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The Poverty of Liberal Economics

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  • David Brady

Abstract

Liberal economic precepts have long been a foundation for the social science of poverty and continue to profoundly influence public policy. Liberal economics contends that poverty is dependent on the harmonious progress of economic growth, free market capitalism, worker productivity, and the supply and demand of labor. This paper traces its origins from classical economics and its influence throughout contemporary social science, public policy and conventional wisdom. Next, I evaluate the liberal economic model of poverty with an unbalanced panel analysis of 18 Western nations from 1967 to 1997 and with newly available comparable data on relative poverty, economic growth, government receipts, productivity and unemployment. The results demonstrate that liberal economics provides a weak and ineffective model of poverty, and many of its precepts are wholly unsupported. Moreover, a central finding emerges that the size of the state has a large and significant negative effect on poverty after taxes and transfers. It is argued that poverty researchers should seriously question the liberal economic model and instead concentrate on the central role of the state in reducing poverty.

Suggested Citation

  • David Brady, 2003. "The Poverty of Liberal Economics," LIS Working papers 343, LIS Cross-National Data Center in Luxembourg.
    • Handle: RePEc:lis:liswps:343
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    References listed on IDEAS

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    2. Stephanie Bell & L. Randall Wray, "undated". "The War on Poverty After 40 Years: A Minskyan Assessment," Economics Public Policy Brief Archive ppb_78, Levy Economics Institute.
    3. Jan Toporowski, 2013. "The Elgar Companion to Hyman Minsky," Review of Political Economy, Taylor & Francis Journals, vol. 25(1), pages 175-177, January.

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