MYTH: Capitalism is a bad economic system that leads to income inequality and poverty.

REALITY: This is false and the opposite is true. The more capitalism a country has the less poverty there is. Capitalism is widely supported by a majority of Americans, but the radical left has a negative view of it.

Capitalism is synonymous with Economic freedom. More specifically, the key ingredients of economic freedom and capitalism are the same.

Numerous studies show that the more economic freedom a country has the less poverty there is. This is obvious when you take a look at the most and least economically free countries. For example, countries with high economic freedom; like Switzerland, Australia, and Ireland have lower poverty rates. While countries with low economic freedom; like Laos, Burundi, and Sudan have extremely high poverty rates.

Capitalism/economic freedom is a great economic system that is essential for lowering poverty. It’s also obvious that the opposite of capitalism, something like socialism, leads to poverty.

(Below is all the evidence)

POLL: A MAJORITY OF AMERICANS SUPPORT CAPITALISM

According to a Gallup poll, 60% of Americans have a positive view of capitalism, while 38% had a favorable view of socialism. Republicans were significantly more likely to favor capitalism than Democrats. The Gallup study stated, “This year, 72% of Republicans and 52% of Democrats have a positive image of capitalism.”

According to that same Gallup poll, 65% of Democrats said they had a positive view of socialism, while Republicans only 14% felt the same way.

Gallup said, “The two partisan groups’ opinions of socialism diverge even more, with 14% of Republicans and 65% of Democrats saying they have a positive image of it. Democrats’ opinions of socialism have gotten slightly more positive over the years, moving from 53% in 2010 and 2012 to over 60% in the past two surveys….. Since 2018, Democrats have rated socialism more positively than they have rated capitalism. Before that, they held similar views of the two economic systems.”

COUNTRIES WITH THE MORE CAPITALISM HAVE LESS POVERTY

Countries with the most economic freedom/capitalism are the richest most developed countries in the world. Here’s a list of some of the most economically free countries/territories: Hong Kong, Singapore, New Zealand, Switzerland, Australia, Ireland, the United States, Sweden, Finland, Denmark, Luxembourg, Chile, and the Netherlands.

This information is according to the Heritage Foundation, Wall Street Journal, Fraser Institute, Cato Institute, and the Foundation for Economic Education.

COUNTRIES WITH LESS CAPITALISM HAVE MORE POVERTY

Countries with the least economic freedom/capitalism are the poorest and most poverty-stricken countries in the world. Here’s a list of the least economically free countries/territories: Zimbabwe, Venezuela, Cuba, North Korea, Eritrea, Republic of Congo, Burma, Laos, Burundi, Sudan, Ethiopia, and Algeria (Fun fact: 3 out of 12 of those countries are socialist).

This information is according to the Heritage Foundation, Wall Street Journal, Fraser Institute, Cato Institute, and the Foundation for Economic Education.

WHAT IS ECONOMIC FREEDOM

According to the Heritage Foundation, “Economic freedom is the fundamental right of every human to control his or her labor and property. In an economically free society, individuals are free to work, produce, consume, and invest in any way they please. In economically free societies, governments allow labor, capital, and goods to move freely, and refrain from coercion or constraint of liberty beyond the extent necessary to protect and maintain liberty itself.”

Economic freedom is based on 12 quantitative and qualitative factors: property rights, government integrity, judicial effectiveness, government spending, tax burden, fiscal health, business freedom, labor freedom, monetary freedom, trade freedom, investment freedom, and financial freedom.

By grading each of these categories on a scale from 0 to 100, a score can be derived for a city, state, or country. The higher the score is, the more economic freedom that area has.

HIGHER ECONOMIC FREEDOM LEADS TO LOWER POVERTY

Numerous studies have shown that the higher the economic freedom score is, the less poverty there is.

The Fraser Institute has found “that countries with institutions and policies more consistent with economic freedom have higher levels of income, more rapid economic growth, and a greater reduction in poverty rates.”

A 2020 study titled “The Relationship between Economic Freedom and Poverty Rates: Cross Country Evidence,” by Colin Doran and Thomas Stratmann of the Mercatus Center proved that economic freedom is essential to lowering poverty throughout the world.

