The Glass Is Half Full By Alvaro Vargas Llosa - Independent

October 29, 2007

MONTERREY, Mexico—Is global capitalism making the poor even poorer, or is it in fact rescuing millions of people out of their misery?

I recently had the chance to participate in a series of debates here about this issue organized by Foreign Policy magazine and Letras Libres, a Mexican cultural publication. Nothing I heard at that meeting changed my conviction that the glass is half-full despite the doomsayers who predict horrific calamities.

Ever since the Industrial Revolution, poverty has been significantly reduced throughout the world. Two hundred years ago, the average income per person worldwide was the equivalent of less than $2 a day; the figure is $17 today. This fact is relevant to the current discussion on globalization because, even though the information technology revolution, biotechnology, the emergence of new world players and outsourcing may give us the impression that we are in the midst of something entirely new, we are simply witnessing a new phase in the process of innovation that is the market economy—and this began a few hundred years ago.

The fact that 20 percent of the world's population is extremely poor should not make us forget that millions of lives have improved dramatically in the last three decades. Illiteracy has dropped from 44 percent to 18 percent, and only three countries out of a total of 102 included in the U.N.'s Human Development Index have seen their socioeconomic conditions deteriorate. China's economy used to represent one-26th of the average economy of the countries that comprise the Organization for Economic Cooperation and Development; today it represents one-sixth.

These are not arcane facts. They are widely available and easy to understand. Publications such as Indur Goklany's “The Improving State of the World,” David Dollar and Aart Kraay’s report on the global economy, and Francois Bourguignon and Christian Morrisson's “Inequality Among World Citizens”—to mention but three among many recent studies—provide overwhelming evidence that the world is better off thanks to the increased flow of capital, goods, services and ideas.

All of which falls on the face of those who predict that in the next few years we will see a massive concentration of wealth among a few winners who will leave millions of losers behind. While it is probably true that the gap between low-skilled workers and those who are better educated will mean that different people will be impacted in very different ways by the continuing evolution of the global economy, the reality is that even those on the bottom rungs stand to benefit from the worldwide embrace of globalization.

Poverty was the natural condition of all of humanity until the market economy opened up the possibility of ever-increasing productivity. By 2030, it is estimated that the average wealth of developing countries will be equivalent to that of the Czech Republic today ($22,000 per person). The World Bank's recent “Global Economic Prospects” report goes as far as to say that Mexico, Turkey and China will equal Spain’s current state of development, which is high.

At the recent meeting in Monterrey, those who were trying to justify their phobia against globalization pointed to Cuba and Venezuela as paradigms of development, and to Mexico’s poor in claiming that increased trade—through the North American Free Trade Agreement—shortchanges the masses.

In 1953, Cuba’s wealth was comparable to that of the state of Mississippi; today, the island’s exports total one-third of the sales of Bacardi rum products, the economic icon of the Cuban exile community. Venezuela’s economic system is a classic case of state capitalism based on oil—exactly what made that nation’s per-capita income go from representing the equivalent of two-thirds of that of the United States in the 1950s to representing barely 15 percent today. And Mexico’s slums are not a factor of that country's increased trade with its North American neighbors, which has quadrupled in the last 15 years, but of the slow pace of reform.

The world was not rich and suddenly turned poor. The progress of the market economy that began to free the world of its shackles continues at an even faster pace today despite the many restrictions still faced by the people who create wealth and exchange it, and despite the fears that these momentous times understandably inspire in those who have difficulty adapting. What a heartening thought.

Randal R. Rucker is Research Fellow at the Independent Institute, Professor of Agricultural Economics and Economics at Montana State University, and co-author (with E.C. Pasour, Jr.) of Plowshares & Pork Barrels: The Political Economy of Agriculture.

Charles V. Peña is Senior Fellow at the Independent Institute as well as a senior fellow with the Coalition for a Realistic Foreign Policy, senior fellow with the George Washington University Homeland Security Policy Institute, and an adviser on the Straus Military Reform Project.

William Ratliff is Adjunct Fellow at the Independent Institute, Research Fellow at Stanford University's Hoover Institution, and a frequent writer on Chinese and Cuban foreign policies.

Ivan Eland is Director of the Center on Peace & Liberty at The Independent Institute and Assistant Editor of The Independent Review. Dr. Eland is a graduate of Iowa State University and received an M.B.A. in applied economics and Ph.D. in national security policy from George Washington University. He has been Director of Defense Policy Studies at the Cato Institute, Principal Defense Analyst at the Congressional Budget Office, Evaluator-in-Charge (national security and intelligence) for the U.S. General Accounting Office, and Investigator for the House Foreign Affairs Committee. Full Biography and Recent Publications

Jonathan J. Bean is Research Fellow at the Independent Institute, Professor of History at Southern Illinois University, and editor of the forthcoming book, Race and Liberty: The Classical Liberal Tradition of Civil Rights.

Anthony Gregory is a Research Analyst at The Independent Institute. He earned his bachelor's degree in American history from the University of California at Berkeley and gave the undergraduate history commencement speech in 2003. In addition to his work with the Independent Institute, he regularly writes for numerous news and commentary web sites, including LewRockwell.com, Future of Freedom Foundation, and the Rational Review.
Full Biography and Recent Publications

Dominick T. Armentano is professor emeritus in economics at the University of Hartford (Connecticut) and a research fellow at The Independent Institute in Oakland, Calif. He is author of Antitrust & Monopoly (Independent Institute, 1998).

Alvaro Vargas Llosa is director of The Center on Global Prosperity at The Independent Institute. He is a native of Peru and received his B.S.C. in international history from the London School of Economics. He is widely published and has lectured on world economic and political issues including at the Mont Pelerin Society, Naumann Foundation (Germany), FAES Foundation (Spain), Brazilian Institute of Business Studies, Fundación Libertad (Argentina), CEDICE Foundation (Venezuela), Florida International University, and the Ecuadorian Chamber of Commerce. He is the author of the Independent Institute books The Che Guevara Myth and Liberty for Latin America. Full biography and recent publications.

Pierre Lemieux is an economist and co-director of the Economics and Liberty Research Group at the Université du Québec en Outaouais and a Research Fellow at The Independent Institute in Oakland, California.

Alexander Tabarrok is research director at The Independent Institute, associate professor of economics at George Mason University, editor of the Independent Institute books, Entrepreneurial Economics, The Voluntary City (with D. Beito and P. Gordon), and Changing the Guard: Private Prisons and the Control of Crime.

Robert Higgs is Senior Fellow in Political Economy at The Independent Institute, author of Against Leviathan and Crisis and Leviathan, and editor of the scholarly quarterly journal, The Independent Review. Click here for a bio on Dr. Higgs, the noted economist and historian.

William Marina is Research Fellow at the Independent Institute in Oakland, Calif., and Professor Emeritus of History at Florida Atlantic University.

David T. Beito is a Research Fellow at The Independent Institute, Associate Professor of History at the University of Alabama, and co-editor of the book, The Voluntary City: Choice, Community and Civil Society.

William Marina and David T. Beito belong to "Liberty and Power," a group blog at the History News Network.

For further articles and studies, see the Center on Peace & Liberty and OnPower.org.

Nicolas Heidorn is a public policy intern at The Independent Institute in Oakland, California.

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