Saturday, 12 May 2007

If we really want to solve poverty, first we have to stop trying

It is the weekend, a time for reading books, watching a three day old episode of Question Time and not spending too long in front of the PC.

So instead, let me guide you to an excellent article by Arnold Kling on why the best means to solve poverty is "decentralised entrepreneurial activity under capitalism", rather than misguided centrally planned wonder-cures.

In the process, he (or rather, Robert Rector, whom he quotes) points out the fallacy of our oft-cited figures on poverty in the Western world, where (in America, where British commentators like to say that poverty is rife) "Forty-three percent of all poor households actually own their own homes... Eighty two percent of poor households have air conditioning... Nearly three-quarters of poor households own a car; 30 percent own two or more cars..." etc.
Kling's final point is especially pertinent. He advises that we need to shift our attention from a focus on intentions (how nice and worthy people are, and how much they want to help poor people), to a focus on outcomes (what effective policies or practices are, and how much they actually help poor people).

In the end, we need to spend less money dispatching 11,000 donor missions to 31 aid-receiving countries each year, and more money buying stuff we want to own, much of which (and, increasingly, more of which) is made in developing countries. If we try less hard, we might do more good.

6 comments:

Julian H said...

Hello Tom,

I recently attended a talk at the International Policy Network on foreign aid. In doing some research it quickly became clear that the whole aid procedure really is not working. This is largely because the solution to the government failure that causes poverty is thought to be - governments giving money to other governments. Or (donor) governments telling (recipient) governments how to govern. Naturally neither works.

Googling "William Easterly" gives some interesting material on this, and a bloke called Chukwe-Emeka Chikezie has written comment along similar lines. The latter works for AFFORD, the African Foundation for Development.

Tom Papworth said...

Thanks, Julian.

The IPN often do lunch seminars, and as I now work on the fringes of London I can't make them. It's a shame.

If I can return the favour, I highly recommend Deepak Lal's "Poverty of Development Economics" (downloadable for free: http://www.iea.org.uk/files/upld-book68pdf?.pdf)

Julian H said...

Indeed, I have only recently discovered their lunch sessions - which are glorious, and not only for the free sandwiches.

Thanks for the pdf link, I've saved it. Btw I've linked to this blog from my blog - which could be considered kind if my blog wasn't dormant (albeit following a rather exciting birth).

Anonymous said...

ahhh liberal polemic you and your libertarian views. nice ideas and all the rest and very true about foreign aid (i'm really fed up of seeing cow adoption aid posters and such like, what these countries need are tractor factories not shovels!). However saying that it all comes down to free market capitalism is in my view rather misleading and i find it also rather patronizing and ignorant to say how well off the poorest in america are just because things used to be a lot worse 200 years ago (duh!). They may have money but it'd be intresting to see how the actuall quality of life compares. Also i would draw your attention to the fact that the state needs to intervene in order not just to reduce poverty by giving people the chance to work their way up through society (universal education and services freeing people from structural poverty) but also to make the capitalist system work (unless you think somalia could truly be called a capitalist economy). However i think your right overall, patronizing states that think they know exactly whats best for their people and force them to change their lifestyle through micro management and central planning always fail (dictatorship of the proletariat becoming dictatorship of the beurocrat). However people must have the democratic structures to enable them to redistribute wealth from richer to poorer if they want to (although this often ends badly if it simply entails punishing those who wish to be rich for no real reason). finnally i would draw your attention to the fact that the 3 or 4 real success stories of the last 50 years in poor countries becoming rich come from countries like Japan and Korea using heavy state intervention to build up their systems (with a little help from America), installing protectionist barriers (until they were capable of competition with the west) and having relatively redistributive systems of taxation. so maybe your thougts on tackling world poverty should focus more on free democracies making their own decisions to get themselves ot of poverty (with a little help from the richer nations of course) rather than forcing countries into Thactcher style free markets before they are ready like the UN, World Bank and IMF currently do?

Anonymous said...

Brilliant. We can solve poverty by buying stuff. It's that old chestnut the "trickle down" theory again, is it?

Tom Papworth said...

First anonymous,

I'm fairly sure the quality of life of the poor in America today, with their lower infant mortality and their longer life expectancy and their higher literacy rate, is far better than that of even the lower middle classes a century ago.

AS for the role of the state, I am a liberal, not an anarcho-capitalist. The state does have a role to play: it is to uphold the rule of law and protect individual liberties (including property rights). The state is not required for social mobility, and where it does have a role (education, for example) it is better off providing access rather than services (vouchers, not schools).

The key point, however, is what I infer to be your suggestion that my "thougts on tackling world poverty... focus... on... forcing countries into Thactcher style free markets before they are ready" I'm sure I'd made this pretty clear: I AM NOT TRYING TO FORCE ANYBODY. I am saying that countries that adopt free markets and liberal economic and social policies will prosper. I am not suggesting for a second that their governments should not be allowed to exercise their sovereign rights to muck it up if that is the (misguided) will of the people!



Second anonymous,

No, not trickle-down. Just trade. We spend billions subsidising our farmers so that they can produce stuff we could buy cheaper from abroad; then we spend billions assisting the poor in rural economoies that are locked out of our markets. It's just stupid.