A 2008 Economic Freedom of the World report by Seth Norton and James Gwartney, found a very strong relationship between higher economic freedom and reduced poverty.

A 2003 study, titled “Poverty and Economic Freedom: Evidence from Cross-Country Data” by Rana Hasan, M. G. Quibria, and Yangseon Kim, found that “economic freedom is as much important for economic growth as for poverty reduction.”

SOURCES

Jones, J. M. (2021, December 6). Socialism, capitalism ratings in U.S. unchanged. Gallup. Retrieved September 14, 2022, from https://news.gallup.com/poll/357755/socialism-capitalism-ratings-unchanged.aspx

2022 Index of Economic Freedom: About The Index. The Heritage Foundation. (n.d.). Retrieved September 13, 2022, from https://www.heritage.org/index/about

2022 Index of Economic Freedom: Country rankings. Heritage Foundation . (n.d.). Retrieved September 13, 2022, from https://www.heritage.org/index/ranking

Doran, Colin and Stratmann, Thomas, The Relationship between Economic Freedom and Poverty Rates: Cross Country Evidence (August 25, 2021). Doran, C., & Stratmann, T. (2020). The Relationship between Economic Freedom and Poverty Rates: Cross-Country Evidence. Journal of Institutional and Theoretical Economics, 176(4), 686–707., GMU Working Paper in Economics No. 21-27, Available at SSRN: https://ssrn.com/abstract=3911478

Press, D. (2017, August 29). Why economic freedom is the best weapon against poverty. Competitive Enterprise Institute. Retrieved August 30, 2022, from https://cei.org/blog/why-economic-freedom-is-the-best-weapon-against-poverty/

The relationship between Economic Freedom and Poverty Rates: Cross… Atlas Network. (2020, September 25). Retrieved August 30, 2022, from https://www.atlasnetwork.org/articles/the-relationship-between-economic-freedom-and-poverty-rates-cross-country-evidence-by-colin-duran

Economic Freedom of the World . Cato.org. (n.d.). Retrieved August 30, 2022, from https://www.cato.org/economic-freedom-world

Rana Hasan & M.G. Quibria & Yangseon Kim, 2003. “Poverty and Economic Freedom: Evidence from Cross-Country Data,” Economics Study Area Working Papers 60, East-West Center, Economics Study Area.

Ladan, L. (2019, June 14). Capitalism remains the best way to combat extreme poverty. Catalyst. Retrieved August 31, 2022, from https://catalyst.independent.org/2019/06/14/capitalism-remains-the-best-way-to-combat-extreme-poverty/

Zitelmann, R. (2020, July 27). Anyone who doesn’t know the following facts about capitalism should learn them. Forbes. Retrieved August 31, 2022, from https://www.forbes.com/sites/rainerzitelmann/2020/07/27/anyone-who-doesnt-know-the-following-facts-about-capitalism-should-learn-them/?sh=64712a213dc1

Sobel, R. S., & Bolen, J. B. (2018, June 1). What is capitalism? the concept of Economic Freedom. Mississippi Center for Public Policy. Retrieved August 31, 2022, from https://mspolicy.org/what-is-capitalism-the-concept-of-economic-freedom/

Jones, J. M. (2021, December 6). Socialism, capitalism ratings in U.S. unchanged. Gallup. Retrieved August 31, 2022, from https://news.gallup.com/poll/357755/socialism-capitalism-ratings-unchanged.aspx

Perry , M. J. (2016, March 22). Why socialism always fails. American Enterprise Institute – AEI. Retrieved September 1, 2022, from https://www.aei.org/carpe-diem/why-socialism-always-fails/

Gwartney, J., Lawson , R. A., Hall, J. C., Murphy , R., Djankov, S., & McMahon , F. (2022, September 8). Economic freedom of the world: 2022 annual report. Fraser Institute. Retrieved September 12, 2022, from https://www.fraserinstitute.org/studies/economic-freedom-of-the-world-2022-annual-report