursue opportunity.  Old hatreds melt away in the fires of achievement.  Society grows stronger as people expect more from one another.  The mutual respect between owners and builders is the strongest regard people can hold for one another.


Capitalism requires freedom.  The result is not unity but harmony, which is infinitely preferable.  Among other things, harmony allows for competition, a peerless human energy that only capitalism can fully unleash.  When the people of a great nation are busily engaged in cooperation and competition, there is very little reason why any of them should be desperately poor.  Insurance against misfortune becomes a trivial expense.

The best way to nourish poverty is to put prosperity in the hands of officials with compulsive power.  No matter what they claim they want to accomplish with that power, the end result is always rich officials and poor citizens.  Do we need another century of experiments to prove that point, or will we finally learn the lesson once and for all?



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