Capitalism? Nah

Bryan Caplan’s EconLog post, Diseases of Poverty: Neglecting the Obvious is worth a read. He points out that solutions proposed on the Wikipedia entry for diseases of poverty focus on redistribution, rather than best proven solution:

It’s almost like the last two centuries never happened.  Quick recap: During the last two hundred years, living standards exploded even though the distribution of income remained quite unequal.  How is such a thing possible?  Because total production per person drastically increased.  During this era, no country escaped dire poverty via redistribution, but many escaped dire poverty via increased production.  And while the effect of moderate redistributive policies on growth is unclear, there is no doubt that populist and socialist movements determined to “tackle the inequitable distribution of money, power and resources” and “change the way that society is organized” sharply retard growth.

Economic and political rights first

I just finished readingThe Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor by William Easterly.

Russ Roberts interviewed Easterly in this EconTalk podcast.

I recommend reading the book and listening to the podcast.

Easterly’s key and powerful point is that the economic and political rights of humans in third world countries are often not considered by experts looking to prove out their prescribed solutions for alleviating poverty and often do so by working with the very leaders of those countries who suppress those rights.

Easterly made the excellent observation that Martin Luther King Jr. didn’t seek to alleviate poverty among African-Americans first. He understood that ensuring that they had economic and political rights came first.

The last half of the book provides a nice description of how the incentives work in a free market (or when people have economic and political rights) to be the most effective pill against poverty. Easterly, though, steers away from using terms that carry baggage in today’s political clime, like markets and capitalism, and keeps the focus on the individuals. Instead of calling it capitalism, he refers it to a people trying to solve other people’s problems.

Who deserves some help?

I’m looking forward to reading Bryan Caplan’s follow-up to his post, Poverty: The Stages of Blame. In the follow-up, he plans to explore what that implies about government and personal behavior.

This topic baffles me. When kept in the abstract, people seem to default to an attitude that ‘something must be done to help’ because people are poor ‘through no fault of their own.’

But, when you start talking about specific people, Caplan’s logic tends to override that abstract reasoning.

But, few people backtrack and wonder how many people really fall into that abstract “through no fault of their own.”

Update: Here’s Bryan’s follow-up post, Poverty: The Stages of Blame Applied. He makes good points.

Speaking of the bottom 50% looking within…

…Walter Williams does just that in his latest column, Dependency, Not Poverty.

A snippet:

No one can blame a person if he starts out in life poor, because how one starts out is not his fault. If he stays poor, he is to blame because it is his fault. Avoiding long-term poverty is not rocket science. First, graduate from high school. Second, get married before you have children, and stay married. Third, work at any kind of job, even one that starts out paying the minimum wage. And finally, avoid engaging in criminal behavior.

Since President Lyndon Johnson declared war on poverty, the nation has spent about $18 trillion at the federal, state and local levels of government on programs justified by the “need” to deal with some aspect of poverty. In a column of mine in 1995, I pointed out that at that time, the nation had spent $5.4 trillion on the War on Poverty, and with that princely sum, “you could purchase every U.S. factory, all manufacturing equipment, and every office building. With what’s left over, one could buy every airline, trucking company and our commercial maritime fleet. If you’re still in the shopping mood, you could also buy every television, radio and power company, plus every retail and wholesale store in the entire nation” ( Today’s total of $18 trillion spent on poverty means you could purchase everything produced in our country each year and then some.

There’s very little guts in the political arena to address the basic causes of poverty. To do so risks being labeled as racist, sexist, uncaring and insensitive. That means today’s dependency is likely to become permanent.


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If you want to help the poor, you should read this

I agree with Mark Perry (an economist who has bought me a beer), of Carpe Diem, that the reduction in the world poverty rate is the most remarkable achievement in human history.

The percentage of the world population living on $1 per day or less has dropped since 1970 from around 26% to just over 5%.

It’s hard to argue with those results. They are inflation-adjusted.

I can think of a couple things that might be easier to argue about regarding those results.

1. I can imagine some folks would say that 5% isn’t good enough.

2. I can imagine that some folks would argue about the cause of those results. I agree with Perry’s explanation as provided by Arthur Brooks: “globalization, free trade and international entrepreneurship.”

I can imagine that some folks would say it was the growth in government and aid. But, for them, I’d ask, what if you’re wrong? As Brooks says:

…if you love the poor, if you are a good Samaritan, you must stand for the free enterprise system, and you must defend it, not just for ourselves but for people around the world. It is the best anti-poverty measure ever invented.

I agree. I could be wrong and I think — for the benefit of the poor — I should keep that in mind and stay open to evidence to the contrary, because whether I’m right or wrong doesn’t amount to a hill of beans.

What is important it what really helps them.

I also think us supporters of free markets often forget this. The opposition paints us as the defenders of the rich, the “1%” and king-like CEOs, while we’re really advocating for the benefit of everyone, including the poor. 

The difference between poverty and destitution

Dan Mitchell comments and expands on Thomas Sowell’s latest column. Both are well worth reading.

I just had to include this passage from Sowell:

“Poverty” once had some concrete meaning — not enough food to eat or not enough clothing or shelter to protect you from the elements, for example. Today it means whatever the government bureaucrats, who set up the statistical criteria, choose to make it mean. And they have every incentive to define poverty in a way that includes enough people to justify welfare state spending. Most Americans with incomes below the official poverty level have air-conditioning, television, own a motor vehicle and, far from being hungry, are more likely than other Americans to be overweight. But an arbitrary definition of words and numbers gives them access to the taxpayers’ money.

Learned Helplessness

Recent discussion in the comments of this blog about poverty reminded me of a caller I heard on a local radio show I heard within the last year.  The caller was a teacher and he shared the results of an assignment he has always done with students in his 30 years of teaching in an urban school district.

He said that he has always done this assignment to encourage his students to think about their futures and how they will earn their keep.

The first part of the exercise is to think about and write down the things they may want to have someday — homes, cars, jewelry, boats, etc.  In the second part of the assignment, they think about what they’ll do to afford those things — like earn money as a nurse, or firefighter or start a business.

He then commented on how he has seen the responses to that exercise change over the years.

In his early years, his students would want to become nurses, firefighters and teachers to be able to earn money to buy what they want.

But, now he’s more likely to get these types of responses: I’ll just use the check or card that comes from the government to buy it, like Mom does.

I doubt much has changed. My guess is that the students normally say they’ll do whatever it is they see their parents or aunts and uncles doing.  The future nurses of 20 years ago probably had a Mom who was a nurse.

Which reminds me of this post where I linked to and quoted from a Wall Street Journal piece by Arthur Brooks about earned success and learned helplessness.

It also reminds me of the story Dr. Carson told in his speech about how his Mom would not allow Dr. Carson or his brother to accept excuses for their failures or their lot in life.