Jay P. Greene's Blog

(Guest Post by Matthew Ladner)

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

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

It sounds like a whisper

While they’re standing in the welfare lines

Crying at the doorsteps of those armies of salvation

Wasting time in unemployment lines

Sitting around waiting for a promotion

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

It sounds like a whisper

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 obviously have a romantic appeal to some, but rather sordid history in practice. Ask the Russians.

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

Today, the growth strategy stands triumphant.

A recent World Bank report, for example, finds that we are living in a golden age of global poverty reduction. The World Bank notes that economic growth is producing a “spectacular” decline in Asian poverty. 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 were 271 million living in extreme poverty- a 42.5% decline.

The World Bank projects that by 2015 there only 19 million people will be living under such squalid conditions- a 96% decline in twenty-five years. A complete elimination of extreme poverty in this region seems entirely possible well within our lifetimes, thanks to high rates of economic growth and job creation. Free market policies are lifting millions out of poverty, in stark contrast to the catastrophic consequences of income redistribution policies of socialist and communist regimes.

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, for instance, has convinced observers from Bill Clinton and Kofi Annan on the left to Ronald Reagan and George W. Bush on the right that a system of property rights is absolutely critical to allowing economic growth and thus eliminating poverty.  Why do some countries remain mired in poverty? People cannot own property such as land, they cannot reliably contract with each other. Rotating cliques of kleptocrats often take turns using government as an instrument of theft, corruption, and oppression. Poverty will not decline without addressing these fundamental flaws, regardless western aid.

One does not need to look abroad for examples of growth reducing poverty. In 2006, the Goldwater Institute released a study comparing the relative success of states in reducing poverty during the 1990s. The study found that during the 1990s, on average high tax states had increases in poverty rates during the booming economy of the 1990s, while low tax states on average saw larger than average declines.

Economic growth (or lack thereof) can quickly make a big difference in poverty statistics. Mississippi began with the highest poverty rate in the country in 1990, twice as high as California’s poverty rate (25% compared to 12.5%). Enjoying the benefits of economic growth, Mississippi’s poverty rate dropped by 20% in the 1990s, while poverty increased by 13.6% in California. If such rates were to be sustained (by no means a given) then California would overtake Mississippi in poverty rates by 2010.

As we struggle through the current financial crisis, we must take care to remember the radical success of free trade and free market polices have produced in reducing poverty. Those who promoted free trade, property rates and lower taxes weren’t just talking about a revolution: they delivered one.