Poverty: We’ll always have the poor among us, the old biblical saying goes. But at the rate absolute poverty is shrinking around the world, that might not be true for much longer.
Politicians of all stripes in virtually every country have long expressed deep concern about global poverty, especially what the World Bank calls extreme poverty — those living on $1 a day or less.
But in fact, the decline in poverty is an unheralded success story, thanks mainly to freer markets around the world. As recently as 2003, nearly 35% of all the world’s inhabitants were considered poor. By 2012, even after two epic stock market meltdowns, a global financial crisis and a Great Recession, only about 12% or so of the world’s population was poor.
It’s one of the great economic shifts in the history of humankind, all taking place in the space of about 20 years. And yet, it largely remains unremarked upon.
How did such a thing happen? In a word, capitalism — that is, economic freedom and all it entails.
Indeed, the process of poverty reduction could be said really to go back 200 years or so, to the beginnings of the Industrial Revolution.
The creation of factories, the steam engine and other mechanical productivity multipliers, the explosion in new goods and services, and the expansion of trade helped create a new middle class in the developed world, pulling millions out of poverty. Despite wars, revolutions, civil wars, coups, and the advent of communist regimes, capitalism’s powerful expansion continued pulling ever-greater numbers of people out of poverty.
But the pace really picked up substantially after the Berlin Wall fell. During the 1990s, economic freedom — the engine of economic growth and prosperity — soared.
“As economic freedom has increased over the last two decades, so has real world gross domestic product,” wrote Tori Whiting in “We Know What’s Solving Poverty Around The World,” found on the Heritage Foundation’s Daily Signal blog. “During this same time period, the global poverty rate has been cut in half.”
Those are truly stunning revelations. Global GDP surged from roughly $32 trillion to $58 trillion from 1993 to 2014, an unprecedented gain. Massive investments in places that had once been closed, such as China and India, made enormous strides in both output and productivity possible.
Yet, more progress against poverty isn’t preordained. Freedom lets us all use our talents and abilities to our best advantage, while encouraging the wise use of scarce resources. Yet, sadly, in recent years socialism has once again reared its ugly head. Venezuela, Argentina, Cuba and Brazil have all made the socialist mistake — and paid for it. Large swaths of Africa and Asia, too. And much of the Mideast has no real freedom at all.
Indeed, Whiting notes, fully 70% of all the world’s people still live in countries described by the Heritage Foundation’s Index of Economic Freedom as “mostly unfree” or “economically repressed”
On Memorial Day, let us thank those who went before us to preserve freedom and to expand it. Their sacrifices created our prosperity — and deserve our gratitude.