Capitalism caused the huge decline in global poverty

The evidence for this claim is so overwhelming that it shouldn’t even be up for debate. Time series evidence, cross sectional, it all points in the same direction. In this old post I explain how we know this.

Unfortunately, people continue to deny reality.

PS. Noah Smith’s post has an impressive summary of the data on poverty, but he’s wrong about capitalism.



37 Responses to “Capitalism caused the huge decline in global poverty”

  1. Gravatar of Ray Lopez Ray Lopez
    4. April 2021 at 22:28

    Poor misunderstood SS. Everybody (except him) is wrong and nobody understands our man in Little Havana (Echo Park), Los Angeles. In fact, the relevant query is not absolute poverty reduction, but relative poverty, i.e., status. Nobody cares that today the poorest person in the USA probably lives better than Louis the XIV. It’s keeping up with the Joneses (inequality) that’s important. Can’t believe I have to explain this to…an economist.

  2. Gravatar of Cartesian Theatrics Cartesian Theatrics
    4. April 2021 at 22:42

    The basic gospel of the Cato Institute is still the best gospel we have, regardless of how boring it is. Inclusive institutions, private property, blah blah blah–we won’t know what we have until we lose it.

  3. Gravatar of postkey postkey
    5. April 2021 at 00:09

    N.A.S. is discussing yesterday’s battles and ignoring the negative externalities of growth as well as the ‘energy supply side’?

    ‘We’ have ten years?

    “ . . . our best estimate is that the net energy

    33:33 per barrel available for the global

    33:36 economy was about eight percent

    33:38 and that in over the next few years it

    33:42 will go down to zero percent

    33:44 uh best estimate at the moment is that

    33:46 actually the

    33:47 per average barrel of sweet crude

    33:51 uh we had the zero percent around 2022

    33:56 but there are ways and means of

    33:58 extending that so to be on the safe side

    34:00 here on our diagram

    34:02 we say that zero percent is definitely

    34:05 around 2030 . . .


    34:43 need net energy from oil and [if] it goes

    34:46 down to zero

    34:48 uh well we have collapsed not just

    34:50 collapse of the oil industry

    34:52 we have collapsed globally of the global

    34:54 industrial civilization this is what we

    34:56 are looking at at the moment . . . “

    Louis Arnoux.

  4. Gravatar of Jerry Brown Jerry Brown
    5. April 2021 at 00:27

    “Unfortunately, people continue to deny reality.”

    Or they just occasionally disagree with you for good reason.

  5. Gravatar of ssumner ssumner
    5. April 2021 at 05:35

    Jerry, And what should I infer from the fact that people are not able to state those “good reasons”?

  6. Gravatar of Michael Rulle Michael Rulle
    5. April 2021 at 06:03

    Agree of course. I wish our politicians, (both parties, but Dems even more so) thought this was obvious. It is not so much they do not believe in free markets per se, it’s their willingness and desire to seek advantage by superseding markets in too many ways. You call it Banana Republic, I call it corruption——perhaps the same thing.

  7. Gravatar of Dale Doback Dale Doback
    5. April 2021 at 08:31

    The old post was a good read. Did anyone ever write a response/criticism of it?

  8. Gravatar of Carl Carl
    5. April 2021 at 08:31

    I loved your econlib article. I expect to cite it many times in discussions with friends and family who hold social democratic or nationalist positions.

  9. Gravatar of Mark Z Mark Z
    5. April 2021 at 10:57

    I think you should do a more detailed post on Noah Smith and Hickel on global poverty/capitalism. It’s not monetary policy, but the neoliberalism debate is your secondary specialty, right?

    The least convincing part IMO of Smith’s post is where he stands on Dani Rodrik et al’s writings on industrial policy. But to the extent that transfers have reduced poverty, those transfers are funded by taxation of the fruits of free markets, so that’s still free markets reducing poverty. He also plainly mischaracterizes the Washington consensus. It doesn’t deter countries from taking a ‘mixed approach’ at all. You can have a big welfare state and still get IMF loans, you just can’t be too egregiously protectionist and excessively hobble your own labor markets.

