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Capitalism and poverty: what Toby Young doesn’t tell you

ood for a hungry mans soulCut a graph from a leading Washington neoconservative website, paste it onto your Telegraph blog, and tack on a few paragraphs presenting the result as irrefutable proof of the superiority of your preferred economic system. If only all of the enduring arguments of political philosophy could be sorted out as easily as that.

Such was the approach of rightwing journalist and noted free schools entrepreneur Toby Young last week, with the American Enterprise Institute’s claim that capitalism reduced world poverty by 80% between 1970 and 2006 triumphantly brandished aloft as Exhibit A.

Just give the free market time to finish what it has started, the clear subtext runs; the left might as well go home now, and let the Chicago Boys tidy up such loose ends as may inexplicably persist in the accomplishment of a task once seen as the central project of socialism.

En passant, Young takes a pop at Owen Jones and John Pilger – well, you might as well while you are about it, mightn’t you? – before rounding off with a ritual declamation of the virtues of ‘tough-minded’ entrepreneurs over ‘bleeding heart’ liberals.

Somehow he manages to restraint himself from using the word Guardianista in this context, only just missing the rightwing cliché bingo equivalent of a full house.

Most of us will have heard this sort of stuff before. Base years and exactly how many hundred million humans have benefited from the munificence of the hidden hand do differ, but variations on this riff have long been standard rightist fare.

In the AEI/Toby Young case, the numbers come courtesy of the National Bureau of Economic Research, a reputable non-partisan source, and I have no reason to doubt that they were honestly compiled.

Whether or not they are accurate is another matter; such statistics are impossible to ascertain with any certainly. Many governments choose to lie about these matters, rather than admit that their policies are not delivering for those at the bottom.

Moreover, the figures are more than seven years old, and in the interim, we have seen the worst economic downturn since the Great Depression, with all too predictable consequences in many regions. The picture may well be rather different now.

The real point at issue is that whether or not capitalism really is as efficacious a poverty reduction agent as its boosters insist hinges centrally on the chosen definition of ‘poverty’.

NEBR’s figures are stated in constant 1987 dollars, a level that equates to $2.08 in today’s money, and calculated on a purchasing power parity basis. If only 5.4% of the world’s population have to make do on that little, all well and good.

The snag here is that an additional 43% of the population of the planet only fractionally exceed this threshold. According to the World Bank’s World Development Indicators for 2008, those surviving on $2.50 a day come to 3.14bn from a global population of 6.46bn.

To be sure, it is better to be a few cents over the entirely arbitrary dollar a day benchmark than a few cents underneath it, but the difference is scarcely qualitative.

So remains the case that capitalism continues to condemn half the world to an unimaginably basic existence, with no margin of security against any minor event that could throw them even further down within a matter of hours.

Some 80% are down to $10 a day or less, which may obviate the risk of starvation, but still falls far short of what can properly be considered adequate. Are we standing on the brink of an end to extreme poverty, then? Hardly.

And even if we did, it is worth bearing in mind exactly what variety of capitalism has gotten us to where we are.

Fully two thirds of the billion that have moved over the dollar a day barrier live in China. While the precise economic character of that country remains contentious on the left, it is widely accepted that the private sector has been the driver of its transformation.

But China’s bureaucratically deformed capitalism is governed by a one-party state, increasingly given to strident nationalism, that brooks no opposition parties or independent trade unionism, and severely curtails the freedoms of opinion, assembly and religion.

Young conclusion that “it is only because China has embraced a form of capitalism, albeit of a state managed kind, that hundreds of millions of Chinese have been lifted out of poverty“.

In so doing, he comes across as the Tory equivalent of one of those British-Soviet Friendship Society stalwarts that used to come back from a package tour of the USSR and tell everybody that whatever the faults of the place, at least it had succeeded in abolishing unemployment.

But I guess Hayek always was known for his insistence that where the requirements of the free market clash with the ideal of democracy, so-called ‘economic liberty’ should win out every time.

For the democratic left – which doesn’t separate the necessity for egalitarianism and human rights from the necessity for the provision of basic material needs – the irony of Young’s Tory enthusiasm for the leadership of the Communist Party of China will not be lost.

Image credit: noltelourens / 123RF Stock Photo

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