Will Capitalism Continue To End Poverty in Our World?

Brad Fox | January 30, 2015
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Between 1990 and 2010 the number of people in extreme poverty has fallen by one billion people reported The Economist last summer. They give credit to: 

“Most of the credit, however, must go to capitalism and free trade, for they enable economies to grow—and it was growth, principally, that has eased destitution.” 

A very large section (almost ¾) of this growth was in our - supplier of "all things affordable,” China. When people try to scare you about the perils of income inequality it actually doesn’t mean much since wealth is not a zero sum game, it can be created, as The United States has shown for over two centuries  and China has recently shown in the last couple decades.

The other important country finally waking up to more free market policy changes is India. If we continue to make poor financial decisions like printing fiat money and the world decides they don't want to use our dollar anymore, hard times could return. Adding to our troubles is our ability to get more people working, especially the ones that are capable. India on the other hand, if given the chance, has potential to grow incredibly fast. 

Amazingly, half of India’s population (1.25 billion) is under the age of 25 with the median age being 27.  They have recently elected a pro business government that plans on lifting more restrictions to foreign investment and investing in much needed infrastructure to facilitate growth. Their middle class in over 250 million people, ready to buy and invest if the opportunity presents itself. India is currently expanding overseas educational institutions and has a large number of burgeoning small businesses. 

"The IMF projected in its October 2014 World Economic Outlook report that the Indian economy would accelerate from a 5.6% pace in 2014 to 6.4% in 2015 , propelled by rising exports and investment. In contrast, China’s growth is projected to moderate to a more sustainable pace, from 7.4% in 2014 to 7.1% in 2015, as decelerating credit growth slows investment and real estate activity continues to ease." - Elvis Picardo Inestopedia

China still seems strong on many levels however, like owning the largest percentage of our debt. They are also on pace to aiding poverty relief through business investments in Africa surpassing our African trade total in 2009. 

Both India and China are expected to grow for the next 20 years according Martin Wolf of the Financial Times who also says: 

"Growth will depend on demographics and each country's ability to innovate. India has a better outlook on both fronts. Its population is growing; China's is shrinking. It's harder to predict which country will be better at innovation. Signs point to India because democracies, with their secure property rights and general stability, tend to be better at fostering successful entrepreneurship."

Time will tell if India will open the floodgates to growth with free markets and privatization, or will they only rely on their central bank and national government to do the heavy lifting? China's success came from opening their markets to the world and using their workforce effectively. India is ready to do the same. Economists are eager to use these two economies as live case studies for free markets.  

Hopefully the United States will be able to join them in their success. 

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