Economic Freedom Is the Way Out of Extreme Poverty

COMMENTARY International Economies

Economic Freedom Is the Way Out of Extreme Poverty

Apr 5th, 2019 1 min read

Commentary By

Patrick Tyrrell

Research Coordinator

Josh Cosby

Spring 2019 member of the Young Leaders Program at The Heritage Foundation

Data show that countries that embrace economic freedom outperform others in reducing extreme poverty. Chaiyaporn Baokaew/Getty Images

A recent report by McKinsey Global Institute contains a startling fact.

From 1990 through 2013, an estimated 1,122,000,000 people escaped extreme poverty—defined as subsisting on less than $1.90 per day—in the 71 developing countries covered by the report.

Of those individuals, an estimated 1,057,000,000—about 95 percent—lived in just 18 countries.

Interestingly, these are the 18 countries that the report labels “outperforming emerging economies,” based on their rapid and sustained economic growth.

Two of the outperformers, China and India, account for most of those escaping poverty.  

That’s not surprising given their vast populations. But the other 16 outperforming nations account for the vast majority (158 million people) of the rest, who now enjoy greater prosperity and hope for the future.

Besides sharing a history of rapid and sustained economic growth, the 18 outperforming countries tend to have one other thing in common: They have expanded their degree of economic freedom far more, on average, than the 53 countries defined by the report as “middlers” and “underperformers.” 

We measured this using data from the very first year that a country was scored in The Heritage Foundation’s Index of Economic Freedom, which, depending on the country was between 1994 and 2001. We also took Index data from 2013, the year that McKinsey provided numbers on individuals escaping poverty since 1990.

The 18 countries that accounted for 95 percent of the more than 1 billion people escaping from extreme poverty from 1990 to 2013 increased their Index of Economic Freedom scores by an average of 7.14 points through 2013, outpacing the average of 53 countries that fit the criteria of middlers or underperformers for having sluggish economic growth. 

The middler/underperformer countries did only half as well in promoting economic freedom.

It just goes to show that the people who are empowered by policies that expand their economic freedom have the best chance of escaping extreme poverty.

This piece originally appeared in The Daily Signal