Poverty, Capitalism and Freedom - Essay Example

The primary reason that nearly 1 billion people have been taken out of extreme poverty in the past 20 years has been capitalism and free trade. Name Date For the past 20 years, billions of people across the world have been living in miserable conditions. Several of them who live in these conditions that border misery cannot afford basic necessities in their life. Many are not employed and those employed earn income that can’t meet generally established threshold which vary from country to country. In the past 20 years, billions of people have economic conditions that fall short of minimally accepted standard (Jeffrey, 2011). Many people living in this state don’t have enough money to buy food, shelter and clothing. In this past years, the world have stepped up its efforts to lift people out of this status of poverty, but it is taking longer than it has always been hoped due to myriads of challenges. The number of those living in abject poverty has fallen between 1990 and 2010 by almost I billion people. The world has a role to uplift people living in misery out of this state (Jeffrey, 2011). Out of over 7 billion people living on this planet over 1 billion in the past decades has been living below the internationally accepted standard. This have been the center for the UN meetings that have taken place in the past to set up targets including millennium development goals, targets that must be achieved to uplift many out of poverty. Some were set in 200 and will expire in 2015. In the developed nations, all the population doesn’t come close to internationally accepted poverty line. In America for example, the poverty line is $63 per day depending on the size of the family, $63 is for a family of 4 (Jeffrey, 2011). In the emerging economies, the poverty line is slightly above the $1.25 generally accepted standard. People that set standard are below poverty line, life of misery that is nasty and short. This population lacks education, shelter and healthcare. They don’t have enough food that can sustain their both physical and mental health. The world in the past 20 years have done what is necessary though not entirely satisfying. Some things could not be achieved in a period of 20 years like reducing by over a half a figure the number of child mortality rate and maternal mortality rate. Some of the development goals though it might not be achieved acts as a yardstick for the development progress and could be achieved in the long term and focus the world’s attention and attention of planners on the magnitude of the poverty. Thanks to capitalism and free trade because through them it enabled development to be realized and through development many have been lifted out of poverty. Poverty rates start reducing at the start of the 21st century because many of the developing countries started taking off at an accelerated rate (Narasaiah, 2006). Poverty reduction in a country largely depends on development. However equality also contributes but a small percentage. Development therefore is the root of all improved welfare and standard of living of the population and with more focus on development many will be lifted out of poverty and ushered into conditions of improved living standard. Between the periods of the last 20 years, capitalism has led to faster growth especially in the developing countries. In ht e past decade alone there has been a GDP growth of around 6% in the developing countries more than in the period before a trend that has led of reduction in poverty. This growth was contrary to the economic crisis that heats the world sine 1930s (Narasaiah, 2006). Rise in GDP per head reduce poverty by greater margin. However growth alone cannot be a measure of improved living conditions but also the distribution of income and that is the reason why reduction in poverty was partly caused by growth and partly by equality. Countries that strive for equality develop at a faster rate and poverty reduces at a faster rate too as compared with countries with greater inequality. Countries that cut the poverty the most over the past decade includes china at the top, and this was significant going by the fact that in 1980 china had the poorest population as compared to any other population across the world. Though there was an incredible rise in income inequality due to capitalism there was a significant growth. In the period between 1980 and 2010 it lifted millions out of poverty a trend that shocked the world but going forward the pace has reduced. It was not however not only about china but also developing economies that rose by a figure of 3.8% per year between 2000 and 2010 (Narasaiah, 2006). Many see capitalism and free trade as benefiting working class people more than it benefit the poor but that is not the case because capitalism once it leads to growth translates to better living condition for all people. Growth is not about redistribution but reduction of poverty. Though the super rich may emerge out of capitalism their wealth will trickle down to the poorest in the society. Critics of capitalism have no valid truth because as capitalism grows so does the economy grows and the wealth