Chapter 2 : Economic Freedom and World Poverty

The eradication of world poverty is one of the most important issues facing economists, policy makers, and concerned citizens. There are several reasons why this is the case. First, as Theodore W. Schultz (1980) notes, most of the world is poor and this fact makes poverty reduction a central issue of economics. On varying intellectual terrains, scholars such as Lucas (1988), North (1981) and de Soto (1990) have spread that message. Second, increased trade and capital flows in recent decades, that is, “globalization,” have drawn increased attention to cross-country differences in income, living standards, and the plight of the poor, particularly those living in impoverished countries. Third, modern communications and transportation have increased the visibility of global poverty. The issue has attracted the attention of celebrities such as the Irish rock star, Bono. Clearly, there is a cachet associated with the movement to eradicate world poverty. Some act as if the eradication of poverty is primarily a matter of elevating this objective and directing aid from high-income to low-income countries. This view is largely reflected in the United Nations Millennium Development Goals. It also permeates the recent popular book by Jeffrey Sachs, The End of Poverty (2005). Sachs argues that the elimination of extreme poverty is simple and readily achievable if wealthy nations are willing to make the commitment and supply needed funds to the poorer nations of the world, particularly those in Africa. In fact, Sachs’s book can be viewed as an apologetic for the feasibility of the Millennium Development Goals, buttressed by criticisms of leaders of industrialized countries for failing to instantly affirm the goals and subsidize strategies to achieve them. Other researchers argue that the views of Bono, Sachs, and the proponents of the Millennium Development