The new encyclical from Pope Francis, due to be officially released tomorrow, is sure to contain at least one claim that the rich are somehow getting rich off the backs of the poor. On a certain level, this is no doubt true: the wealthy are more able to influence state institutions, and are thus more readily able to use state powers — such as taxation and regulation — to exploit others to their own benefit. But that’s not what Francis means. Francis means that markets are bad for the poor.
This is an empirical claim, of course, and also one outside the Bishop of Rome’s prerogatives, which are limited to interpretations of moral theology and divine revelation. And it’s a good thing too, since the claim that markets are especially hard on the poor is demonstrably and empirically false.
After the release of the 2013 encyclical Evangelii Gaudium, Nicolas Cachanosky addressed these empirical facts in detail. His article explored multiple indicators of income disparity and real measures of poverty. The data adds up in favor of markets:
[T]he effect produced by the Evangelii Gaudium on public opinion invites us to review some general indicators of social and economic welfare in countries that are more and less inclined to free markets. Is it true that the free market leaves the homeless and marginalized the less wealthy? How much truth and how much myth is in the so-widespread criticism of “evil capitalism”? What Pope Francis expresses is ultimately a reflection of a widespread belief across a number of sectors in most countries around the world.
It is easy to get an overview of the economic and social situation of more and less free market countries if we group them into four categories according to their economic freedom. This allows a gradient of results and to observe differences between more and less free countries. It is important to note that the data of all countries must be observed, and not chosen, for example, from only a few (more details here). This would allow both an advocate and a critic of free market to choose a couple of countries at their convenience. Is the entire sample, not ad hoc selection, what should be used as reference. Let us consider, then, some economic and social data from countries around the world according to their economic freedom...
...Some brief concluding remarks. First, advocates of free market do not hold that such an economic system is perfect. But it does not help wealth creation and poverty reduction to promote market interventions with worse results than free markets because free markets are not perfect. It is unwise to make the lack of perfection the excuse to promote less efficient institutional arrangements.
Second, these results hold if we look, for example, at differences in the countries that are most and least free constraining the sample only to small countries. That is, this data is not the result of an effect of “large countries” where, just for being a large country, indicators show better results.
Third, the same results are also observed if we separate between more and less free countries within the 25% least free countries. This means that the theory of international exploitation does not hold. Within the least free countries, more free economies have better economic and social indicators than the least free economies in the worldwide group of the least free.
