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Fellows with Friedman

The Growth of Freedom

Peter Berkowitz

According to Peter Berkowitz, one of the causes behind better economies and higher wealth is capitalism. Capitalism has had a “stunning track record in lifting hundreds of millions around the world out of the grinding poverty that has been the typical lot of ordinary people throughout history, and in creating prosperous middle classes across nations and civilizations.” Furthermore, capitalism enables a higher quality of life and produces a competitive market driven by dramatic improvements in transportation and communications. Consequently, the new mobility and the new capacity to exchange information at a distance “transform workers around the world into a universal class whose members grasp their shared interests.”

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Edward Lazear

Free markets and private ownership help individuals from all income groups. Individuals with income in the lowest 10 percent of a country’s income distribution do significantly better in economies with free markets, competition, and low state ownership. Moving toward a free market also substantially enhances the income of the poor. For example, “when countries were ranked on the basis of an economic freedom index in 2015, Mexico was the median country, and Singapore was the most free. Changing freedom from the Mexico level to the Singapore level is predicted to raise the income of the poor by about 40 percent. All income groups benefit from the change, but the change typically helps the poor more than other income groups.” 

As Lazear argues, “A rising tide lifts all boats. When the median income in a country rises by 1 percent, the income of the lowest 10 percent also rises by about 1 percent. Furthermore, the richest 10 percent do not increase their income at the expense of the lowest 10 percent. In fact, the reverse is true. Incomes of the poor move with the incomes of the rich, not in opposite directions. Even when the income of the richest 10 percent grows more rapidly than the income of the poorest 10 percent, causing an increase in income inequality, the poor tend to be better off in absolute terms.” 

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