Why are some countries
rich/poor?
How can we
reduce poverty?
What about Capitalism?
Joke of the Evening
Why are some countries
rich/poor?
How can we
reduce poverty?
What about Capitalism?
The Wealth of Nations
Real Gross Domestic Product Per Capita (1990 $)
1000
1500
1700
1820
1900
1952
2003
$427
$772
$997
$1,202
$2,892
$4,963
$19,912
USA
527
1,257
4,091
10,316
29,037
India
550
533
599
629
2,160
2008
Area
Western
Europe
China
450
600
600
600
545
537
4,609
Africa
425
414
421
420
601
928
1,549
World
450
566
615
667
1,262
2,260
6,477
21,672
31,178
2,975
6,725
1,780
7,614
Sources: Development Centre Studies The World Economy: Historical Statistics, Maddison 2003.
World Population, GDP and Per Capita GDP, 1-2003 AD, Maddison, 2007,
http://www.ggdc.net/maddison/ and http://www.ggdc.net/MADDISON/oriindex.htm for 2008 data
Economics for Leaders
Source: World Bank Poverty Data www.worldbank.org
Poverty Fact
The number of extreme poor has
declined by 740 million
since 1981
What factors
contributed to this decline?
Source: World Bank Poverty and Inequality Database
http://databank.worldbank.org/Data/Views/Reports/TableView.aspx (April 30, 2012)
Economics for Leaders
Some Good News in Africa
Source: World Bank Poverty and Inequality Database
http://databank.worldbank.org/Data/Views/Reports/TableView.aspx (April 30, 2012)
Institutions Matter
Let’s define CAPITALISM as having the
RIGHT INSTITUTIONS in place.
Rule of Law
Private Property Rights
Open, Competitive Markets
Entrepreneurship and Innovation
Institutions Shape Incentives
Douglass North
Nobel Prize in
Economics 1993
Economics for Leaders
Institutional
Variation
Measurement: Fraser
Institute
Economic Freedom:
Size of government and taxation
Protection of private property and the rule of
law
Soundness of money
Trade regulation and tariffs
Regulation of business, labor and capital
markets
Economics for Leaders
32
Background: Economic Freedom Project
 25 year project
 Transparency is a highly valued part of the project
 Based entirely on third party data from World Bank,
International Monetary Fund (IMF), Global
Competitiveness Report, etc. (based on both
objective and survey data)
 They rank 144 countries representing 95% of the
world’s population according to the extent to which
they permit their citizens to be economically free
Economics for Leaders
33
World Average
Economic Freedom Over Time
8
4
6.8
9
6.7
0
6.8
6
6.8
3
6.8
9
6.7
9
6.5
2
6.1
6
5.6
5
5.3
0
5.3
1
5.3
6
9
5.8
Economic Freedom Score
10
4
2
0
1970 1975 1980 1985 1990 1995 2000 2005 2006 2007 2008 2009 2010
Economics for Leaders
Source: The Fraser Institute, 2012
Per Capita Income and
Economic Freedom Quartile
GDP Per Capita
(ppp), 2011
$40,000
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
Most Free
Quartile
2nd Quartile
3rd Quartile
Least Free
Quartile
Most Free ……………. Least Free
Economics for Leaders
Sources: The Fraser Institute; The World Bank, World Development Indicators, 2013
Growth in Developing Nations Per
Capita and Economic Freedom Quartile
Growth GDP per capita
(average annual %), 19912011
%
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Most Free
Quartile
2nd Quartile
3rd Quartile
Least Free
Quartile
Most Free ……………. Least Free
Sources: The Fraser Institute; The World Bank, World Development Indicators, 2013.
Economics for Leaders
Growth GDP per capita
(average annual %),
1991-2011
Income Share of the Poorest 10% and
Economic Freedom
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Most Free
Quartile
2nd
Quartile
3rd
Quartile
Least Free
Quartile
Most Free ……………. Least Free
Sources: The Fraser Institute; The World Bank, World Development Indicators, 2013.
Economics for Leaders
Income of the Poorest 10% and
Economic Freedom
Income of the Lowest
10%, 1990-2010
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0
Most Free
Quartile
2nd
Quartile
3rd
Quartile
Least Free
Quartile
Most Free ……………. Least Free
Sources: The Fraser Institute; The World Bank, World Development Indicators, 2012.
