As the Rich Get Richer, the Poor Get Richer

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Apr 9, 2018

The rich are getting richer, and the poor are... also getting richer. What's driving this wealth creation process? In this video, Daniel Hannan explains why it is capitalism — and capitalism alone — that has led to the unprecedented enrichment that is the central fact of Western life.

As free market capitalism has grown, global inequality has fallen. Yes, the rich are getting richer, but the poor are getting richer faster.

  • The expansion of the free market has led to dramatic improvement in the lives of people all over the world. In 1990, 35% of the world's population lived in extreme poverty; in 2013, that number dropped to 10.7%.View Source
  • The worldwide infant mortality rate per 1000 births fell from 64 to 31 from 1990 to 2015.View Source
  • The average life expectancy has risen from 52 to 71 since 1960.View Source
  • From 1976 to 2016, the world literacy rate has risen from 68% to 86%.View Source
  • Capitalism lowers inequality, but even when people advance ahead of us financially, their productivity helps society.View Source

The most rapid declines in poverty are happening in countries that are adopting free trade policies.

  • Compare growth rates in free-trading Colombia, which has averaged 4% annual economic growth since 2010, and protectionist Venezuela, which has suffered years of economic contraction and high run-away inflation.View Source
  • Free-trading Vietnam has pulled ahead of protectionist Laos, seeing annual real GDP growth of over 6% since 2015, with only 11% of its population living in poverty, compared to 22% in Laos.View Source
  • After economic liberalization in 1979, China has experienced tremendous growth, averaging 9.5% annual growth over the last two decades.View Source
  • Countries that have embraced socialist policies, like North Korea, Zimbabwe, and Cuba have remained stagnant.View Source

The expansion of the free market has helped slash the percentage of those living in extreme poverty from 35% to 10% in 25 years.

  • In 1990, 35% of the world's population lived in extreme poverty; in 2013, that number dropped to 10.7%. During that time the free market expanded significantly.View Source
  • Capitalism lowers inequality. While the rich do get richer in capitalism, the poor get richer too — and they've been doing so at a higher rate.View Source
  • Related video: "If You Hate Poverty, You Should Love Capitalism" – Arthur BrooksView Source
  • Related reading: "Free to Choose" – Milton Friedman and Rose FriedmanView Source

Since it adopted more capitalistic policies starting in 1979, China's economy has enjoyed an average of 9.5% growth annually.

  • After economic liberalization in 1979, at which point it began to embrace more capitalistic policies, China has experienced tremendous growth, averaging 9.5% annual growth over the last two decades.View Source
  • Related video: "Myths, Lies and Capitalism" – Arthur BrooksView Source
  • Related reading: "How Capitalists Can Win The Argument" – Daniel HannanView Source

Capitalism is not about greed. It's about incentivizing people to match their skills to their goals and create earned success.

  • Capitalism is not about greed. It’s about creating an environment in which people match their skills to their goals and use their skills to create earned success.View Source
  • The unique quality of capitalism is that it structures incentives so that the way to succeed is to offer a service to the people around you.View Source
  • Under every other system, you get ahead by sucking up to those in power: commissars, kings, or dictators.View Source
  • Related video: "Is Capitalism Moral?" – Walter WilliamsView Source

While free trade-embracing Colombia's capitalistic economy has grown, protectionist Venezuela's socialist economy has collapsed.

  • Colombia, which has adopted many free trade policies, has averaged 4% annual economic growth since 2010, while protectionist Venezuela has suffered years of economic contraction and high run-away inflation.View Source
  • WATCH: Brazilian journalist Felipe Moura Brasil discuss "how socialism ruined my country."View Source
  • Related Reading: "Basic Economics" – Thomas SowellView Source

Capitalism caters more to the masses than the economic elite, making things increasingly more affordable for more people.

  • Economist Joseph Schumpeter on how capitalism caters to the masses, not the wealthy: "The capitalist engine is first and last an engine of mass production which unavoidably also means production for the masses. ... It is the cheap cloth, the cheap cotton and rayon fabric, boots, motorcars and so on that are the typical achievements of capitalist production, and not as a rule improvements that would mean much to the rich man. Queen Elizabeth owned silk stockings. The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within reach of factory girls in return for steadily decreasing amounts of effort."View Source
  • Related video: "Myths, Lies and Capitalism" – Arthur BrooksView Source
  • Related reading: "The New Road to Serfdom: A Letter of Warning to America" – Daniel HannanView Source

As Vietnam has embraced free trade, its economy has pulled ahead of protectionist Laos.

  • Free-trading Vietnam has pulled ahead of protectionist Laos, seeing annual real GDP growth of over 6% since 2015 and with only 11% of its population living in poverty, compared to 22% in Laos.View Source
  • Related video: "Why Capitalism Works" – George GilderView Source
  • Related reading: "The Road to Serfdom" – F.A. HayekView Source

Opposing capitalism isn't standing up for poor people, it's standing in the way of the best way to attain a better lifestyle. 

  • Opposing capitalism and market liberalization doesn't help poor people in the long run, it hurts them. Capitalism creates better goods for cheaper prices. According to economist Milton Friedman: “The great achievements of Western capitalism have redounded primarily to the benefit of the ordinary person.”View Source
  • Socialism is dogmatic, capitalism is pragmatic.View Source
  • The Left often focuses on the loss of traditional jobs while ignoring the productivity and prosperity gained through innovation.View Source
  • Related videos: "Why Socialism Never Works" – PragerUView Source

The expansion of free trade, property rights, and entrepreneurship around the world helped millions pull themselves out of poverty.  

