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THE POOR NEED CAPITALISM
The Left's version of recent economic history boils down to one terrible fact: The distribution of income has gradually become more unequal. Within the United States, that fact is incontrovertible. It is not clear, however, that increased inequality has been bad, says economist Kevin A. Hassett.
Inequality is, after all, the foundation of a capitalist society. When individuals work hard, or innovate, they receive outsized rewards. When others see those rewards, they are motivated to work hard and innovate. As the lottery-ticket market has demonstrated, the bigger the prize, the bigger the motivation, explains Hassett.
A landmark new study by economists Maxim Pinkovskiy and Xavier Sala-i-Martin set out to study changes in the world distribution of income by gathering data from many different countries. As a byproduct of their work, they are able to count the number of individuals who live on $1 per day or less, a key measure of poverty. According to their calculations:
The number of people living in poverty so defined has plummeted, from 967,574,000 in 1970 to 350,436,000 in 2006, a decrease of a whopping 64 percent.
The biggest factor in the reduction was the emergence of middle classes in previously poverty stricken China and India.
Source: Kevin A. Hassett, "The Poor Need Capitalism," National Review, November 23, 2009; based upon: Maxim Pinkovskiy and Xavier Sala-i-Martin, "Parametric Estimations of the World Distribution of Income," National Bureau of Economic Research, Working Paper No. 15433, October 2009
THE POOR NEED CAPITALISM
Parametric Estimations of the World Distribution of Income