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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
The Wealth of Nations
Economics for Leaders
Area1000 1500 1700 1820 1900 1952 2003 2008
Western Europe
$427
$772
$997
$1,202
$2,892
$4,963
$19,912
21,672
USA
527
1,257
4,091
10,316
29,03731,178
India
550
533
599
629
2,1602,975
China
450
600
600
600
545
537
4,609
6,725
Africa
425
414
421
420
601
928
1,549
1,780
World
450
566
615
667
1,262
2,260
6,477
7,614
Real Gross Domestic Product Per Capita (1990 $)
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
The number of extreme poor has declined by 740 million
since 1981
What factors contributed to this decline?
Poverty Fact
Source: World Bank Poverty and Inequality Databasehttp://databank.worldbank.org/Data/Views/Reports/TableView.aspx (April 30, 2012)
Economic Growth
offers a way out!
Economics for Leaders
Source: World Bank Poverty and Inequality Databasehttp://databank.worldbank.org/Data/Views/Reports/TableView.aspx (April 30, 2012)
Some Good News in Africa
Institutions Matter
Rule of LawPrivate Property RightsOpen, Competitive MarketsEntrepreneurship and Innovation
Let’s define CAPITALISM as having the RIGHT INSTITUTIONS in place.
Economics for Leaders
Institutions Shape Incentives
Nobel Prize in Economics 1993
Capitalism“A particular set of institutionsgoverning the production and
exchange of goods and services.”
Douglass North
Institutional Variation
Economics for Leaders
32
Measurement: Fraser Institute
Economic Freedom:
Size of government and taxationProtection of private property and the rule of lawSoundness of moneyTrade regulation and tariffsRegulation of business, labor and capital markets
Economics for Leaders
33
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
World Average Economic Freedom Over Time
5.89 5.31
5.30
5.35
5.66
6.12
6.59
6.79
6.83
6.86
6.80
6.79
6.84
0
2
4
6
8
10
Eco
no
mic
Fre
edo
m S
core
1970 1975 1980 1985 1990 1995 2000 2005 2006 2007 2008 2009 2010
Source: The Fraser Institute, 2012
Economics for Leaders
Per Capita Income and Economic Freedom Quartile
Least Free Quartile
3rd Quartile2nd QuartileMost Free Quartile
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
GD
P P
er C
apita
(p
pp),
2011
Sources: The Fraser Institute; The World Bank, World Development Indicators, 2013
Most Free ……………. Least Free
Economics for Leaders
Growth in Developing Nations Per Capita and Economic Freedom Quartile
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Gro
wth
GD
P p
er
ca
pit
a
(av
era
ge
an
nu
al
%),
19
91
-
20
11
Least FreeQuartile
3rd Quartile2nd QuartileMost FreeQuartile
Sources: The Fraser Institute; The World Bank, World Development Indicators, 2013.
Most Free ……………. Least Free
%
Economics for Leaders
Income Share of the Poorest 10% and Economic Freedom
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
Gro
wth
GD
P p
er
cap
ita
(avera
ge a
nn
ual
%),
199
1-2
011
Least FreeQuartile
3rdQuartile
2ndQuartile
Most FreeQuartile
Sources: The Fraser Institute; The World Bank, World Development Indicators, 2013.
Most Free ……………. Least Free
Economics for Leaders
Income of the Poorest 10% and Economic Freedom
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
Inco
me o
f th
e L
ow
est
10%
, 1990-2
010
Least FreeQuartile
3rdQuartile
2ndQuartile
Most FreeQuartile
Sources: The Fraser Institute; The World Bank, World Development Indicators, 2012.
Most Free ……………. Least Free
Economics for Leaders
Economics for Leaders
Consider the “slice of pie”
Source: World Development Indicators, 2011.
Economics for Leaders
Economic Freedom and Poverty
Economics for Leaders
Life Expectancy at Birth and Economic Freedom Quartiles
45
55
65
75
85
Yea
rs
Least FreeQuartile
3rd Quartile2nd QuartileMost FreeQuartile
Sources: The Fraser Institute; The World Bank, World Development Indicators, 2013.
Most Free ……………. Least Free
Economics for Leaders
Economic Freedom and Quality of Health Care, 2009
Economics for Leaders
Literacy & Economic Freedom Quartiles (% of population)
Male Female
50
60
70
80
90
100
Least FreeQuartile
3rd Quartile2nd QuartileMost 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 RightsLow scores indicate high level of rights
0.0
1.0
2.0
3.0
4.0
5.0
Po
litic
al R
igh
ts (
ou
t o
f 7)
Least FreeQuartile
3rd Quartile2nd QuartileMost FreeQuartile
Sources: The Fraser Institute; Freedom House, Freedom in the WorldCountry Ratings, 2013, available at http://www.freedomhouse.org/.
Most Free ……………. Least Free
Economics for Leaders
Economic Freedom and Civil RightsLow scores indicate high level of rights
0.0
1.0
2.0
3.0
4.0
5.0
Civ
il L
iber
ties
(
ou
t o
f 7)
Least FreeQuartile
3rd Quartile2nd QuartileMost FreeQuartile
Most Free ……………. Least Free
Sources: The Fraser Institute; Freedom House, Freedom in the WorldCountry Ratings, 2013, available at http://www.freedomhouse.org/.
Economics for Leaders
Economic Freedom and CorruptionHigh scores indicate low corruption
0102030405060708090
100
Co
rru
pti
on
Ra
tin
g
(ou
t o
f 1
00
)
Least FreeQuartile
3rd Quartile2nd QuartileMost FreeQuartile
Sources: The Fraser Institute; Transparency International, Corruption Perceptions Index, 2012 available at http://www.transparency.org.
Most Free ……………. Least Free
Economics for Leaders
Overall Economic Freedom Index and the Bottom 10
0 2 4 6 8 10
Score (out of 10)
Mozambique
Chad
Algeria
Guinea-Bissau
Congo, Dem. R.
Angola
Congo, Rep. Of
Zimbabwe
Myanmar
Venezuela
Source: The Fraser Institute, 2012
Economics for Leaders
The Big PictureUntil 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
Consumer durables
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
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
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/
The Two Dollar Challenge
