04 September 2005

Making Poverty History...

Here in Glasgow, especially around the University, there is substantial support for the white "Make Poverty History" wrist band campaign. While the cause of wanting to reduce poverty is indeed noble, and one that I sincerely share, I fear that the efforts to reduce poverty through this program may have exactly the opposite effect.

Through the vast majority of human history, virtually all humans in all regions have lived in a squalid poverty that is hard for most of us to quite fully fathom. Suddenly, some 250 years ago, something happened to cause some countries to climb to unfathomable riches while others remained generally destitute. How did it happen? What enabled the western world to become so wealthy?

They didn't rob the poor, as the poor today are actually generally better off than 250 years ago. They didn't simply have access to resources, as even rocks like Hong Kong and Singapore became wealthy while their surrounding neighbours and soviet russia, teaming with resources, remained in relative poverty.

There is one, singularly important factor that has historically eradicated poverty: capitalism. Free markets, property rights, rule of law, stable currencies, and limited governments have allowed men to come out of the dark ages and rise towards their true potential by creating phenomenal amounts of wealth that simply didn't exist before.

Even today, we witness the wonders of capitalism in both directions. Countries that suppress it, like Zimbabwe, are facing famine. Countries that embrace it, like India and China, are rising in wealth at phenominal rates. Even natural disasters can be better contained in a relatively capitalist country as compared to a less-capitalistic one. Take, for example Hurricane Katrina vs. the Sumatra earthquake. The human casualties of Katrina are orders of magnitude smaller because American's wealth allows it to take action to minimize casualties. I cannot think of a single capitalist country that has had a famine, while non-capitalist countries have them relatively regularly.

If we truly want to reduce poverty around the world, there is a clear solution: promote worldwide capitalism and globalization. When we buy products from poor countries, we create jobs so that they can build their economy. Our factories in third world countries provide the valuable first steps for many children and young women to get out of the sex trade and into an honest job from which to support themselves. Too often we try to impose our level of luxury, where we can afford to not have our children working, on countries that are still at an earlier stage of development.

Instead of wearing bracelets, we should:
- encourage capitalistic instutions around the world
- buy products from poor countries at market prices
- build factories in poor countries when it makes economic sense
- encourage globalization

Alas, many of the bracelet-toting activists will do exactly the opposite, the the detriment of the poor. For those that care, the following economic analysis does a brilliant job of explaining the why capitalism is the best solution for the poor:

For those who care to better understand the track record of capitalism, I suggest: