Capitalism, bitchez!

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In a world wallowing in the Great Malaise, it’s good to remember there is some good economic news from time to time.

The international poverty line is defined as living on US$1.90 or less a day (purchasing power parity). Others call it the “extreme poverty”. In a report just released, the World Bank analyses the trends over the past quarter of a century.

In 1990, the year after the fall of the Berlin Wall, 37 per cent of people in the world lived below the international poverty line. Twenty-two years later, in 2012, only 13 per cent did. Thirteen per cent is still an awful lot of people – far too many – but in just over two decades, 24 per cent – and quarter – of the world population went from living in extreme poverty to living above the poverty line. The World Bank estimates that by last year, the number fell further, to 10 per cent.

While we in the West have been preoccupied by the good, the bad and the ugly in the White House, wars on terror, financial crises, the internet, and funny cat videos, elsewhere throughout the world a silent revolution has been unfolding. In a period of 22 years, a little more than a blink of an eye in the context of the human history, billions of people have been lifted up from grinding poverty. Never in the history of the human endeavour have so many have done better in a shorter space of time. When new modern histories are written decades from now, this, rather than any other event or phenomenon, might be seen as the most important development of the turn of the millennium.

The extreme poverty has fallen everywhere around the world since 1990, but the great bulk of that fall took place in East Asia and the Pacific. In 1990, a staggering 60 per cent of people living in China and nearby countries lived below the international poverty line. In 2012 it was only 7 per cent. We are talking here about the space of less than a generation. In South Asia – primarily India – the decrease was from 51 to 19 per cent.

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(World Bank)

There is no doubt that too many people around the world are still extremely impoverished, and many of those who have moved up still live in a relative poverty. But let us stop for a moment to contemplate this success, even while we wish for it to strongly continue into the future. It has not been the foreign aid that did the trick, or state socialism for that matter. Billions of people are no longer very poor because of capitalism and trade, and business and enterprise – often dirty, corrupt, flawed and imperfect, but in the end so much better than any alternatives. In fact, the region to experience least improvement in poverty elimination was the sub-Saharan Africa, which remains the least touched by the markets and international trade.

Not surprisingly, those who consider themselves to have benefitted the most from freer markets and their greater opportunities appreciate them the most. When two years ago, Pew Research Centre gave people in China a statement “Most people are better off in a free market economy, even though some people are rich and some are poor”, 76 per cent of respondents agreed and only 18 per cent (of probably die-hard Maoists) disagreed. This is both the higher rate of agreement and the lower rate of disagreement about the benefits of capitalism than in Germany, Great Britain and the United States.

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Many of us in the West might be disillusioned and shell-shocked, feeling hard done by the system, but out there, elsewhere in the world, a lot of people are counting their lucky stars.

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