Can America Build A Broad-Based Economy?

One of the most significant economic achievements of the past fifty years has been the radical diminishment of extreme poverty. Between 1990 and 2018 alone, those in extreme poverty (defined as someone living on less than 1.90 international dollars a day) fell from 1.9 billion (36% of the world’s population) to 650 million (about 7%). The pace and scale of this decline is unparalleled in human history. Granted, there are outliers to this trend—most notably, sub-Saharan Africa—but the reduction goes beyond China’s borders. Significant players like Indonesia and India have also realized major successes.

These changes were not achieved through massive wealth transfers from developed nations to the developing world of the type advocated by many development economists after 1945. Nor did it have much to do with foreign aid or industrial policy, likewise promoted by the same experts. It was accomplished through economic growth. And that growth was primarily driven by nations shifting their economies from the late-1960s onwards towards competition and trade openness. They did so by liberalizing imports and foreign investment rules, steadily removing export controls, and broadening the scope for individuals and businesses to pursue their comparative advantage in domestic and foreign markets.

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