Free Enterprise And The Poor

Arthur Brooks makes a bold statement in a book I am reading. “Free Enterprise has eradicated poverty all over the world for billions of people.” It does seem counter-intuitive that as I pursue self-interest, value creation occurs, and people are helped. I’m still thinking about how this works so I can argue for or against this position. However, a couple of things have happened that gives me a sense that this is true.

Yesterday I was sitting next to “Jeff” in a meeting, and he showed me his KIVA account. KIVA is an organization that provides micro loans for small businesses around the world. Jeff has deposited $200 in this account and has loaned it out and been repaid several hundred times. This $200 has created over $7000 in value. Here is Jeff taking a little of his surplus and helping small businesses around the world.

The United States is a rich country built on a system that is considered free enterprise. But, the numbers also state we are a very generous country. Brooks gives these statistics in his book, while placiung the US in a juxtaposition with more collectivist countries to compare the level of giving between individuals who live under a more capitalist environment versus a more socialist system. “Seventy to eighty percent of American households donate money every year.” That seems pretty significant. The average household donates about $1,000 annually. “Between 50 to 60% of Americans formally volunteer their time each year.” Another significant number. The total chartable donations in the US are around $300 billion annually. Brooks goes on to state that, “In 1995, Americans gave three and one half times as much to causes and charities per capita as the French, seven times as much as the Germans, and fourteen times as much as the Italians.” Maybe there is something to this free enterprise system, our ability to choose how to make money, and how we intend to care for others not as fortunate.

I am a free market advocate, but I am not convinced that if we leave the market alone that it will take care of the poor. I am reading and thinking about this and will articulate it at some point in the near future. However, I would like to make two points regarding free enterprise and poverty.

One of the first longitudinal studies concerning the affects of school vouchers has been completed. This was a study initiated in New York in 1997, when students were in kindergarten, and continued until 2011, when students went to college. The findings were discussed in the WSJ this morning. An indication of the findings were stated in large print, “African-American kids in New York were 24% more likely to attend college if they won a scholarship to attend private school.”  The ability to choose freely where a child attends school, rather than being forced to go to an underfunded inner city school, was blatantly evident and supported by one parent’s comment. “I have an 8 year-old in the third grade, and she’s doing great. Its miraculous the way she has changed, said a voucher winning African-American mother at a focus group meeting in 1999.” The voucher system initiated in New York City affected only a certain amount of students, but it does give an indication that a free market system, involving choice, for education has an impact.

Donna Beegle, author of the book “See Poverty, Be The Difference” tells us about five elements that matter when dealing with education and students who have experienced great poverty. This is of interest to me as an educator.

Believe in the student’s ability to be educated.
Believe the student has strengths and talents.
Know the benefits of connecting students to others who are educated.
Know that assets are critical to success and how to build them.
Know how to navigate middle-class systems, procedures, and paperwork.

These elements may not be specifically related to a free enterprise system, but they are not specific to a socialist one either. The free market is truly amoral, but we are not. We the people care about others, My original ideas still work. Maintain a free enterprise system, have a government that acts as a referee and ensures mechanisms are in place to help the disadvantaged, and then individuals initiate moral responsibility individually and with a willingness to pay for those systems through charitable giving, not big government.

And that is my thought for the day!

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One thought on “Free Enterprise And The Poor

  1. Good comments. The only thing I would add is that when I perform the analysis similar to what you do here is that I am keenly aware that my analysis compares capitalism against other types of world governments, NOT against some ‘ideal’ I have in mind. When you compare it this way, and capitalisms RELATIVE benefits, it is clearly unequaled when it comes to lifting people’s station in life. Can it be more/do better? YES. But the conclusion needs to be that the foundation is freedom/capitalism.

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