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

Economics for Leaders Area Western Europe $427 $772 $997 $1,202 $2,892 $4,963 $19,912 21,672 USA 527 1,257 4,091 10,316 29,037 31,178 India ,160 2,975 China ,609 6,725 Africa ,549 1,780 World ,262 2,260 6,477 7,614 Real Gross Domestic Product Per Capita (1990 $) Sources: Development Centre Studies The World Economy: Historical Statistics, Maddison World Population, GDP and Per Capita GDP, AD, Maddison, 2007, and for 2008 data

Source: World Bank Poverty 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 Database (April 30, 2012) Economic Growth offers a way out!

Economics for Leaders

Source: World Bank Poverty and Inequality Database (April 30, 2012) Some Good News in Africa

Institutions Matter Rule of Law Private Property Rights Open, Competitive Markets Entrepreneurship and Innovation Let’s define CAPITALISM as having the RIGHT INSTITUTIONS in place.

Economics for Leaders Institutions Shape Incentives Nobel Prize in Economics 1993 Douglass North

Institutional Variation

Economics for Leaders 32 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 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 Source: The Fraser Institute, 2012

Economics for Leaders Per Capita Income and Economic Freedom Quartile 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 Sources: The Fraser Institute; The World Bank, World Development Indicators, Most Free ……………. Least Free %

Economics for Leaders Income Share of the Poorest 10% and Economic Freedom Sources: The Fraser Institute; The World Bank, World Development Indicators, Most Free ……………. Least Free

Economics for Leaders Income of the Poorest 10% and Economic Freedom Sources: The Fraser Institute; The World Bank, World Development Indicators, Most Free ……………. Least Free

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 Sources: The Fraser Institute; The World Bank, World Development Indicators, 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 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 Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, 2013, available at Most Free ……………. Least Free

Economics for Leaders Economic Freedom and Civil Rights Low scores indicate high level of rights Most Free ……………. Least Free Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, 2013, available at

Economics for Leaders Economic Freedom and Corruption High scores indicate low corruption Sources: The Fraser Institute; Transparency International, Corruption Perceptions Index, 2012 available at Most Free ……………. Least Free

Economics for Leaders Overall Economic Freedom Index and the Bottom 10 Source: The Fraser Institute, 2012

Economics for Leaders 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 Consumer durables Available to % of non-poor people in U.S. population Available to % of poor people in U.S. population Refrigerator Stove Color television Telephone Washing machine Clothes dryer Microwave Dishwasher Freezer VCR Air conditioner Personal computer 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

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." The Two Dollar Challenge