Capitalism Eliminates Poverty, Not The State

The war on poverty has been fought foremost by the relentless working of capitalism, not by aid, not by government benefits and subsidies, not by minimum wage laws, not by collectivism, and not by the state. The invisible hand has improved the lives of the people of the world more than welfare or government hand-outs ever has or ever will.

What I am saying is shocking at first. It may even seem devoid of empathy, to insinuate capitalism eliminates poverty and welfare does not. Let me first clarify what I am saying. Society built on the foundations of the individual, on competition, and on the freedom of enterprise will have less poverty than society built on welfare, socialism, and equality of outcome.

What I am not arguing is that those less fortunate or disadvantaged should not be assisted; it is the moral duty of society to provide for an equality of opportunity. However, when the state chooses winners and losers through select subsidies (think green energy, think big oil, think farm subsidies), when the state props up those failed companies which are too big to fail, and when the government is built on a premise of paternalism and equality of outcome, poverty will increase.

To begin to understand how capitalism eliminates poverty, you must look at it as an impressionist painting. Allow me to explain.

What do you see when you closely examine impressionist art; random, uncoordinated swaths of oil and ink is all that is apparent, arranged in a chaotic concoction of unseemly blotches lacking any rhyme or reason. It is ugly and meaningless, much as capitalism when viewed closely.

Yet, step back, and watch, as you continue to separate yourself from the seemingly random collection of blotches, as it begins to take on reason, what was once blotches of blue are now the ripples of the ocean, what was once scrambled shades of yellow turning to orange become the beginnings of dusk. What was once meaningless is now a necessary and discernible element of the larger picture.

Allowing capitalism to flourish, such as by not subsidizing green energy, the "energy of the future" is at first random and obscene. Eliminating government jobs or government programs hurts society. It prolongs suffering immediately and is harmful. Looked at closely, it is ugly and meaningless. Yet, step back from the situation and peer in with greater breadth, examine the problem in its entirety. Is the benefit free; is it free money, a free job, with no cost? The late Nobel Laureate Milton Friedman once stated, “There is no such thing as a free lunch.” What appears a free lunch to the publicly employed or the officer of the subsidized industry becomes the burden of the next generation by way of debt, or if paid for through printing money, simply creates inflation, meaning we all pay (this is one form of taxation without representation). Now, take another step back, and let’s view the canvas in its entirety.

In order to understand how capitalism combats poverty, you must understand that wealth is not zero-sum. One person making millions does not involve another losing millions. One person’s creation is not another’s loss. When Benjamin Franklin created the light bulb, no one was poorer.. When Henry Ford divided labor and built an assembly line, he made the car accessible to everyone. These innovations allowed people to live better lives and, more importantly, reduced poverty. People want less, have more, and live more comfortably, due to capitalism.

For evidence, let us examine life before and after the proliferation of capitalism through the industrial revolution. If we lived in the world of 1820, the world average income would be about $650, we would be lucky to live to the age of 30, and the very word leisure would not be in existence. Today, the average income is over $7,500, and all other measurements of prosperity are higher. More people live in the world, and more people live better thanks to industrialism. The incredibly small population of nobles and kings of two centuries ago were the only ones who lived well, with leisure time, entertainment, and luxuries of any sort. Not today.

I am not arguing poverty is not a problem today, it is and will remain a serious global problem, but poverty today is not the norm, it is the exception. Extreme destitution was accepted as life in the 1700’s, extreme poverty is no longer accepted today, that alone is a testament to the power of capitalism. 90% of the world’s population were farmers 250 years ago, living solely of their own land, starving during bad crop seasons. Today, less than 5% of the world are farmers. That is because the world is not zero-sum; innovations of capitalism have created new jobs, and have created opportunity out of misery for those in poverty to prosper.

History is amazing in what it blatantly proves, which is that capitalism is the best means by which to reduce poverty. Time and time again this is proven. Recent history alone is overabundant with examples. Did the USSR or the USA fall by revolution from its own people, did North Korea or South Korea recently have mass graves erected for the millions dying of malnourishment, did the East Germans or West Germans tear down the Berlin Wall to escape poverty, and did Africa or China experience over 200 million people rise out of extreme poverty over only two decades. The answer, in every example, the state with capitalism prospered, and the state which controlled failed, regardless of how great the intention. The state built on welfare and hand-outs fails, the state founded on the individual prospers.

The road to ruin will be paved with good intentions. Coercive state power, forced collectivism, and oppression will not eliminate poverty. People, allowed to compete freely, to innovate, will. It is true, that those who succeed may become grossly rich, Bill Gates is worth over 40 billion, but if the sole unwanted byproduct of modernity and progress is the so-called over-remuneration of those pioneers, then I ask, does that damn it, and more importantly, what works better.

In the movie Wall Street, Gordon Gecko famously states that “greed- for lack of a better word- is good.” The “better word” Gecko was searching for was capitalism, and his speech should have followed as such, “capitalism is good, capitalism works, capitalism clarifies, cuts through, and captures the essence of the evolutionary spirit, capitalism, in all its forms, has marked the upward surge of humankind, and capitalism, you mark my words, will save this world from poverty.”

SOURCES:
Angus Maddison "Statistics on World Population, GDP and Per Capita GDP, 1-2008 AD."

Michael Mandelbaum "Democracy's Good Name: the Rise and Risks of the World's Most Popular Form of Government."

Milton Friedman "Capitalism and Freedom"

Gary M. Walton "A Long-term Economic Perspective on Recent Human Progress."