An Untold Economic Miracle
Published May 21, 2020
Critics of free markets point to growing income inequality as evidence that capitalism only benefits the wealthy. But focusing too much on income inequality misses the more important point: market reforms of recent decades have lifted billions of people out of poverty. Whether in China, India, or many other nations, economic freedom benefits everyone.
- Why is it not enough to look at income inequality when analyzing the effects of economic policies?
- What happens to income when socialist policies are enacted?
Critics of free markets contend that the poor are treated better under socialist economies. They point to growing inequality as evidence that capitalism only benefits the wealthy and well-connected.
But inequality measurements do not tell the whole story. When we look carefully at economies that have adopted free-market reforms we often do see rising inequality, but, more importantly, we also find billions of people who have been lifted out of abject poverty.
Take China for example... Income inequality has grown steadily since it began to implement free-market policies in the 1980s BUT the poor haven’t stayed poor. In fact, since the 1990s, incomes among the poorest Chinese have increased five-fold.
Likewise, after India embraced market reforms in the 1980s and 1990s, inequality rose, but the poor were much better off. In the last 30 years, the incomes of the poorest Indians doubled and hundreds of millions have escaped subsistence-level poverty. Whether we look at China, India, Chile, South Korea, or many other nations, increased economic freedom has benefited billions of people, most notably the poor.
Focusing too much on inequality misses the more important point: the market reforms of recent decades have lifted billions of people out of poverty. This is nothing short of a miracle.