We have all heard the claim in our society that the rich are getting richer and the poor are getting poorer. It is true that there are a lot of poor people in the world. Jesus told us that the poor would always be with us (Mark 14:7). However, capitalism, where individuals own the means of production (and not the government) has caused more people to emerge from poverty than any time in history.
Before discussing the poor and those in poverty we should start with some definitions. The poor are those who live in poverty. Extreme poverty is defined by economists as those who live on less than a dollar a day (this is subsistence-level or minimal). Relative poverty is simply the gap between the richest and poorest in a society.
Think about how life was 300 years ago. People were uneducated, poor, and unhealthy. The technology that exists today was not around back then. The industrial revolution had not yet started. Most people had one set of clothes and wore no underwear. These clothes would have been made of wool. Weavers would have been making thread by hand and then taking months to slowly craft a piece of fabric with the help of another weaver by hand. Most people did not travel more than ten miles outside where they were born. Entire families worked in fields (including children) to scrape out a subsistence level living working 50-70 hours per week. The average global lifespan was about 24 years, ¼ of children died in childbirth, and half of children died by the age of 5.
With the rise of technology the wealth and health of every society increased anywhere it was free to spread. The capital, which was the technology that transferred the labor from people to machines, allowed greater productivity, wealth, and health. This capital also made goods available in massive amounts to everyone more cheaply than could be obtained from hand-made goods. This privately owned capital improved the lives of everyone. Even the poor became better off as a result of the societal wealth increasing. What is the evidence for this?
Consider that 84% of the world lived in extreme poverty in the early 1800s. The normal condition of everyone throughout all history before then is everyone was poor and sick. The global population has exploded and multiplied 7 times since then. As of 1980, according to the World Bank, 44% of the world population lived in this extreme poverty. As of 2015 the number of people living in extreme poverty has fallen to less than 10%. What has caused such a dramatic shift in the number of people living in poverty in the last 200 years? What lifted millions from the plight of extreme poverty?
One way to discover this answer is to look at the Index of Economic Freedom. This Index measures the freedom of 186 countries. What it shows is that those countries that have the most freedom also have the most wealth. People can flourish more and become more healthy and wealthy with property rights, rule of law, and fewer barriers to trading with others. This freedom has led to an explosion in wealth, health, and has lifted billions from poverty around the world.
What then should we make of that claim about the rich and poor? If you look at the facts you’ll see, at least in America, it is not the case that the rich get richer and the poor get poorer. This assumes that the size of the amount of wealth in society is fixed. The economic fallacy in this type of reasoning is called the fixed pie fallacy. As a matter of fact, due to the amount of wealth increasing in our society we have more goods, services, and wealth available now than in the past. This means that both the poor and rich are getting better off. Ask yourself, would you rather be poor in America or in a third world country? If you look, the poor in America actually have more than the middle class in Europe on average. The reason is that when wealth is being created new things come into existence that didn’t previously exist.
Armed with these facts, Christians should not condemn capitalism for causing poverty. Keep in mind, the majority of people in the world were poor throughout all of history until the rise of capitalism. So, next time you hear the claim, “The richer are getting richer…,” you should finish the sentence, “and the poor are getting richer too.”
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