Is capitalism really ending poverty? | Crunched

So, what shall we
spar about today? Today we’re going to be
asking: Has 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 has it
happened, if it has? And can it be attributed
to success of capitalism spreading around the world
over the last 100 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 100 per cent to 0 per cent, and
from the year 1820 to 2015. Now, what do we mean
by extreme poverty? That’s people living on
less than $1.90 per day. Now, that figure in 1820
was around 90 per cent. So it started declining
fairly slowly. But then in around,
in the late 1800s, 1900s starts dropping
more sharply. After the world wars it
accelerates even more. So we’re now down at
around 10 per cent. So this is the central
claim made by Gates, 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
scepticism from you. Well, as you expect, I’m going
to take issue with this claim that living on $1.90 a day is a
useful measure of people living in poverty. For example, in the UK virtually
no one lives on that level. The average earnings are
more like $100 per day. That’s not to say that we
have no one living in poverty or even extreme poverty
in this country. That’s impossible. Yeah, and that’s
a point that has been made by some of the
critics of this argument. So a couple of leftwing
economists including, most prominently,
Jason Hickel have critiqued this idea of using
such a low poverty line. So let’s have a look
at other poverty lines. This is $1.90 a day. So let’s that we’re
here now, 1980. OK, so another one sets the
poverty line at $3.20 a day, so 55 per cent,
more or less, here. And it went down… To about– 25 per cent. OK. So that’s a quarter of the
world population still living on $3.20. There’s another one
which is $10 a day, and that went from
65 per cent… Down to about 55 per cent. I mean, yes, things
have improved. But it’s not as rosy a picture,
maybe, as Roser, Pinker. And $10 a day is
still not a lot. There’s a famous
line from a play that China, in this
space of time in fact, went from famine to slim fast. Over a billion
people, surely they are distorting
somehow these numbers. Is this just China, basically? OK, we’re now going to have
a look at a chart which takes the same metric and looks
at how does global poverty reduction appear when you look
at the entire world and then when you look at the
world minus China. So 1981, so we’re looking
at that more recent period, through to 2015. The axis starts at 0 per cent
of people in extreme poverty. And we’ll go up to 100 per
cent again to be consistent. When we look at
the entire world, China included, we start off
at about 40 per cent there. And we’ve come down to about
just under 10 per cent. If we look at the world
not including China… So this is the world
average without China? Without China. It was initially lower and is
now at broadly the same point, so world minus China. So it’s true that when
you include China, a billion being lifted
out of absolute poverty has had a big impact. But this isn’t just China. The world has got
better in terms of people being in 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 0, and 1 is complete inequality. From 1850 to the years
just before the recession or just as the recession
started hitting, I’m going to look at
inequality 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
increasing inequality 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 raises
everyone by a certain level, then that’s 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 per cent below the median income. So let’s say the median
income is £10,000, just picking a figure
out of thin air. We’re looking at the number of
people that are earning 60 per cent of that, so £6,000. 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 per cent of
children, a small improvement. Before housing costs, it’s a
quarter of kids, in ’95, ’96. It went down to 17 per cent. In this period here, where
there was a recession, there wasn’t much change. So the government actually
acknowledged this and said: well maybe this measure of
poverty or 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 de-link 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 would make, or
pro-capitalism lobby, which is that if life expectancy
has gone up then that surely is a sign that the fundamental
reason that humans exist is actually… we’re getting that right. So I’m going to do a chart
here showing global average, from 1920 to 2015. And that has gone up for
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 indicator
captures have steadily increased over that period when
capitalism has 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 1960s. So we’re looking
at it went up to 80 and then just 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 the
country and its population. Aggressive marketing of
opioids, for example. Exactly, that’s one element
that has clearly had an impact. Again, over the long run there
from ’60 to 2015 in the US life expectancy has risen. But this recent
stagnation and decline is certainly not a good sign. And the US is the poster
child of capitalism. So evidently, I and
capitalist 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, free
markets, and improvements in quality and quantity of life. My exhibit A in favour of the
argument that capitalism has improved the world is
saying that over 200 years, the percentage of people living
in extreme absolute poverty has fallen from 90 per
cent to 10 per cent. 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 globally. So 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 slim fast. 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 has still decreased. And then I said, well, if
things are so rosy then how come inequality has gone up. But 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 increasing inequality has also elevated
people out of poverty. It’s increased their incomes. But money isn’t
insufficient, because if we look at example of child
poverty in the UK, then we’ll see that this
measure doesn’t explain at all what happened during
the recession which had a drastic impact on UK society. And we should look at
other metrics like health, educational attainment,
quality of housing, and general quality of life. And I said, that’s
a very good point. 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… The US, the poster child
of rampant capitalism, shows that there is
not such progress in the last couple of years. JOHN BURN-MURDOCH: Yeah, so I
guess, with my capitalist hat and monocle on I would say
we have seen improvements in life expectancy and poverty
reduction during the area where capitalism has been
expanding across the world. However, I would 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, say 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 utopia. And I would say
that in conclusion, Pinker, Gates, so on haven’t
quite persuaded me yet.

  1. Great series this.Two points:
    The U.S as the poster child of capitalism is true mostly in a figurative and an attitude sense. There are indexes such as the World Banks "Ease of doing Business" that ranks scandinavia higher than the US.

    Secondly; do the comparison not need a counter weight system? Like what would be better? I think Pinker & Co mostly argue that under capitalism we have improved, but that we obviously have plenty of areas that need improving.

