Free markets are the antidote to poverty

Back in January, Oxfam published its annual report on poverty and inequality. The main thrust of the argument being that inequality is a problem and if there were fewer billionaires then the world would be a much better place. Even if one is willing to overlook the flawed methodology of the report, and the deeply disturbing catalogue of abuse of some of the most vulnerable people in the world committed by members of its staff, problems remain with the conclusion reached by the report and its underlying assumption; namely that the root cause of poverty is inequality caused by free market capitalism.

Oxfam is not alone in labouring under this delusion. The idea that we should strive for equality above all has been the driving force behind every socialist revolution throughout history. Moreover, this ideology is now shared by the leading figures in the Labour Party.

In reality, free market capitalism has brought economic growth and prosperity on a scale which is unprecedented in human history. The number of people living in extreme poverty worldwide declined by 80 percent from 1970 to 2006 in conjunction with the spread of capitalism. There are tens of millions of people in countries such as China and India who are alive today thanks to capitalism.

The story is the same all over the globe. Once countries open up their markets, respect private property rights, and begin to trade freely with the rest of the world, the results appear miraculous. The countries start to become wealthy, and the citizens of these countries – who are often some of the poorest people on the planet – are lifted out of a life of subsistence and squalour.

It was Adam Smith, in his great work, the Wealth of Nations, who explained how nations become wealthy. It is not through hoarding onto their gold reserves, but rather through free trade. It was true when it was published in 1776, and it is true today, countries become wealthy through the capitalism system and trade.

The history of the past 300 years – and the past 50 in particular – reveals that the most effective method ever invented of eradicating poverty is free market capitalism. In 1820, worldwide poverty included 94% of the world’s population. In 1981 it was 53%. By 2011 it was down to 17%. This is the most rapid reduction in human history and its thanks to industrialisation and capitalism.

The most striking example of positive change is China. After decades of the failed economic policies of socialism, and the tens of millions of deaths which it caused, the Chinese government started to liberalise its economy. The result was a huge increase in economic growth and a dramatic increase in living standards.

There are far fewer people around the world living in absolute poverty today thanks to free market capitalism. It has brought wealthy, prosperity, and given tens of millions of people access to clean water, healthcare, educational opportunities, and technological advances which previous generations could only dream of.

However, much more still needs to be done. Organisations such as Oxfam are right to be concerned that millions of people around the world still live in poverty. However, their obsession with inequality is unhelpful. Instead we should all focus on eradicating poverty through free markets, property rights, and international trade.

If we are serious about eliminating poverty and bringing wealth and poverty to the world, then we should embrace the one system which has been shown throughout history to work. If you are anti-poverty, then you should be champions of the free market.

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