In-Depth Notes on Capitalism and Extreme Poverty

Overview of Capitalism and Extreme Poverty

• Current Economic Climate
  • The upcoming 2020 election has reignited debates over free-market economics.
  • Criticisms focus on income inequality, with politicians arguing that wealth disparities create poverty for many citizens.

Extreme Poverty in America

• Extent of Extreme Poverty

  • A United Nations report claims over 18 million Americans live in extreme poverty, akin to the entire population of Chile.
  • Philip G. Alston highlighted the contrast between America's wealth and the extreme poverty conditions faced by nearly 18.5 million individuals.
  • Levels of poverty:
  • 40 million Americans in poverty.
  • 18.5 million in extreme poverty.
  • 5.3 million in conditions of absolute poverty.

• Counterargument

  • Recent research suggests a different picture:
  • A May 2019 study shows only 0.11% of Americans (about 336,000 people) live in extreme poverty.
  • The extreme poverty rate for parents (single or married) is virtually zero.
  • This indicates challenges in the system but reassures that falling into extreme poverty is increasingly difficult.

The Role of Capitalism

• Effectiveness of Capitalism
  • Capitalism is highlighted as an effective mechanism for combating extreme poverty through free exchange of goods and services.
  • Economic Freedom Correlation:
  • Tracking increases in economic freedom correlates with rising living standards.
  • Many countries have improved their economic freedom scores, which supports declining poverty rates.
  • Global average economic freedom score has risen by 3.2 points in 25 years.

Historical Context and Global Trends

• Decline in Global Poverty

  • The proportion of the world’s population living in extreme poverty decreased from over 42% in the early 1980s to under 10% currently.
  • Approximately 1.2 billion fewer people live in extreme poverty today, despite the global population increase.
  • A person escapes extreme poverty every 1.2 seconds, equivalent to the population of a medium-sized city per day.

• Case Study: China

  • China's economic reforms since 1995 contributed to lifting 800 million people out of extreme poverty.
  • The country's economic freedom score improved significantly, indicating a correlation between market openness and poverty reduction.

Conclusion

• Capitalism, despite its imperfections, has proven to be the most effective solution in fighting extreme poverty globally.
• As more economies adopt free-market principles, trends indicate that poverty levels will continue to decline, aiding global efforts to combat poverty.