The World Bank’s new report on global poverty is chock‐full of precisely the kind of wrongheaded economic thinking that the Bank has become so famous for. Congressional Republicans should seize upon this most recent study on “the extraordinarily uneven” gains from global capitalism as evidence that the Bank is hopelessly left‐leaning and infested with politically correct scholars who haven’t the slightest clue about how to help nations create wealth and prosperity. The Bank is a deterrent to economic progress and the U.S. does a great disservice to the world’s poor by continuing to fund it.
Instead of celebrating free markets and the spread of global capitalism that is lifting living standards almost everywhere around the world (outside of Africa), the report says that global capitalism is insufficient to pull the poor out of poverty. It recommends a bigger government sector in health care, greater political rights for women, and even affirmative action for the poor and minorities. Global capitalism is “failing the world’s poor,” the Bank’s chief economist says. He says that rather than stressing free‐market reforms, the Bank will in the future focus more on issues of “health, education, and equality.” The key to conquering poverty says the report is to give more political power to the poor. No, the author wasn’t Che Guevera, but there are so many sophisms in this report that it sure sounds like him bellowing from the grave.
The report says the world’s poor are getting poorer and that they are more vulnerable to disease. Dead wrong on both counts. In fact, worldwide per capita living standards have more than doubled since 1960. The world’s two most populated nations, China and India, have recorded stunning progress in living standards over the past quarter century. How? By privatizing state‐owned enterprises, moving toward free‐market policies, and establishing private‐property rights in agriculture, by cutting the government sector, and by chopping confiscatory tax rates.
The past 30 years has witnessed the greatest era of global prosperity in world history, and the Bank completely buries the lead, by emphasizing “income gaps” rather than “income gains.” Globalization has been a big component of the success story. International trade is bringing new and higher‐paying jobs to poorer nations where historically jobs at livable wages, outside of agriculture, have been scarce to nonexistent.
As for health care, the progress here has been even more thunderous. The infant‐mortality rates in developing countries have been cut by more than half, just since 1970, in most non‐African Third World nations. Life expectancies have soared even in the poorest countries like Bangladesh and India. This is mostly due to incredible gains in nutrition, sanitation, and basic health care.
Just about the only place on earth where economic and health progress has not occurred has been Africa. But these nations tend to be the least connected to the forces of globalization. Global capitalism is not the cause of the horrible epidemic of death and economic backsliding in Africa. Global capitalism appears to be these nations’ only possible salvation.
The World Bank hasn’t a clue to as to what causes countries to get rich. It’s not really very complicated. A recent Heritage Foundation report shows that nations that have the most economic freedom have the most economic progress. Nations that are the most economically free have per capita incomes that are roughly 10 times higher than those that are not free. I recently used the Heritage Index on Economic Freedom and discovered that nations that have the most open and free economies have life expectancies for their citizens that are 20 years longer than for residents of the most unfree nations. This may be hard for the World Bank bureaucrats to comprehend, but economic freedom (i.e., capitalism) really is the panacea to better health and greater wealth.
After reading through this most recent report, I became convinced that the protesters in front of the World Bank and IMF buildings were right: These institutions should be closed pronto. They do more harm than good. The left‐wing protesters in Washington this past spring were right about that. Next time they rally in front of the World Bank building, I’ll join them.
This new report again reinforces the long‐held suspicion that it is the Bank itself, not capitalism, that is the greatest threat to worldwide prosperity.