  10. Gravatar of ssumner ssumner
    5. April 2021 at 12:47

    Dale, Not that I know of.

    Mark, Maybe when I have more time.

  11. Gravatar of Spencer Bradley Hall Spencer Bradley Hall
    5. April 2021 at 13:48

    Of course, we necessarily have regulated capitalism, not laissez faire capitalism.

  12. Gravatar of Spencer Bradley Hall Spencer Bradley Hall
    5. April 2021 at 13:54

    The FED is following an extremely easy money policy. The remuneration rate has receded to that below all one year money market rates.

  13. Gravatar of ankh ankh
    6. April 2021 at 01:20

    Sometimes your views seem very contradictory.

    For example, you clearly point to the benefits of capitalism and claim to be of the “Chicago School” not just in terms of graduating from the school, but in subscribing to Friedman’s ideology.

    Yet, wittingly or unwittingly, you also support Marxists. You support Aung San Suu Kyi despite the fact that her father was a communist, that she supports the CCP totalitarian model, and that her family is one of the most prominent members (gold star members) of the WEF, which now propagates the abolition of private property. She essentially sold Myanmar to the CCP through the belt and road initiative. The CCP builds their infrastructure through the Myanmar heartland as we speak.

    You often point to Trump supporters as delusional uneducated conspiracy theorists, but one does wonder whether it is conspiracy when the head of the WEF says, on video, and in his book, that we will never return to normal, and that humanity should accept “collectivist principles” in which no inalienable rights exist? Is is conspiracy when Rockefeller, in 1991, on video, says he is proud to be part of a global cabal that tears down “national interests” in place of a “one world govt”. Based upon your previous writings, I presume you are also in favor of this one world government.

    But has it occurred to you that a one world govt will destroy individuality and universality, and with it, the very principles with which capitalism rests.

    Capitalism doesn’t work without private property.

  14. Gravatar of John John
    6. April 2021 at 01:43

    Ray says…..”Nobody cares that today the poorest person in the USA probably lives better than Louis the XIV. It’s keeping up with the Joneses (inequality) that’s important.”

    Well they should care. Because the alternative will make them worse off, not better off. If Marxist academics were really “woke” they’d be running in the opposite direction of the gulags, not towards them.

    If you have a problem with your low standard of living, then create a product or service. You will find that it is not so easy. It requires the capacity to take on risk, to make sacrifices in your life that often times involve neglecting family and friends (you will have no time for anything other than your business). If you cannot do that, then that is your problem. Innovators who took on extraordinary risk, and succeeded, owe you nothing but the product or service they provide. And if you don’t like what they have to offer, then you simply don’t buy it.

  15. Gravatar of Spencer Bradley Hall Spencer Bradley Hall
    6. April 2021 at 06:38

    The “Chicago School” was not uniform in its outlook throughout its storied history.

  16. Gravatar of postkey postkey
    6. April 2021 at 07:36

    “Capitalism doesn’t work without private property.”

    Capitalism doesn’t work without cheap energy. Soon to be no more.

  17. Gravatar of Spencer Bradley Hall Spencer Bradley Hall
    6. April 2021 at 07:42

    Bike company stocks rebound with the markets — as Shimano hits record highs

  18. Gravatar of ssumner ssumner
    6. April 2021 at 08:36

    ankh, It’s so good to see the Trumpistas back again, I thought they’d never return. Any comments on the Trump election conspiracy theorists admitting in court that they made it all up, and claiming as a defense that no reasonable person would have believed their obvious lies?

  19. Gravatar of Spencer Bradley Hall Spencer Bradley Hall
    7. April 2021 at 08:13

    Trump’s tariffs on Canadian lumber are pricing Americans out of the U.S. housing market

    By Jessica Vomiero Global News
    Posted June 24, 2018

  20. Gravatar of Michael Rulle Michael Rulle
    8. April 2021 at 06:26

    Sidney Powell may be a blowhard, but the whole point about the election unfairness was implementing a system, some against state laws, that created unprecedented number of votes ——many impossible to verify.

