There are many reasons why foreign aid and handouts do not succeed in lifting anybody out of poverty, but one of the main reasons is that progress requires effort. Sadly, there is no effort involved in being the recipient of a handout.
Capitalist free markets do not generally create a situation where everyone has the same amount of stuff. Sadly, progress tends to yield unequal outcomes. Enter the welfare state, a creature of most modern capitalist economies. The idea is that taxes will be collected to create a repository of public funds to provide a safety-net for the poorest and most vulnerable in society. Thus the welfare state would be expected to meet the costs of unemployment insurance and pensions for those who found themselves cast on the heap when the company they worked for goes bust.
When people support notions of economic equality it's not always clear exactly what they have in mind. All we hear is vague notions that people should have more or less the same amount of stuff, and nobody should have much more stuff than other people because It Feels Very Unfair when some are so rich while others are so poor. That is not a very sophisticated way to understand economic life. What's the relevance of comparing how much one person has, to how much another person has? In Capitalism and Freedom Friedman challenges us to think a bit more intelligently about the meaning of 'equality' in the context of a market economy. If we are to translate the ideals of equality into reality we'll need a conceptual framework that's a bit more sophisticated than 'everyone having the same amount of stuff' or 'paying everyone the same wage'.
All functioning societies are governed by a set of rules defining the boundaries of appropriate behaviour, though the rules emanate from many different sources. Within the framework of private law, individuals are largely self-governing subject to the basic principles of the law of obligations (contract, property, and tort); the law has nothing to say about whether everyone should have the same amount of stuff or even the same amount of social standing or economic power. This creates a lot of freedom, but also produces a lot of inequality because there are no rules about how to share stuff out fairly to ensure that nobody has more than others.
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