Eradicate poverty, do not demolish wealth

Ph.D. in Economics at the University of Chicago. Rector of the University of CEMA. Member of the National Academy of Education. Academic Counselor for Libertad y Progreso.

By the time you finish reading this article, if you reach the end, about six hundred people from all over the world would have come out of poverty.

In 1990 35% of the world population lived in extreme poverty. Today, according to the World Bank, they don’t reach 10.7%.

In 1987, there were 660 million poor people in China. After the economic opening, that figure has fallen to only 25 million. In India, the number of poor since that year has been reduced more than a hundred million people.

140 million people join the middle class every year.

However, we are living in a time when this magnificent news is ignored to focus on interventionist messages about wealth. You will read that “1% of the world controls 87% of wealth” and things like “if the ten richest people in the world gave their wealth away there would be no poverty”.

The 635 million Chinese who have left poverty in the last thirty years disagree. They are delighted that China is the country where most millionaires are created each year and where the middle class grows the most, and thanks to that prosperity there is a “growing inequality” that is not only negative but positive. Millions of poor people who stop being poor, millions of poor people who move to the middle class and a few who, thanks to progress, are millionaires.

Instead of looking at the models of success that have led to the unprecedented fall of poverty, the interventionists are getting worried. If poverty ends, their work is over. Contrary to what the defenders of repression say, capitalism is delighted with the fall of poverty and the improvement of the middle class. It means more and better consumers, better products, more sustainable and more development and with it, more benefits and better public services. Those who suffer from the reduction of poverty in society are the redistributors of nothingness.

It’s so unintelligent to think that confiscating the wealth of the rich would end the poverty that it seems incredible that in 2017 we must remember the disaster and exponential increase of poverty that brought the magical idea of plundering to the success since the time of the assignats after the French Revolution until the recent examples of Argentina, Zimbabwe, Venezuela, etc. The list is endless.

The plundering of wealth has only generated poverty and worse conditions for all. Besides, it’s a lie. Expropriate the wealth of the richest citizens and with this, in addition to destroying the employment of thousands of people, not only does it not remove the poor from their misery but what happens the following year? There are no more rich people to plunder. The poor increase and misery multiplies at the evidence that, if you penalize success, you share failure.

Every January there are two events, Davos and the Oxfam report. Many of you will think that they are two different and even antagonistic events, and yet they share a common base. The glorification of interventionism as a solution to the problems created by… interventionism.

It’s no coincidence. The transfer of wealth from savers and successful workers to governments is a good business. Because when it fails it’s always blamed on not enough intervention. And it is curious because the evidence of the economic disaster that supposes to place as the only and central objective of the politics the redistribution and equality is evident. Because they are consequences of prosperity, growth and employment.

The objectives cannot be focused on the second derivatives because intervention it is only achieved when there is nothing left to distribute. Inequality is not the same as injustice, as the Nobel Angus Deaton explains, and we are not to be surprised that the interventionists insist on placing inequality as a problem, when it is 40%, (ie, a very high level of equality) instead of poverty and how to accelerate the growth of the middle class, the main payer – via taxes – of the state excesses.

It is not a coincidence that societies with greater economic freedom also have higher incomes and stronger welfare states. And even those who preach to carry out the opposite know this. But for the bureaucrat, the objective is to maintain the apparatus, not to make it unnecessary.

Capitalism and free trade have done more to reduce poverty than all government committees combined.

The debate about poverty and inequality has become an excuse to intervene, not on how to keep improving. They do not want the poor to be less poor, just that the middle and upper classes are less rich.

Interventionism assumes that inequality is a perverse effect, not a consequence of prosperity. And the inequality is positive. If my co-workers are more successful than me it is an incentive to do better. Only when there is an inequality for success do societies progress, and a sustainable welfare state is guaranteed. There is no greater inequality than egalitarianism, which eliminates merit and the incentive to improve. And egalitarianism not only does not reduce poverty, it increases it. But, yes, as I applauded Oxfam on Venezuela eight years ago, “inequality is reduced”. Making everyone poor, except for redistributors. Those are cover in money.


Written by: Daniel Lacalle
Doctor in Economics, Professor of Global Economy and Finance, as well as investment fund manager.
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