    But I don’t care about that—anymore. I do care about voting laws going forward. And if one thinks the GA law is racist because it requires ID (I doubt you think that —-not my point), that is not a Trumpista problem—-it is a Democrat problem.

    You may have commented on your voting law opinions, might have missed it. Since you are for a National vote, you may not care. If so, you are wrong to not care about voting laws. It still matters. IDs. Dems should be careful what they wish for. Switch 3-4 million votes in NY and CA combined and GOP wins in National election. Which I disagree with.

    Unfortunately, but predictably, you still cannot get your energy up on the crappy blog. At least you write excellent articles on the real blog.

  21. Gravatar of postkey postkey
    9. April 2021 at 00:04

    “It still matters.”
    I’m sere you ‘believe’ it!
    ‘Democratic’ reality?

    “Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens
    Martin Gilens and Benjamin I. Page
    Each of four theoretical traditions in the study of American politics—which can be characterized as theories of Majoritarian Electoral Democracy, Economic-Elite Domination, and two types of interest-group pluralism, Majoritarian Pluralism and Biased Pluralism—offers different predictions about which sets of actors have how much influence over public policy: average citizens; economic elites; and organized interest groups, mass-based or business-oriented. A great deal of empirical research speaks to the policy influence of one or another set of actors, but until recently it has not been possible to test these contrasting theoretical predictions against each other within a single statistical model. We report on an effort to do so, using a unique data set that includes measures of the key variables for 1,779 policy issues. Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. The results provide substantial support for theories of Economic-Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism. “

  22. Gravatar of Pcash Pcash
    9. April 2021 at 09:46

    Capitalism had allowed us to live much better lives but with less purpose. It’s the lack of purpose that is angering people. That and health care, housing and education costs.

  23. Gravatar of Pcash Pcash
    9. April 2021 at 09:47

    Capitalism has* allowed us to live much better/longer lives but with less purpose. It’s the lack of purpose that is angering people. That and health care, housing and education costs.

  24. Gravatar of Carl Carl
    9. April 2021 at 19:33

    Are people truly angrier nowadays or do we just have more microphones around? Here’s a literature review of the last 200 years that concluded that people have never been happier:
    And, did people have a greater sense of purpose in the past or simply less autonomy and choice? And the three markets you mention as irritants are all highly distorted by government policy. So, maybe the problem with them is too little capitalist accountability and not too much.

  25. Gravatar of Michael Sandifer Michael Sandifer
    10. April 2021 at 07:06

    Scott is certainly correct in this post, and Americans who are unhappy are largely so due to “first world problems”. In the case of Trump voters, many of them are also unhappy due to the various forms of bigotry they now cultivate, being in constant outrage as certain despised minority groups progess.

    That said, the unhappiness is very real, and with more wealth comes desires and even expectations for more autonomy, security, purpose, and meaning in our lives, which is something that American political economy has failed to deliver for various reasons. Increased wealth is not sufficient to boost happiness, especially when the level of wealth has fallen below expectations. There’s little question, for example, that Americans expected to have a higher RGDP/capita before the Great Recession than has been realized. This presumably exacerbates the other frustrations that come with modern life in America.

  26. Gravatar of ssumner ssumner
    10. April 2021 at 08:15

    Pcash, Just the opposite. People have much more of a sense of purpose under capitalism than under communism, which produces very cynical people.

    Carl, If people were less happy in 1975 than in 1820, what does that say about the impact of economic growth on happiness?

    Michael, See my reply to Carl.

  27. Gravatar of Carl Carl
    10. April 2021 at 09:18

    I was saying that they were happier in 1975 as was the study I referenced.

