14 July 2020

Less growth, more tax: the UN rapporteur’s strange recipe for poverty reduction

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Philip Alston, the UN’s Special Rapporteur on Poverty, is back again to tell us just how wrong most people are about how best to alleviate poverty.

Alston, an Australian lawyer, has form on this topic, including a recent report on the UK, which read more like the opening draft of a Ken Loach film than a serious analysis of our economic and social problems.

I’ve touched on his errors before on this site before, the most egregious of which is that he so desperately wants to be true something that just ain’t so. It is this which drives him into desperate perversions of basic logic. What Alston wants to tell us, in his final report in this UN role, is that mere economic growth isn’t the answer to poverty.

As he says in an accompanying piece in the Guardian, we’ve all accepted a “highly misleading” narrative about poverty. First, it is attributed to economic growth, justifying a “pro-growth” agenda,” he complains. From a certain point of view this is true, of course, for it is known what produces economic growth – capitalism and free markets. As those two are to be abhorred then they cannot be the solution to anything, QED. All that remains is to misdirect matters until this can be shown to casuistic satisfaction and the job is done.   

One method Alston uses is to move the goalposts to claim that poverty isn’t really falling at all. He does this by stating that the World Bank $1.90 a day isn’t all that much of a target and therefore reaching that, as so many have done in recent decades, isn’t dealing with poverty.

It is indeed a low baseline, but there’s good reason to use it. That $1.90 a day is, about and -ish, equivalent to a GDP of $600 to $800 per capita. Which has been the modal experience of humanity over our entire existence. This is what history was, as the Reverend Malthus pointed out. Any time matters improved – the weather, technology, new crops – then more survived childhood and in time there was no rise in living standards, simply more people living at that same old standard. This was true of Ur of the Chaldees, the Roman, Aztec and Chinese Empires, was true of everywhere until the Reverend sat down to write. What changed matters was the Industrial Revolution, itself a product of markets and capitalism.

Which is why that target is used. It’s about the level at which it is possible – just – to survive long enough to produce children to repeat the cycle. Exactly why it was that baseline of Malthusian growth. There’s no point in using a lower target as below this level the population – eventually – disappears. It’s also the very thing to be striven against by that trick of having an economy which increases living standards. That growth, that is, that Alston so desperately wants to portray as not beating poverty.

He’s also plain wrong to claim that the decline in absolute poverty from 1.9 billion people in 1990 to 735 million in 2015 is “due to rising incomes in a single country China”. In fact, China had largely hit the target by 2000, and the reduction since then has been in other places, not least India. Even if China were responsible for the fall in absolute poverty, it would still be impressive of course.  Just look how much reduction in poverty is gained from the abandonment of Maoist idiocy and the adoption of markets and profits.

Now, many people have argued, as Alston does, that the $1.90 is not ambitious enough. That’s certainly understandable – we’d all like everyone to be as rich, fat and happy as we are in the richest, fattest and happiest nations. But what those nations tend to have in common is very high living standards driven by consistent levels of economic growth. Clearly some countries have quiet a way to go on that path, but journeys start with a single step, after all. As an interim target at least, there’s nothing wrong with lifting as many people as possible off the subsistence level represented by the $1.90 a day target. It’s only once that has been accomplished that we can look to more ambitious targets of consumption and human flourishing.

But rather than more growth, what Mr Alston wants is more redistribution, more ‘tax justice’ and the like – with governments essentially dealing with all the worlds iniquities at a stroke. The idea that neoliberalism might actually work is rejected with an almost visceral disgust, despite all the many examples – from South Korea to the former eastern bloc – of countries moving from poverty to prosperity by embracing a market economy.

Then again, I’m not even sure Alston understands what economic growth actually is. In one part of his report, for instance, he notes that:

“In too many cases, the promised benefits of growth either don’t materialize or aren’t shared. Countries that experience resource booms often don’t see benefits outside that sector.”

This is hardly news to anyone who has studied economics. It’s not the discovery of oil, or copper, that makes a place rich or Russians would be among the world’s wealthiest people, which they emphatically are not. Indeed, abundance of a particular resource can actually result in mass poverty – the ‘Dutch Disease’ of which Venezuela is the most obvious and tragic recent example. 

What does make countries rich is the division and specialisation of labour, the application and invention of technology and so on – usually underpinned by free markets and the rule of law – these are precisely the things promoted by the neoliberalism that the likes of Alston are so keen to criticise.

If it were merely that the man from the UN were wrong well, tant pis. But the fact someone with such basic misconceptions wants to foist his prejudices and misunderstandings on the world, promoting the kind of policies that will leave millions in poverty, is altogether less forgiveable.

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

Columns are the author's own opinion and do not necessarily reflect the views of CapX.