When Capitalism Wins, Poverty Loses

Why do folks on the left support punitive policies such as high tax rates and a bigger burden of government?

Some of them are motivated by resentment against those who have achieved success. These are the people who support the hate-and-envy message of politicians such as Bernie Sanders and Elizabeth Warren.

Others folks on the left, by contrast, are motivated by sympathy for the less fortunate.

That’s a noble sentiment. Where they go wrong is in thinking that the economy is a fixed pie. This leads them to the mistaken conclusion that some people are poor because other people are rich.

Maybe I’m overly optimistic, but I think these people can be convinced to support good policy if they learn the facts about how free markets and limited government are a proven recipe for prosperity.

This is why I shared data earlier this year showing how per-capita economic output jumped dramatically once capitalism was allowed starting a couple of hundred years ago.

Today, let’s look at how poor people have been the biggest winners. Professor Max Roser of Oxford University recently shared a profoundly important tweet about the dramatic reduction in global poverty. We see not only that poverty rates have plummeted, but also that falling poverty rates are correlated with increases in per-capita GDP.

In other words, everyone is getting richer. There’s no fixed pie.

As you might expect, regions that are friendlier to capitalism have enjoyed bigger increases in prosperity and bigger reductions in poverty.

The bottom line is that people who care about the poor should be the biggest advocates of free enterprise.

P.S. It’s worth noting that, according to both U.S. data and global data, the big reduction in poverty occurred before welfare states were created.