Myth Debunked: Capitalism Creates Poverty

I debunk the myth that capitalism creates poverty.

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Transcript

Myth Debunked: Capitalism Creates Poverty

There is a common trope, by economic leftists, to blame capitalism for poverty.

However, this generalization is not only false, but comedically false.

People are born into the world with nothing – naked as a baby.

As people start out with nothing, it requires significant work for people to go from their state of infancy to adulthood and build up wealth.

In the prehistoric era before 10,000 BC, most humans were hunter-gatherers living in small nomadic groups with no monetary exchange.

Most everything they acquired was consumed within a short period of time.

In modern income equivalent, the caloric intake and needs of prehistoric man required about $100 to $300 per year of resource acquisition in 2025 dollars.

This reflects the poverty early man was in, barely getting by with very rudimentary wooden and stone tools and clothing made from animal skins and plant weavings.

Ancient civilizations did not fare much better in the 3000 to 500 BC period.

Most people in societies like Mesopotamia, Egypt, and Rome were subsistence farmers and laborers with incomes ranging from about $400 to $600 per year in 2025 dollars.

Medieval Europe between 500-1800 AD saw marginal improvements, but not much, as feudalism was the predominant economic model.

Peasants during that time saw incomes of around $500 to $800 per year in 2025 dollars.

In the Early Modern Period from about 1500 to 1800 AD, global poverty remained widespread with average incomes ranging around $600 to $1,200 per year in 2025 dollars.

There were some technological developments that improved life like the implementation of crop rotation systems and the spinning Jenny for weaving fabrics, but with widespread lack of firm property rights still the norm, most still suffered.

The pre-industrial era between 1800 and 1850 began the modern shift toward capitalist industrialization, but property rights still were lagging with slavery still rampant.

Average incomes for most ranged between $1,000 to $1,500 per year in 2025 dollars.

It wasn’t until the widest respect of property rights dovetailed with industrialization that the average person really started to move out of poverty.

Between 1850 and 1950, capitalist industrial incomes rose, especially in the West, to about $2,000 to $4,000 per year for most workers in 2025 dollars.

This was because property rights strengthened over this period, which enabled a massive expansion of capitalism through large businesses that operated with stock investment, leading to multinational business expansion.

Chattel slavery came to an end and civil rights movements normalized property rights for all people regardless of race or sex.

Between 1950 and the present, modernization took place across the world with many countries, not just the United States, moving away from slavery, feudalism, and mercantilism, and toward capitalism, through greater respect of property rights.

Serious decolonization efforts took place with many African, Asian, and Caribbean nations gaining independence, which shifted economic priorities from solely benefitting outside governments to benefitting locals more broadly.

Socialist states collapsed, like the USSR in 1991, which paved the way for more capitalist practices in Russia like the removal of price controls, trade liberalization, and privatization of state-owned enterprises through share offerings.

Japan’s post-World War II land reforms moved away from the strongly feudal and mercantilist system toward a more capitalist economy between 1955 and 1973, causing Japan to have an annual GDP rise of about 10%.

The Chinese government embraced a more capitalistic period from 1997 through 2018 by privatizing many state-owned enterprises and establishing special economic zones like Shenzhen, which greatly increased Chinese prosperity by dialing toward capitalist norms.

Hong Kong became a notable bastion of capitalist prosperity in Asia because of its status as special administrative region under British convention.

Nordic countries began freeing their markets, so much so, that Denmark, Norway, Netherlands, and Sweden now all rank higher on Heritage’s index of economic freedom than even the United States.

Today, the global per capita income in 2025 dollars is approximately $14,000 per year, marking a 46-factor improvement from hunter-gatherer life and about a 10-factor improvement from the pre-industrial era.
The top 10 most capitalist countries in the world, Singapore, New Zealand, Australia, Switzerland, Ireland, Canada, United Kingdom, Estonia, Taiwan, and Germany, boast median incomes ranging from $21,000 to over $40,000 per year in US dollars.

If capitalism were to be the cause of poverty, we’d expect people to be much poorer now than when human beings lived without capitalism.

Instead, what we have seen is that a turn toward capitalism has brought the world out of poverty and into prosperity in ways unimaginable to those past.

What’s left keeping people from greater prosperity is not capitalism, but governments continuing to prevent people from having full ownership over their property.

When the government takes money from people with taxes and spends it on war and cronyism, people lose out on their productivity’s benefit.

When the government makes it so that people cannot engage in free trade by banning victimless activity, from the war on drugs, to the war on raw milk, the government makes it harder for people to bring each other value and create more prosperity.

When the government taxes people on their homes and makes it so that they can never truly own their home outright, they make it so that people are still in a form of feudalism to their state lords.

And while economic leftists will attempt to say that capitalism inherently means the government is picking winners and losers through corporate bailouts and subsidies, this is a wrongful distortion of capitalism.

Capitalism is free trade with people making consensual arrangements, whether it is for wages, rent, sales, or business ownership.

It isn’t the government stealing from people through taxes to fund corporations.

That’s cronyism!

And when the economic dial turns toward cronyism instead of free markets, all suffer on the road to serfdom.

So, the next time someone tells you that capitalism “creates” poverty, ask them what their historical timeline looks like for human prosperity.

Either they will have to admit that their generalization is false, or they will have to fabricate a historical fantasy that very non-capitalist, early societies were magically wealthy despite mountains of evidence otherwise.

Sources

Clark, G. (2007). A Farewell to Alms. https://press.princeton.edu/books/paperback/9780691141282/a-farewell-to-alms

Maddison, A. (2001). The World Economy: A Millennial Perspective. https://www.oecd-ilibrary.org/development/the-world-economy_9789264189980-en

Allen, R. C. (2009). The British Industrial Revolution in Global Perspective. https://www.cambridge.org/core/books/british-industrial-revolution-in-global-perspective/9780521687850

Broadberry, S., & Gupta, B. (2006). The Early Modern Great Divergence. https://www.jstor.org/stable/3876475

Bourguignon, F., & Morrisson, C. (2002). Inequality Among World Citizens: 1820–1992. https://www.aeaweb.org/articles?id=10.1257/000282802762024553

Credit Suisse. (2025). Global Wealth Report. https://www.credit-suisse.com/about-us/en/reports-research/global-wealth-report.html

Heritage Foundation, Index of Economic Freedom 2024
https://www.heritage.org/index/country/singapore

World Bank, World Development Indicators database
https://databank.worldbank.org/source/world-development-indicators

Gallup, Global Median Household Income Estimates 2020
https://www.gallup.com

Visual Capitalist, Mapped: The State of Economic Freedom in 2023
https://www.visualcapitalist.com/mapped-the-state-of-economic-freedom-in-2023/

Singapore Department of Statistics (SingStat)
https://www.singstat.gov.sg

Ministry of Manpower (MOM), Singapore
https://www.mom.gov.sg

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