I had a pretty interesting discussion today about world poverty with someone who holds the common progressive/university view of “boo neoliberals.” He does not support free trade or non-state solutions to resource management (he would call that latter privatization).
His conclusions pretty much rest on the assumption that big businesses keep resources out of the reach of the common man and thereby crush him. A stretch, and only possible with government intervention, but that’s not the biggest flaw in progressive thought.
They have no satisfactory explanation of wealth creation. People are either rich because they control resources, or poor because they don’t have access to them. How the resources turn into things valuable and the method people transition from poor to rich are unexplained.
Part of the correct explanation includes economic freedom. The theory is built on sound logic and empirical evidence supports it. Institutions that protect private property and commercial freedom allow people to save, invest, and make an honest living for themselves and their family. Economic freedom is a necessary (but not sufficient) condition for human freedom.
These critical institutions and foundations are lacking in every single poor country. People are not cooperating enough with each other for a variety of reasons. People need security in their persons and property to take entrepreneurial risks. People need the freedom to sell their production to the highest bidder. Without these pieces in place, society is built on coercion.
Free people have the capacity to make wealth and then enjoy it. Over a short timeframe, income per person and general welfare rapidly increases. The poorer a country starts the quicker it can grow.
How to get the rest of the world there, I don’t know. Top down solutions probably won’t work. A planner can’t just snap his fingers and put a few laws on the books. The economic wounds to civil society run fairly deep. But every change towards more economic freedom pushes the momentum in the correct direction.
The United States and other donors should not prop up these poorly governed countries with foreign aid. It’s possible to get more of the charity to the people, but unless the processes of wealth creation are there, poor people won’t be able to get richer.
Throwing money at the problem and into the hands of rent-seeking politicians is definitely not the answer, and potentially makes the situation worse. Sorry Jeffrey Sachs and company, but your noble ideas on how to end world poverty are divorced from reality.
[...] must defend their methodology from colleagues who don’t understand markets or the process of wealth creation, all while simultaneously arguing that markets are inherently unfair and doomed to failure without [...]