Economics for Leaders
Economics for Leaders
Consider the “slice of pie”
Economics for Leaders
Source: World Development Indicators, 2011.
Economic Freedom and Poverty
Economics for Leaders
Life Expectancy at Birth and
Economic Freedom Quartiles
85
Years
75
65
55
45
Most Free
Quartile
2nd Quartile
3rd Quartile
Least Free
Quartile
Most Free ……………. Least Free
Sources: The Fraser Institute; The World Bank, World Development Indicators, 2013.
Economics for Leaders
Economic Freedom and
Quality of Health Care, 2009
Economics for Leaders
Literacy & Economic Freedom Quartiles
(% of population)
Male
Female
100
90
80
70
60
50
Most Free Quartile
2nd Quartile
3rd Quartile
Least Free
Quartile
Most Free ……………. Least Free
Sources: The Fraser Institute; World Development Indicators 2013
Economics for Leaders
Economic Freedom and
Educational Quality, 2009
Economics for Leaders
Economic Freedom and Political Rights
Low scores indicate high level of rights
Political Rights
(out of 7)
5.0
4.0
3.0
2.0
1.0
0.0
Most Free
Quartile
2nd Quartile
3rd Quartile
Least Free
Quartile
Most Free ……………. Least Free
Economics for Leaders
Sources: The Fraser Institute; Freedom House, Freedom in the World
Country Ratings, 2013, available at http://www.freedomhouse.org/.
Economic Freedom and Civil Rights
Low scores indicate high level of rights
5.0
Civil Liberties
(out of 7)
4.0
3.0
2.0
1.0
0.0
Most Free
Quartile
2nd Quartile
3rd Quartile
Least Free
Quartile
Most Free ……………. Least Free
Economics for Leaders
Sources: The Fraser Institute; Freedom House, Freedom in the World
Country Ratings, 2013, available at http://www.freedomhouse.org/.
Economic Freedom and Corruption
Corruption Rating
(out of 100)
High scores indicate low corruption
100
90
80
70
60
50
40
30
20
10
0
Most Free
Quartile
2nd Quartile
3rd Quartile
Least Free
Quartile
Most Free ……………. Least Free
Sources: The Fraser Institute; Transparency International, Corruption
Perceptions Index, 2012 available at http://www.transparency.org.
Economics for Leaders
Overall Economic Freedom Index
and the Bottom 10
Mozambique
Chad
Algeria
Guinea-Bissau
Congo, Dem. R.
Angola
Congo, Rep. Of
Zimbabwe
Myanmar
Venezuela
0
Economics for Leaders
2
4
6
8
10
Score (out of 10)
Source: The Fraser Institute, 2012
The Big Picture
Until the 1750’s extreme poverty was the
standard for all of human history.
Since 1750 economic growth has lifted large
sections of humanity to levels of wealth
unheard of previously.
The engine of economic growth is reducing
poverty rates worldwide.
Capitalism consists of institutions that help
promote economic growth.
Economics for Leaders
Available to %
of non-poor
people in U.S.
population
Available to
% of poor
people in U.S.
population
Refrigerator
99.4
98.5
Stove
99.1
97.0
Color television
99.1
97.4
Telephone
91.9
79.8
Washing machine
86.2
68.7
Clothes dryer
83.8
61.2
Microwave
97.1
91.2
Dishwasher
67.5
36.7
Freezer
38.1
25.1
VCR
93.3
83.6
Air conditioner
86.6
78.8
Personal computer
70.2
42.4
Consumer durables
Source: U.S. Census Bureau, Survey of Income and Program Participation, 2004
Panel, Wave 5 Internet Release date: November, 2009.
Economics for Leaders
Hans Rosling 200 Countries 200
Years, 4 minutes
http://www.youtube.com/watch?v=jbkSRLYSojo
Economics for Leaders
The Two Dollar Challenge
What is Challenge Week?
Live on two dollars a day and follow other RULES for a week, and
record your experiences for others to read. Fundraise for economic
development as you abstain from purchasing goods.
Why Participate
Begin to understand firsthand the hardship that half the world's
population endures. Nurture a new respect for impoverished persons.
Participants have many reactions throughout Challenge Week as
demonstrated in these blog entries from past years. Students face
additional, unexpected obstacles and struggle with the emotional
discomforts of "playing poverty."
http://www.twodollarchallenge.org/