22 October 2018

Fighting poverty is less complicated than Oxfam thinks


Oxfam thinks that Singapore is an unsuccessful economy – ranking it 149th out of 157 countries – because it has inequality. Singapore thinks that turning a fetid swamp into one of the world’s richest countries in only 80 years looks a lot like a success story.

You will, of course, picks sides in this debate. But beyond the story of an anti-poverty charity’s struggle to remain relevant in a world rapidly abolishing poverty is a deeper point about why poverty is disappearing at such great speed. Here, the weight of evidence is on the side of the neoliberal globalisers.

Paul Krugman muses on “that mysterious it” that lets poor countries become rich, and poverty rates to plummet. The technology needed to solve poverty has existed for quite some time. Some countries enjoy the benefits of that technology. Over time more countries do so, for some as yet precisely unidentified reason — by Krugman at least — thus decreasing the number of still poor places and the number of people still stuck in that poverty.

But exactly what is the “it” we must identify? One recent attempt came from Jeff Sachs. There’s a poverty trap, Sachs argues, when a place is simply so immiserated that it cannot climb out unaided. The problem with this idea was always that at some point in history, places must have escaped that trap, otherwise the planet would be stuck in poverty forever.

From Sachs’s theory we have the Millennium Village Project. Take places at the bottom, apply all the currently fashionable nostrums as to what will make them richer and not just discover – for academe knows that already – but prove to the sceptics the truth. A bit of help causes that growth take off.

Reality begged to differ. The MVP project didn’t work. The underlying concept doesn’t work either. There is no set of careful interventions we can apply. At least, the currently fashionable nostrums don’t constitute that set of successful interventions.

We should have known this because the last set didn’t either. The end of colonialism was greeted with an endless succession of more or less socialist plans for the development of the newly free – and righteously liberated – countries none of which worked. Central plans, buildings of a steel works, an international airport and a dual lane highway from the Presidential palace to the airport turned out not to be how to develop a country.

We also have more evidence from Lant Pritchett on how this poverty reduction thing works. Redistribution, whether within or between countries, doesn’t. NGO aid doesn’t. Nor does government aid.

One thing we can do is allow poor people from poor countries to immigrate into rich ones. That is a sure fire way of improving living standards. Though Pritchett is far too polite to note the problems this might cause at the receiving end. The only other poverty reduction method that works is simple economic growth.

Yes, it’s entirely true that the benefits of growth can be spread unequally, as in Singapore. The sort of reorganisation that growth requires can be uncomfortable at times. But the only thing which increases the consumption of the majority of the people – the only useful definition of a place or people becoming less poor – is that there is more produced for people to consume.

We actually end up with a tautology. Poverty is not being able to consume, we make the poor richer by their being able to consume more. The lesson is that poverty reduction requires economic growth and nothing else. Further, grand plans to achieve it don’t work, neither the steel works nor the MVP.

Our own recent experience does tell us that something does though. What is the lesson from the recent move of billions from poverty to non-poverty? Don’t have plans, just get out of the way and let those markets and capitalism do it for us.

That may be terribly unsatisfying because many of us insist that we must do something, must work to alleviate such a horror as true destitution. Or that there are rich people who must be to blame. But the truth really is that once we’ve aided with catastrophe and disaster the best is don’t do something, just stand there and allow that economic growth to happen.

Tim Worstall works for the Adam Smith Institute and the Continental Telegraph.