  2. Please cut out all the self-serving crap ! Capitalism, the rabid kind, is horribly compounding poverty the world over.

    But, yes, the socially-responsible version of capitalism is helping elevate poverty to some degree, particularly when the state oversees socio-economic proceedings, like the case in China !

  3. The biggest eradication of poverty in history was China in the last few decades , let's not forget that it's a communist party in charge , and a socialist economy . With the fastest growing economy in the word , much higher than the capitalist America or UK

  4. One of the greatest life expectancy increases was in the USSR when it turned to communism , it went from 30's to high 60's . The First statistic was taken in 1913, meaning it wasn't due to the war .

  5. Cuba despite being a very poor country , With it's socialist healthcare policies has a higher life expectancy than the USA's capitalist healthcare . Also the USA spends double the percentage of GDP on healthcare than what most socialised healthcare systems do

  6. No. Its not. What reduces poverty ? People like Nicholas Tesla who were not obsessed with money but increasing knowledge. As for Tesla Motor its a perfect example how capitalism supposed to allocate capital efficiently is mostly hot air. Lonely idealist inventors not money makers are the key not London banksters.

  7. If u actually separate china and india then global poverty hasn't changed that drastically or even increased

  8. This is somewhat bias you didn't go into other facts like the world population has increased dramatically because of better medication and healthcare especially of children which in turn has led to a boom where there are many young people and not many old people which means much higher productivity as they don't have all the health problems old people have and there no longer has to be half the population looking after old people or looking after people with health problems (at least for now) also, there are many other inventions that can be attributed to the latter that have improved the world's productivity like semiconductors, plastic, cars and cheaper travel etc. I argue that none of these would have happened if people didn't have the time to do them which directly falls on the fact healthcare has improved dramatically.

  9. Not as Rosie of a picture? Have you seen the rates at which the poverty decreased even at higher levels like 10$a day? That is crazy. And the look at individual countries – the moment they adopt neoliberal policies (liberalize the market – allow investment – free movement and trade) they grew at unseen rates.

    In the 10$ a day, which you say is still not good at the percentage it is right now there are included undeveloped and undemocratic aswell as unliberalised countries try looking at the top 150 countries (economic freedom index) and try doing this analysis on them.

  10. The US is not even ranked that highly in economic freedom by the Heritage Foundation and Fraser Institute . It used to rank highly a few decades ago but not so sure you can say it's the poster child of capitalism anymore. The only countries/jurisdictions that have consistently got high scores for last few decades are Hong Kong, Singapore and Switzerland

  11. Its old, but "The Age of Milton Friedman" discusses the results of global capitalism and uses seven (?) countries that resisted globailsation as a control in a natural experiment.

  12. You need to make a distinction between free markets and crony markets (so called crony capitalism: which isn't a free market). Health care, education, and many other industries in the US are controlled by the Lobby and their political lapdogs. This distorts markets significantly. But this is the major issue with laissez faire systems: capitalism always favors monopolies. We as a society haven't found a good way to deal with that almost force like tendency. Socialism isn't an answer, forced redistribution is just legalized theft and will always tend toward dictatorship since there is always a power vacuum in any system: capitalism favors monopoly, socialism tends toward authoritarianism.

  13. >use capitalistic technologies like internet,computers,electricity,smarphones,planes,cars everyday
    >it doesnt work

  14. I wish they would have spent $20/hr to pay someone to do the graphics for them instead of showing us scribbles on a legal pad

  15. What's your null hypothesis? There is none. Who can say what the world would look like under an alternative economic system…?

  16. So many painfully basic errors in this analysys that it makes my head hurt to consider how people can be so stupid

  17. Capitalists think that all children, women and men who are forced into prostitution "should be happy they have a JOB, they're lucky they have a master who gives them food so they aren't starving!"
    Psalm 18:30 As for God his way is perfect!
    All people would have a Guaranteed Residual Income! There would be no poverty on Earth, and no one would be forced into prostitution, the worst JOBS imaginable! There never should have been any unequal wealth! God hated it, but rich people loved it, and still do! We should "make our burdens (work) lighter" and eliminate all work with AUTOMATION!

  18. the genie coefficient graph should've used from 0-1, not 0.5-0.7. its misleading as a huge growth

  19. Did you consider the dollar inflation when crunching your numbers? If not it would be quiet interesting how numbers change when taking this into account …

  20. One form of it yes. Way less people starving globally than we used to have and better disaster response. World is still very unequal but capitalism is an ideology, it doesn't aim for things like human happiness just self preservation like every ideology / religion we have ever imagined & beleived in. If we were aiming for human happiness we should have stayed hunter gatherers.

  21. The entire world, BBC included conveniently forget a very important aspect
    in the context of GLOBAL POVERTY for the last TEN YEARS.I wonder how many
    decades to take notice. There is an avoidable loss in public funds to the tune
    of US $ 4 Trillions per year since 2008.This is in audited Govt. constructions.
    This is an avoidable loss as this is after an unethical auditing(according to
    FIDIC) same by Financial Accountants only. Already US $ 40 Trillions lost. Introduce
    an additional Technical Audit as suggested by GOPAC in 2015. Even a 25% salvage
    shall be US $ One Trillion (roughly equal to GDPs of Saudi Arabia & South
    Africa) is enough to wipe out GLOBAL POVERTY. Please stop all these boring
    analysis by so called experts.

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