Four Ways Capitalism Has Helped Alleviate Poverty

Four Ways Capitalism Has Helped Alleviate Poverty
Merriam-Webster defines capitalism as “a way of organizing an economy so that the things that are used to make and transport products are owned by individual people and companies rather than by the government.”

Today, in much of academia, capitalism is portrayed as an inherently corrupt system; the exploitative sweatshops and lack of child labor laws are constantly in the limelight.

Yet in the last 30 years, as capitalism flourished and globalization opened up its gates, 1 billion people have been taken out of poverty. Many remain unaware of and fail to account for global improvements in health, education and living standards.

  1. “Extreme” poverty has almost disappeared in most industrialized countries. Extreme poverty used to be a norm for many people throughout industrialized countries. Currently, however, severe poverty has disappeared in most industrialized countries because of free-market capitalism. Between 1990 and 2010, poverty rates fell by half in developing countries, from 43 percent to 21 percent — a reduction of almost 1 billion people. Compared to the average rate of poverty reduction throughout history, this is an impressive improvement.
  2. Third world countries are moving out of poverty. China and India have made the most progress in the pursuit to alleviate poverty after they began moving toward capitalism. Since the 1980s, these countries have abandoned central government planning, instead expanding and liberalizing trade in global markets, which improved economic conditions. China increased its per capita income 13-fold since the beginning of its economic reforms in 1978. The country pulled 680 million people out of poverty between 1981 and 2010 as well as reduced its extreme poverty rate from 84 percent in 1980 to 10 percent today. In India, income rose three-fold after the country liberalized its markets. Third world nations are experiencing an overall decrease in the rate of poverty as well. Thirty years ago, 50 percent of the people in the poorer nations of the world lived in extreme poverty. In contrast, in 2012, 21 percent of people in the poorer nations of the world lived in extreme poverty.
  3. More aid is able to reach third world countries. Since the beginning of globalization, and with more countries embracing capitalist ways, international and national aid has increased, helping boost development projects such as investments in schools, health clinics, housing and infrastructure, as well as improved access to water. Many more charitable nonprofit organizations have opened up and can now transfer and receive humanitarian aid globally through private companies more easily than ever before.
  4. Standard of living has gone up; more leisure time. Since the agricultural and industrial revolutions, individuals no longer need to spend all day doing manual labor in order to make a living. The standard of living has increased greatly. In the 18th century, being a country with a high standard of living meant having millions in dire conditions. France had the fourth highest standard of living of any country, yet 10 million, almost half the population, relied on some sort of public or private charity to survive, and 3 million citizens were full-time beggars. This poverty no longer exists in developed countries; more than half of the population has the privilege of leisure time, which can be used to further learning.

Capitalism has lessened the severity of poverty over time. Yet there is no hiding the fact that 1.2 billion people currently live in extreme poverty. Many of these capitalist problems stem from too much government regulation. However, we are continuing to gradually alleviate poverty. The report, by Oxford University’s poverty and human development initiative, predicts that “countries among the most impoverished in the world could see acute poverty eradicated within 20 years if they continue at present rates.”

Marcelo Guadiana

Photo: Flickr