  • The expansion of free trade, property rights, and entrepreneurship around the world has helped millions pull themselves out of poverty. Even jobs that have changed very little over the years, such as a barmaid, are enriched by increases in technology.View Source
  • Achievements like GPS and Uber have helped the average American the most.View Source
  • Meanwhile, socialist states like North Korea, Zimbabwe, and Cuba have remained stagnant.View Source
  • Related video: "Why You Love Capitalism" – Jared MeyerView Source

A desire for wealth is a part of the human condition. In capitalism, the way to succeed and grow wealth is to offer a service to others.

  • The unique quality of capitalism is that it structures incentives so that the way to succeed is to offer a service to the people around you.View Source
  • Socialism is dogmatic, capitalism is pragmatic.View Source
  • Capitalism is not about greed. It’s about creating an environment in which people match their skills to their goals and use their skills to create earned success.View Source
  • Related video: "Socialism Makes People Selfish" – Dennis PragerView Source

Myth: Capitalism is plundering developing countries. Reality: Countries that embrace capitalism see dramatic economic improvement.

  • Embrace of free market principles results in improved economies. For example, free-trading Colombia has averaged 4% annual economic growth since 2010, while protectionist Venezuela has suffered years of economic contraction and high run-away inflation.View Source
  • Another example: Free-trading Vietnam has pulled ahead of protectionist Laos, seeing annual real GDP growth of over 6% since 2015, with only 11% of its population living in poverty, compared to 22% in Laos.View Source
  • Related video: "How Socialism Ruined My Country." – Felipe Moura BrasilView Source
  • Related reading: "The New Road to Serfdom: A Letter of Warning to America" – Daniel HannanView Source

“The rich are getting richer and the poor are getting poorer.”

“The top one per cent of people on the planet have half the wealth.”

“Western corporations are plundering developing countries.”

“Capitalism is on its last legs.”

Really?

The truth is that global inequality is tumbling. Yes, the rich are getting richer—but the poor are getting richer faster. And what’s driving that process? The market.

Look at the most basic measures: Literacy. Longevity. Infant mortality. Calorie intake. Height. More and more people are being lifted out of poverty.

I think of the changes just in my lifetime.

When I was born, in 1971, an American worker had to earn a month’s salary to be able to afford a TV set. Now, it’s two days.

In 1971, fewer than half of girls worldwide completed at least primary education. Now, it’s more than 90 percent.

In 1971, a stationary car emitted more pollution than a car moving at full speed today.

Go a little further back. In the seventeenth century, the most powerful man in the world was Louis XIV of France. Every night, he’d have 40 dishes prepared for his dinner, and he’d pick the one he felt like. Think about it: A receptionist today can stop off at a store on her way home and have not only a wider choice than that king, but a fresher one and a healthier one. We all live better than Louis XIV.​

What has caused that miracle? Not any UN development program. Not any government aid scheme.

What caused it was the market.

The most rapid falls in poverty are happening in countries that are joining the global trading system. Compare growth rates in free-trading Colombia and protectionist Venezuela; or in free-trading Vietnam and protectionist Laos; or in free-trading Bangladesh and protectionist Pakistan.

It’s the same story every time.

China after 1979, India after 1991. You remove barriers to trade. Prices fall. Your people no longer have to work every hour just to afford food and basic commodities. They have time to invent and make and buy and sell other things.  The whole economy is stimulated. Poverty falls.

OK, you might say, so maybe capitalism works; maybe people are better off. But isn’t there a cost? Doesn’t it make us more materialistic? Doesn’t it make us greedier?

If by “greed” you mean a desire for material wealth, that’s part of the human condition. It’s in our DNA or, if you prefer, it’s in our fallen nature. Under any system—socialism, communism, fascism, absolute monarchy, theocracy—people want more stuff.

The unique quality of capitalism is that it structures the incentives so that the way to succeed—the way to be “greedy,” if you insist on using that vocabulary—is to offer a service to the people around you.

Under every other system, you get on by sucking up to those in power: commissars, or kings, or dictators.

But under a free market system, you get on by offering consumers something they want.

As the economist Joseph Schumpeter put it, the achievement of capitalism is not to provide more silk stockings for princesses, but to bring them within the reach of the shop girl.

So, why can’t  we see it? Why do well-intentioned, idealistic young people oppose free trade and market liberalization, thinking that they’re standing up for the poorest people on the planet, when in fact they’re doing the opposite?

A big part of the answer is aesthetic. As the Victorian novelist, Anthony Trollope, wrote, "Poverty, to be scenic, should be rural." 

I grew up in Lima, Peru which, in those days, was surrounded by shantytowns known as las barriadas.

Western visitors would come, and they’d visit Machu Picchu, and then they’d ask in bewilderment why people would migrate from the Andes to the slums.

Why did they swap the clean air and the mountain scenery for open sewers and traffic fumes?

It’s a very first world question. No Peruvian ever needed to ask why you’d leave a place with no electricity, no school, no clinic, and no jobs.

Those shantytowns, those barriadas, for most of their residents, are transitional. They’re busy places, humming with enterprise, and the people in them sense that they’re on their way up. If we want to help those people, the best thing we can do is let them sell us their stuff.

Capitalism has achieved things which earlier ages ascribed to gods and magicians. It’s abolishing hunger and disease and want.

It’s led to an unprecedented enrichment that is the central fact of your life. The fact that you’re watching this video is enough to tell me that.

Now let it work its magic in the rest of the world.

I’m Daniel Hannan for Prager University.

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