News, September 18, 2007: Delivering an Anti-Poverty Revolution

Posted on

By Dr. Matthew Ladner

I have an admittedly odd appreciation for left-wing protest songs. For my money (sorry boomers) there is none finer than Tracy Chapman’s Talkin’ Bout a Revolution. Released in 1990, Chapman۪s spare and urgent song delivers an ominous warning:

Don’t you know they’re talking about a revolution…

Poor people are gonna rise up

And get their share

Poor people are gonna rise up

And take what’s theirs

Although stirring, the underlying assumptions of this song are dead wrong. Income redistributing revolutions have a romantic appeal to some, but a rather sordid history in practice.

Anti-poverty strategies fall into two broad categories: redistribution plans and economic growth oriented plans. One can either try to take wealth from Group A and give it to Group B, or can focus on creating more wealth for everyone.

In 2007, the growth strategy stands triumphant. Free market, pro-economic growth policies are lifting millions out of poverty, in stark contrast to the catastrophic consequences of income redistribution policies of socialist and communist regimes.

A recent World Bank report finds that economic growth is producing a “spectacular” decline in poverty in Asia. In 1990, there were over 470 million people in the East Asia and Pacific region surviving on less than $1 a day. By 2001, there had been a 42% decline in the number of people living in extreme poverty in the region.

The World Bank projects that by 2015 only 19 million people will be living under such squalid conditions, still a shockingly large number of people, but it represents a 96% decline in twenty-five years. A complete elimination of extreme poverty in that region is possible within our lifetimes.

Other parts of the world, notably Africa, have not been doing nearly as well. A broad consensus now exists in explaining the reason. The work of Hernando de Soto on development economics has convinced observers from Bill Clinton and Kofi Annan to Ronald Reagan and George W. Bush that a system of property rights is absolutely critical in creating an environment that fosters economic growth.

Throughout Africa rotating cliques of kleptocrats take turns using government as an instrument of theft, corruption and oppression. With no guarantee of property rights, little contract law and no system of contract enforcement, many countries remain mired in poverty because there is no incentive for people to invest in businesses. Poverty will not decline without addressing these fundamental flaws, regardless of western aid.

One does not need to look abroad for examples of economic growth reducing poverty. The Goldwater Institute has studied the relative success of states in reducing poverty. We found that during the booming economy of the 1990s, on average, poverty rates increased in states with high taxes, while poverty rates decreased in states with low taxes.

When the private-sector grows, aided by low taxes, more jobs are created. When more people have jobs, per capita and median family incomes rise. Jobs are the key to lifting people out of poverty.

Mississippi had the highest poverty rate in the country in 1990, twice as high as California’s. Enjoying the fruits of economic growth, Mississippi’s poverty rate dropped by 20% in the 1990s, while poverty increased by 13.6% in California. Another decade like the 1990s and Mississippi could have a lower poverty rate than both California and New York by 2010.

Policymakers throughout the world continue to prescribe economically illiterate reforms and to resist productive growth policies like lower taxes. Don۪t you know, the free market movement is not just talking about a revolution. We’re delivering one.

Dr. Matthew Ladner is vice president of research for the Goldwater Institute and an expert on educational reform and school choice. Dr. Ladner holds a Ph.D. from the University of Houston.

« Back to News