Is capitalism really ending poverty? | Crunched

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So what shall we spar about today today we’re going to be asking how capitalism made the world a better place we’re going to be looking at this debate between two groups of economists about global poverty reduction so has it happened how fast does it happen if it has and can it be attributed to success of capitalism spreading around the world over the last hundred

Or so years what we’re going to be looking at here is the percentage of people in the entire world who live in extreme poverty going from a hundred percent to zero percent and from the year 1820 to 2015 now what do we mean by extreme poverty that’s people living on less than one dollar ninety per day now that figure in 1820 was around ninety percent so it started

Declining fairly slowly but then at around in the late 1800s 1900 starts dropping more sharply after the world wars accelerates even more so we’re now down around ten percent so this is the central claim made by gate pinker and so on absolute poverty has come down during a period when capitalism was spreading around the world a capitalist system has led to the

Almost eradication of extreme poverty i sense some skepticism from you well as you expect i’m gonna take issue with this claim that living on one dollar ninety a day is a useful measure of people living in poverty for example in the uk between no one lives on that level the average earnings are more like a hundred dollars per day that’s not to say that we have

No one living in poverty or even extreme poverty in this country that’s yeah possible yeah and that’s a point that has been made by some of the critics of this argument so a couple of left-wing economists including most prominently jason jaquel have critiqued this idea of using such a low poverty line so let’s have a look at other poverty lines this is one dollar

At ninety a day say that we’re here no 1980 okay so another one sets the poverty line at $3 20 a day so 55 percent more or less here and it went down to about 25 or 25 percent okay okay so that’s a quarter of the world population still living on three dollars yeah there’s another one which is ten dollars a day and that went from 65 percent down to about 55 i mean

Yes things have improved i mean but it’s not as rosy a picture maybe as rosy pink not a lot there’s a famous line from a play china in in this pace of time in france went from famine to slimfast over a billion people surely they are distorting somehow these numbers is this just china basically okay we’re now gonna have a look at a chart which takes the same metric

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And looks at how does global poverty reduction appear when you look at the entire world and then when you look at the world – china so 1981 so we’re looking at that more recent period through to 2015 the axis starts at 0 percent and people in extreme poverty and we’ll go up to 100% again to be consistent when we look at the entire world china included we start off

At about 40 percent there and we’ve come down to about just under 10 percent if we look at the world not including china without without china it was initially lower and is now broadly the same point so world – china so it’s true that when you include china a billion being lifted out of absolute quantities had a big impact but this isn’t just china the world has

Got better in terms of in terms of people being an extreme poverty over the last 35 years so if we look at the gini coefficient the gini coefficient is a measure of inequality if the world were perfectly equal it would be at zero and one is complete inequality from 1852 say the years just before the recession or just as a rashad recession started hitting i’m gonna

Look at inequality from from 0.5 to 0.7 and what happened is that inequality actually rose this line alone shows you an inverse trend from what we were seeing but i think the process of capitalism which led to this increase in the quality is the same process that lifted more than a billion out of extreme poverty and when you have huge economic growth in capitalism

Most of those gains accrue to the people at the top but if that system also brings raises raises every one by a certain level they’re not still a good thing on net one way that we measure poverty is to look at the share of the population that lives below the average income now even though i would say that’s an improvement on the poverty line $1 90 and so on i think

It’s still faulty and i’ll show you why so in the uk we measure relative poverty by looking at the number of people who live at 60 percent below the median income so let’s say the medium income is 10,000 pounds just poking and figure out of thin air we’re looking at the number of people that are earning sixty percent of that so six thousand pounds so this is what’s

Happened in the uk we’re looking at before housing costs and after housing costs number of children who live in poverty we had a third of kids in this period of time now we have 28 percent of children small improvement before housing costs it’s a quarter of kids in 95 96 it went down to 17 percent in this period more here where there was a recession it wasn’t much

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Change so the government actually acknowledged this and that will maybe this measure of poverty relative poverty is wrong it doesn’t include whether these kids live in good housing whether they live in crime-ridden areas whether they’re performing well in schools all these things that go beside income and that affect our lives now the problem with this idea is

That policymakers didn’t like the fact that they wanted to delink poverty from income that would have been an issue at the international level because this is how everyone measures poverty and so this was abandoned however one could argue that taking them into account is crucial to assessing whether people who live in extreme poverty are also having a bad quality

Of life so this is another argument that the sort of pro capitalist lobby we’ve made more pro capitalism lobby which is that if life expectancy has gone up then that surely is a sign that the fundamental reason that that you know humans exist is is actually you know we’re getting that right so i’m gonna do a chart here showing global average from 1960 to 2015 and

That has gone up from about 52 to now about 72 that seems to me again evidence that global quality of life global life expectancy global health all of these things that this this indicator captures have steadily increased over that period when capitalism is been spreading across the planet if we want to stick to the quantitative element of how many years we get

To live there’s clearly a sign of improvement but look at what happened in the us for example with life expectancy so they went from 70 in the 1960 so we’re looking at it went up to 8 sort of stalled and this is despite the fact that health costs in the us went up and it’s one of the only countries where actually life expectancy seems to be declining and one could

Argue not necessarily me but one could argue that it’s rampant capitalism that is doing this to its population a aggressive marketing of opioids exactly had an impact again over the long over the long run there from 60 to 2015 in the u.s. life expectancy has risen but this recent stagnation and decline is certainly not a good sign and you know and the u.s. is the

Poster child of capitalism so evidently i and capitalists advocates would have to accept that something there has gone wrong in the last 10 years and we’re certainly no longer seeing this clear relationship between capitalism and free markets and improvements in in quality and quantity of life my exhibit a in favor of the argument that capitalism has improved the

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World was saying that over 200 years the percentage of people living in extreme absolute poverty has fallen from 90 percent to 10 percent we then looked at the impact of using more reasonable poverty lines yeah and then we see that more than half of the population is still living in poverty so it still so we still had an improving trend but it wasn’t as quick and it

Hasn’t got as far as was initially claimed then we looked at whether this was all china going from famine to slimfast and we found that it’s true that china’s rapid development has sort of inflated the extent to which it looks like poverty reduction has taken place but even if you take china out of the picture the percentage of people living in absolute poverty

Worldwide house still decreased and i said well if things are so rosy then how come inequality has gone up but the the argument for those who say capitalism has made the world a better place would be that yes things have become more unequal but the same system that produced that increase inequality there’s also elevated people out of poverty to increase their

Incomes but money is insufficient because if we look at the example of child poverty in the uk then we’ll see that this measure doesn’t explain at all what happened to during the recession which are the jessyca impact on uk society and we should look at other metrics like health educational attainment quality of housing and general quality of life as i said that’s

A very good point that’s let’s look at something where money is totally to one side and we just look at how long people live globally there’s been a steady and still increasing rise in life expectancy however you asked the poster child of rampant capitalism shows that there is not not such progress in the last couple of years yep so i guess with my capitalist hat

And monocle on i would say we have seen an improvement in life expectancy and poverty reduction during the area when arrow and capitalism has been expanding across the world however i will acknowledge that income based measures of human development are very limited and also that if you look at the most capitalist countries in the world so the likes of the us and

The uk increases in life expectancy have now actually stalled and there’s some evidence they may be falling so even if perhaps the journey to capitalism helped countries it seems we’ve hit diminishing returns or even now a fork in the road where capitalism is maybe not and i would say that in conclusion pinker gates or haven’t quite persuaded me yet

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Is capitalism really ending poverty? | Crunched By Financial Times

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