Libertarianism Can End World Poverty

June 10, 2014 – The core of libertarian philosophy is a respect for individual rights and a belief that all exchange should occur voluntarily. The rights to life, liberty, property, and voluntary association are of utmost important to libertarians, as they were to the founders of the United States of America. These deeply held beliefs lead libertarians to consistently support private property rights, free trade, and free markets. In short, libertarians believe in economic freedom (or economic liberty), which they see as no different than any other sort of civil liberty. Economic freedom of course refers to the following things:

– Limited Government
– A legal system which protects property rights
– Sound monetary policy
– The freedom to trade internationally
– The regulatory burden (more regulations correspond with less freedom)

While opponents of economic freedom may claim that it is a system of exploitation that will make everyone worse off, these claims are factually unfounded. Indeed, economic freedom may well be the greatest anti-poverty device in human history.

Empirical research continually finds that economic growth is the key to any successful poverty reduction strategy. For example, recent research published by the World Bank, which examined 118 countries over four decades, has found that over 75 percent of the income gains going to the poorest 40 percent of income earners were a result of economic growth. Another study, which examined global poverty trends over time, states, “the poverty rate falls when per capita GDP, [a measure of economic growth], rises and vice versa.”

Given the tremendous impact economic growth has on the incomes and standard of living of the poor (as well as everyone else), it’s worth asking:

“What effect does economic freedom have on economic growth?”

Using the Fraser Institute’s “Economic Freedom of the World” index, researchers have been able to examine the relationship between economic freedom and economic growth. It appears as though there is a consensus on the relationship, and that consensus is that economic freedom appears to be correlated with economic growth. Consider one study which states:

“[W]hen measuring real GDP growth per capita from 1980-2000 of 94 countries, the most economically free countries had the fastest growing economies . . . the persistently free group [of countries] achieved an average annual growth rate of 3.44 percent, compared to 1.67 percent for the middle group and 0.37 percent for the least free group [after controlling for initial GDP, regional variations, and growth in human capital].”

Economic-Freedom-Growth-Fraser-Insitute

While correlation does not prove causation, numerouscausalitytests have tested the relationship and concluded that economic freedom is in fact causing economic growth.

Additionally, research has found that:

“In the top quartile [of economic freedom], the average income of the poorest 10 percent was $10,556, compared to $932 in the bottom quartile in 2011US (PPP) dollars. Interestingly, the average income of the poorest 10 percent in the most economically free nations is more than twice the overall average income in the least free nations.”

Economic-Freedom-Fraser-Institute

These findings strongly suggest that economic freedom is necessary to help the poorest and most vulnerable among us. And while opponents of economic freedom may be well intentioned, they are fighting one of the most effective anti-poverty devices in human history.

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