  28. Gravatar of ssumner ssumner
    10. April 2021 at 09:26

    Carl, The article you linked to says:

    “The low point of happiness in the US was around the time of the Fall of Saigon in 1975,”

  29. Gravatar of msgkings msgkings
    10. April 2021 at 11:33

    It’s my understanding that general ‘happiness’ doesn’t change much over time, people adapt to the world as it is, they don’t know any other. So when we say things like “would you be happy living in 1800 without electricity and indoor plumbing” the answer is about as happy as you are now. Because you lived the life in front of you, and your happiness was based on the world you were in.

    Were Native Americans ‘unhappy’ in 1600 AD? I’d argue not really.

  30. Gravatar of Carl Carl
    10. April 2021 at 12:38

    That’s embarrassing. It seems the author of the article I referenced and I both have a reading comprehension problem. I glossed over the fact that he made that claim about 1975 being the year of peak unhappiness because that claim is nowhere to be found in the study summary in Nature he cites:

    And that Nature study summary claims a positive correlation, albeit localized, between happiness and GDP that is definitely not found in the actual study: In the study they merely make the claim of a strong correlation between life expectancy, health and happiness with no correlation to GDP. And they note short term drops in happiness due to conflicts(e.g. wars).

    Oh well.

  31. Gravatar of yslov yslov
    10. April 2021 at 16:27

    This article is precisely why the rest of the world’s economists laugh hysterically at low IQ U.S. economists.

    Your country is rotting from the inside out, and now with over 30 trillion in debt, your answer is to try and force other countries – like Ireland – to raise their corporate tax rates in an effort to save your fledgling republic?

    We don’t care about your country, or your people. You send us million s in aid, and you cannot even cover your own debt.

    These countries are not going to lower their rates because “you have a problem”.

    The way to be more competitive, which you should have learned at University – before receiving your PhD – is to lower your tax rates. Of course, because your government is horribly corrupt, that is apparently out of the question. You have a lot of government mouths to feed.

    When you are broke and ask us for aid, we will laugh at you. Just like we do now when you send us aid. But hey, don’t stop. We love the free money!

  32. Gravatar of dcpi dcpi
    11. April 2021 at 07:58

    Scott: Thanks for the great post and helping get the important message out. Free markets also increase net happiness by allowing the conditions for more and longer lives. So even if people have a set happiness point their are many more of us at that point.

  33. Gravatar of ssumner ssumner
    11. April 2021 at 08:38

    msgkings, That’s my view as well.

    Thanks Carl.

    yslov, Given how Europe is doing right now, I doubt they are laughing at the US. Yes, Yellen’s idea is a bad one, but I suspect the rest of the world will be bullied by the US into supporting it. Sad.

  34. Gravatar of Spencer Bradley Hall Spencer Bradley Hall
    11. April 2021 at 15:01


    U.S. economists will kill capitalism. We will end up with more state capitalism and a command economy.

    It is incontrovertible. Capitalism requires that the banks be driven out of the savings business.

  35. Gravatar of postkey postkey
    12. April 2021 at 00:21

    “You send us million s in aid, . . . .”

    And ‘make a profit’?

    ‘A few years ago I sought to update my breakdown of the balance of payments to update the impact of U.S. military spending and foreign aid. But the Commerce Department’s Table 5 from its balance of payments data had been changed in such a way it no longer reveals the extent to which foreign aid generates a transfer of dollars from foreign countries to the United States, as it did in the 1960s and 1970s. I phoned the statistical division responsible for collecting these statistics and in due course reached the technician responsible for the numbers. “We used to publish that data,” he explained, “but some joker published a report showing that the United States actually made money off the countries we were aiding. It caused such a stir that we changed the accounting format so that nobody can embarrass us like that again.” I realized that I was the joker who had been responsible for the present-day statistical concealment, and that it would take a Congressional request to get the Commerce and State Departments to replicate the analysis that still was being made public in the years in which I wrote Super Imperialism. ‘

  36. Gravatar of Spencer Bradley Hall Spencer Bradley Hall
    13. April 2021 at 06:42

    The U.S. went off the gold standard because of the unilateral transfers to foreigners (our widespread military bases and operations).

  37. Gravatar of msgkings msgkings
    13. April 2021 at 08:25


    Then why did everyone else go off of it?

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