Once we get down to the thirty-five least capitalist nations, average income has dropped to but $3,900 per year. And because rates of economic growth are also higher in more capitalist nations, the differences in income between the most and least capitalist nations are growing over time. 1 Of course, this is a chapter about poverty, and the average income in a nation may bear little relation to the income earned by its poorest residents.

It is convenient for our purposes to divide all the nations in the world into five groups, ranging from “most capitalist” to “least capitalist.” Data limitations prevent doing this with every single nation. Nevertheless, it is possible to do it for about 140 of them, putting 35 nations into each of the four groups.

Of course, no country in the world is completely capitalist; in the United States, for example, less than two-thirds of resources are allocated by the private sector, while the rest are allocated by federal, state, or local governments. At the other end of the spectrum, even in Communist countries such as Cuba, Vietnam, and North Korea, markets play at least some role in allocating resources.

Despite a few ambiguities, then, it is possible to measure the degree of capitalism (or, as some would term it, economic freedom) in each country around the world. Doing so yields measures that seem to correspond reasonably well with what many people would think is true about the economies of those countries.

For example, using the measures constructed by Canada’s Fraser Institute, Hong Kong’s economy is rated the most capitalist, while the United States is sixth. Singapore, Switzerland, New Zealand, Canada, the United Kingdom, and Australia are other nations whose economies are judged among the ten most capitalist in the world. If you know much about economic prosperity around the world, you will be aware that these countries are also among the world leaders in real per capita income. Indeed, the association of capitalism with prosperity is everywhere quite strong.

This story of human progress has been uneven across countries. Europe, North America, and a few other locations have witnessed the greatest increases in real per capita income and the greatest decreases in poverty. By contrast, the standard of living and the extent of poverty in many African nations have changed little over the past 250 years.

The past half-century is but a small part of a story that has evolved over the course of 250 years or so. In the middle of the eighteenth century, perhaps 90 percent of the world’s population lived in a state of abject poverty, subsisting on the equivalent of less than $1 per person per day, measured in today’s terms.