This week, the World Bank announced the historic news that extreme global poverty will drop below 10 percent this year for the first time in recorded history.
Self-congratulatory enthusiasm, typical among global elites, has ensued. In a press release about the news, the Bank’s president Jim Yong Kim called it “the best story in the world today,” and said, “These projections show us that we are the first generation in human history that can end extreme poverty.” By “we,” Mr. Kim is of course referring to elites in the “international community.”
The international community has no doubt improved basic human goods such as health and education through its goal-setting and investments, but this way of thinking obscures the true source of the progress the World Bank is celebrating: the hundreds of millions of people over the past few decades who have improved their lives through free enterprise. They, not we, are the source of progress.
The Bank’s report is based on the fact that incomes are rising for a growing percentage of people in the developing world. This trend is not due to government aid or forced redistribution schemes but to greater economic opportunity and prosperity made possible by free markets and economic freedom. As people in countries beset with poverty are able to access new markets and benefit from commerce, they act not according to plans designed by faraway elites but according to the fundamental human drive to improve their lives through aspiration, entrepreneurship, and work.
Recognizing this fact is critical if we hope to maintain momentum in the developing world. We need to advance policies and a culture of enterprise that protect the rights and abilities of individuals to participate freely in their economies. The billions of decisions and actions each day by people working in free markets around the world will always produce better outcomes than the plans of the international community.
South Korea and Chile offer all the evidence we need. Fifty years ago, both countries were mired in poverty and personal freedom was practically nonexistent as self-serving autocracies ruled. In the ensuing decades both countries enacted reforms that strengthened property rights and opened commerce to global trade, which freed everyday workers to boost their incomes.
The results are staggering. In 1960, the productivity of South Korea’s workers was little more than half that of Brazil’s workers. By 2010 it was nearly three times as much as Brazil’s, which lifted the earnings of South Korean workers into developed-world status while Brazil’s workers remained in developing-world status. Fewer than 2 percent of South Korea’s population lives in extreme poverty, compared to 22 percent in Brazil, and infant mortality is four times lower in South Korea.
The same types of reforms transformed Chile from an impoverished country tarred by civil unrest into one of South America’s richest countries. In both cases the incomes of formerly poor people were raised not by the plans of the international community but by empowering them to live and work in free markets.
Free enterprise, entrepreneurship, and the opening of international markets (which skeptics refer to ominously as “globalization”) are all elements of economic freedom that allow individuals to pull themselves, and others, out of poverty. They are the reason East Asia’s poverty rate has dropped 97 percent in less than 40 years while poverty has remained entrenched in places impervious to them, such as the Democratic Republic of Congo.
Unfortunately, as the developing world expands individual freedoms, the developed world is retracting them. According to the latest Economic Freedom of the World: 2015 Annual Report, released just last month, over the past ten years, the U.S. has dropped significantly in this international ranking of economic freedom levels. It has been pulled down primarily by falling scores on property rights protections and freedom to trade with international markets – precisely the indicators on which the best developing countries have excelled.
The best story in the world today is the story of freedom that is bringing more hope and opportunity to the developing world. The developed world should take note.
Ryan Streeter is the Director of the Center for Politics and Governance at the University of Texas at Austin.