Friday Graph: Freedom, Poverty and Prosperity

This is the Business Roundtable’s last Friday Graph, and it is appropriate to end on an uplifting note on the Business Roundtable’s major themes of the link between increasing prosperity and increased economic freedom – freedom of trade and contract backed by sound laws and regulations and excellence in the provision of public goods, through sound policies and institutions.

Late last month the UK magazine, The Economist, reported here that new World Bank estimates showed that between 2005 and 2008, poverty fell in every region of the world, for the first time ever.  This is the chart from that article.

click to enlarge

The Economist‘s article notes that half of the long-term decline in poverty is attributable to China, which has taken 660 million of people out of poverty since the 1980s.  The critical role that greater openness to trade and commerce has played in that is obvious to all.

Less well known is the recent decline in poverty in sub-Saharan Africa and its relationship to economic freedom.  Continuing gains in economic freedom in this region were highlighted in the Heritage Foundation’s 2012 Index of Economic Freedom.  A chapter here in this publication authored by Obiageli Ezekwesili, vice president of the African region at the World Bank reported that a World Bank research report had ” found new empirical evidence supporting the idea that economic freedom and civil and political liberties are at the root of reasons why some countries achieve and sustain better economic outcomes while others do not”.

Stephen Jennings alerted New Zealanders to the exciting developments in Africa in delivering the 2009 Sir Ron Trotter lecture.  Overall, he considered that, “the next several decades of accelerated economic convergence will see the fastest growth, most rapid structural change and greatest economic inclusion in history”.  He concluded that New Zealand could and should be a global success story if it did two things: (1) embrace change based on enterprise and competition and be willing to acknowledge and celebrate economic and business success, “rather than regarding it as something it is impolite to dwell on”, and (2) move back to a system of government that allows democratically elected leaders to make performance-enhancing changes, “without excessive pandering to narrow sectoral interests”.

New Zealand made great progress in improving prosperity and economic freedom over the past 25 years.  It is timely to record Roger Kerr’s leading role in researching, devising, advocating and defending the critical reforms throughout that period as executive director of the Business Roundtable. Among his  lasting achievements was his insistence that the result of each reform must be to make enduring improvements to the lives of ordinary New Zealanders.  Roger’s published research, thinking and forthright advocacy of sound public policies – in terms of quality, rigour, depth and reach – is unmatched in this country’s history.

But the task of further improving competitiveness, resilience and flexibility remains.  That work will be continued by the new merged think tank whose new name and executive director will be announced next week.

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