Editor’s Note: This article is part of a week-long series illustrating how the free market works, from around the globe to our day to day lives.
Of all of the critiques made of capitalism, the claim that it only serves to benefit the wealthy at the expense of the poor seems to resonate with people the most. Income inequality was a pressing issue during the 2016 campaign season, and candidate Bernie Sanders made it a cornerstone of his campaign. The claim stems from the idea that there is finite wealth in the world, like a slice of pie. However, the reality is exactly the opposite.
Capitalism is working fast to eliminate poverty, while the State is working fast to eliminate wealth.
For much of human history, a majority of the world lived lives of poverty and serfdom. These experiences were inescapable, and only those in charge had enough wealth to live a relatively decent life. That began to change only a couple hundred years ago when capitalism kicked into high gear. The industrial revolution changed the way the world works. While today we look back and criticize the horrible working conditions endured during this period, these workers experienced much better lives than their ancestors had. As more countries began industrializing and trading with each other, life expectancy went up, and population increased along with it. Even as the State pushed back with the advent of fascism, communism, and two world wars, not even these were powerful enough to stop the engine of capitalism.
Today, critics are quick to point out income inequality and how wealthy the top have become in America, but this analysis is limited in scope. American poverty is great wealth compared to the rest of the world. Indeed, even the average American in poverty today has a better standard of living than John D. Rockefeller.
The World Bank defines extreme poverty as living on $1.90 a day or less. Today, less than 10% of the world’s population fits into that category. Even with the State pushing back, a free and connected market has been a force like any other, and the market has now nearly eliminated extreme poverty.
What makes this phenomenon truly incredible is that it has occurred in spite of the fact that population has skyrocketed in recent decades.
This is a primary concern of those claiming the world is overpopulated, that we will run out of resources and everyone will live in extreme poverty, but it seems the opposite has happened. Even though the population is now over 7 billion people, those living in extreme poverty have decreased by 1.25 billion. As technology and innovation continue to grow; poverty will continue to decline. The free market has given individuals the freedom to innovate, and with that freedom, there is nothing that can’t be solved.
When capitalism is not allowed to flourish, wages are limited, resources become finite, and money is scarce to anyone not in a position of power.
Venezuela is a recent example of this. Even though Venezuela is one of the most oil-rich nations in the world, their citizens are starving in the streets and waiting hours in line for the chance to buy bread. Their citizens have taken to protesting in the streets to demand change away from socialism.
At least eight Venezuelans were killed by their government in the “mother of all marches” that took place a few weeks ago. The people of Venezuela are outraged that their government has tied their hands, and the modern-day experiment in socialism in the 21st century is a failure.
Venezuela is a tragic case of what happens when individuals are not allowed to be free to innovate. While Venezuelans are dying at the hands of socialism, the free market is lifting the rest of the world out of poverty and into prosperity. Venezuela will inevitably accede to the economic power engine that is capitalism, but the current government is doing everything in their power to keep it from happening in the mean time.
Times, events, and people all change, but there are a few things that remain constant. One is that the free market is a force for innovation and liberation. No matter what year it is or what new event occurs, capitalism will always be a powerhouse that works to make the lives of every individual better. Markets work when they are free. They are working every day to eliminate extreme poverty across the world, and the State cannot stop it.