In his inaugural address in 1949, President Harry Truman said, “More than half the people of the world are living in conditions approaching misery. … For the first time in history, humanity possesses the knowledge and the skill to relieve the suffering of these people.” That decade set off a half-century of well-meaning efforts from all sorts of government and nongovernment organizations creating things like Millennium Development Goals designed to reduce the human suffering that severe poverty brings. Since then over $2 trillion has been spent to eradicate poverty in developing countries.
And yet, poverty levels remained the same and even increased in some places.
Until something remarkable happened. The percentage of the world’s population living in poverty plummeted over the last 20 years.
But it wasn’t all those trillions in government and NGO spending that did it. It wasn’t socialism. It wasn’t redistribution of wealth. It wasn’t higher taxes.
A billion people were lifted out of poverty because of capitalism and free-market principles.
Of that billion, two-thirds live in China, whose government has long eschewed the high-minded anti-poverty goals of groups like the UN Millennium Project. So how did China reduce poverty so drastically if not through aid agencies?
What’s fascinating about this is that Communist China offers us a natural experiment in real time. China has been ruled by its Communist Party since 1949, the same year Truman called for ending poverty-induced misery, and for much of that time it instituted a planned economy where the government decides who makes what and how much. Tragically, as discussed in this Utah Citizen Network article, China’s socialist economy created a massive famine that resulted in the deaths of 36 million people. It wasn’t until a group of peasant farmers secretly met to institute private property principles in their farming that the tide of misery began to turn. They grew more food that season than the previous five harvests combined. Members of the official Communist Party took notice, and slowly, economic freedom made headway in China.
China still has a ways to go, but capitalism reversed tragic famines that killed tens of millions and then pulled almost a billion people out of poverty. Whether they can keep those gains, and whether other developing countries can duplicate those improvements, will depend not upon how much foreign aid is sent, or how many IMF loans they get, but upon their governments’ willingness to embrace the greatest weapon there is in the war on poverty: capitalism.