Economic Freedom and Global Poverty

Over the period 1980–2005 many developing countries achieved remarkable increases in economic growth. Real per capita income increased substantially in countries that had experienced only modest increases in living standards for a century or more prior to 1980. Recent scholarship has pointed to the adoption of institutional and policy changes more consistent with economic freedom as an important, if not the most important, explanatory factor underlying the recent economic growth of developing countries.1 But economic growth and increases in real per capita GDP only provide information on how average income figures are changing. They may be a misleading indicator of what is happening to the living standards of the poor. Did the rapid growth of 1980–2005 lead to lower poverty rates? How does economic freedom affect poverty? What can be done to accelerate reductions in poverty rates? This chapter will address all of these issues.