available in the society increases. The poor will therefore become automatically better off in a growing economy. There was a similar scenario in Soviet Union whereby poorest in the society were better off economically in the recent past few decades than the poor of early 20s and therefore the periods and the class of economic growth matters (Carnoy, 1998). Free trade has also played a greater part in uplifting the living conditions of the poor, it enable people to buy more goods of greater quality at much cheaper cost (Carnoy, 1998). It encourages a free system without many restrictions and by so doing encourages innovation, leading to economic growth. Basically free trade enables people to get goods at much lower prices and of high quality. Cheaper products from countries with comparative advantages will ease inflationary pressure especially on developing countries. Goods from low income countries like china will help in holding down the prices of goods. Free trade also leads to more economic growth. Some of the imports are not necessarily consumer goods but industrial raw materials. By encouraging free trade, there will be minimal import cost on raw materials leading to cheaper end product and subsequently encouraging economic growth (Friedman, 1962). Efficiency and innovation are also boosted by free trade. Resources are allocated based on the best alternatives available leading to greater returns more incomes, more investment and more opportunities available. Free trade is the driver for competitiveness. The workers and business have to adapt to the changing demands in the marketplaces, and these demand and adjustment are what perpetuate competitiveness and competition drive the long term growth. With free trade also comes fairness and everyone plays by the rules with limited skewed rules. The participating parties cannot play by their own rules to disadvantage others i.e. tax evasion that will put them ahead of competition. There is more wealth generated in the government that runs in a capitalist nation. This strengthens the capitalist system and more who are poor are lifted out of their poor state. Many economists also support the idea of free trade because they believe that free trade many countries that have applied it have benefited (Friedman, 1962). Milton Friedman the liberal economist addressed widely this question of capitalism being cause for inequality and he totally disagreed with it. He argued that in western countries where capitalism thrives there is less inequality and that the more capitalist it is the less the inequality. The economic progresses that have been achieved in capitalist countries have driven almost all the population out of poverty and many are not even close to the poverty line. Capitalism being a free society has led to more inequality than any other system tried. According to Friedman, the liberal economist, capitalist contrary to popular belief leads to more equality compared to other systems that are in existence to date (Friedman, 1962). He argued that existence of capitalism have worked towards lessening inequality in the societies. Friedman also believed that non-capitalist societies are more unequal than capitalist societies and in these systems inequality is permanent as opposed to capitalist where there is mobility from one status to another. On social mobility he argued that a society with greater social mobility is far much better off than the one that perpetuates the status quo. Capitalism lessen inequality because in capitalist system there is less money that goes into what many think as capital and more goes to human service leading to greater equality. Conclusion Many people in the past 20 years have been uplifted out of poverty and misery state due to growth and development witnessed in the past years credited to capitalism and free trade. Capitalism encourages growth and growth leads to better wage for majority of the population. Free trade also leads to growth by allowing markets to freely operate without skewing rules that will lead to unfair competition the result of which less competition and rise in prices coupled with drastic drop in qualities. Many economists especially the likes of Friedman argued a very valid case in support of capitalism arguing that the non-capitalist states are more unequal and worse is that their inequality is permanent due to lack of social mobility. References Friedman, M. (1962). Capitalism and freedom. Chicago: University of Chicago Press. Towards the end of poverty: Nearly 1 billion people have been taken out of extreme poverty in 20 years. The world should aim to do the same again. (2013). Economist (united Kingdom), 407, 8838.) L, D. (1991). What is the Secret of the Socioeconomic Effectiveness of Modern Capitalism? Problems of Economic Transition, 34, 4, 65-84 Narasaiah, M. L. (2006). Poverty and food security. New Delhi: Discovery Publishing House. Jeffrey, S. (2011). The End of Poverty: How We Can Make it Happen in Our Lifetime. London: Penguin Books Limited. Martin Carnoy (1998). "National Voucher Plans in Chile and Sweden: Did Privatization Reforms Make for Better Education?" Comparative Education Review, 42 (3): 309–337 Read More