Sunday, July 17, 2011
By Paul Jacob
Can you name five formerly poor countries that have grown rich through wealth transfers from more economically advanced nations?
No? Okay, then just name one.
Still stumped? As you probably suspect, not a single nation has ever grown wealthy by way of financial handouts from other, more well-to-do societies. That's worth remembering when we consider how best to pull people out of poverty.
Last week, the United Nations issued a report on its Millennium Development Goals (or MDGs, for short). One important goal is to "eradicate extreme poverty and hunger," with a chief target being to cut in half the proportion of the world's people whose income is less than $1.25 a day by 2015.
According to an article in the Vancouver Sun, The Millennium Development Goals Report 2011 "grudgingly admits" that "wealth creation and not wealth redistribution is the main driver behind reduced levels of extreme poverty around the world." Seems most of this very welcome decline has occurred in East Asia (mainly China) and in India -- areas benefitting not from foreign aid but from massive economic growth.
The findings released by the UN's Economic and Social Affairs Department show that the percentage of Chinese citizens living on $1.25 a day or less has already been reduced by more than half -- from 60 percent to just 16 percent. The report goes on to state, "The fastest growth and sharpest reductions in poverty continue to be found in Eastern Asia, particularly in China, where the poverty rate is expected to fall to under five per cent by 2015."
India's economic expansion has also had a major impact on alleviating world levels for poverty and hunger. "In that country," the document says, "poverty rates are projected to fall from 51 per cent in 1990 to about 22 per cent in 2015."
On the other hand, sub-Saharan Africa receives the largest amount of the world's overseas development aid, per capita, yet those living there in extreme poverty dropped only modestly between 1990 and 2005, from 58 percent to 51 percent.
But to Ban Ki-moon, the UN's Secretary-General, the success of homegrown economic growth means simply that, "Already, the MDGs have helped lift millions out of poverty." Shazam!
And what to make of the lackluster track record of development aid?
Secretary-General Ban and those running the United Nations continue to push for increased wealth transfers from richer to poorer nations. In 2010, wealthier countries gave $129 billion in aid. The MDG report argues this is far short of the money that should be shifted each year from rich to poor nations.
If those making a lifelong living off redistributing wealth can so cavalierly ignore their own statistics, they'll have little trouble ignoring a lifetime of work by Peter Bauer in development economics. Bauer argued that legitimate investment, rather than foreign aid, would flow in ample amounts to countries with a safe and productive climate for business.
"Development aid is . . . not necessary to rescue poor societies from a vicious circle of poverty," Bauer found. "Indeed it is far more likely to keep them in that state."
Still, another UN report issued last week provides a different rationale for taking money from rich countries to give to poor ones. The World Economic and Social Survey 2011 called for "investment" of $72 trillion over the next four decades, much of it in green technology, with most of it going to developing countries. That's five times the U.S. annual GDP of $14.7 trillion.
Animating this report is the convenient notion that the world's wealthier, industrialized nations owe a "climate debt" to less developed nations. Ottmar Edenhofer, the German co-chair of one of the working groups of the UN's Intergovernmental Panel on Climate Change, explained:
[D]eveloped countries have basically expropriated the atmosphere of the world community. But one must say clearly that we redistribute de facto the world's wealth by climate policy. Obviously, the owners of coal and oil will not be enthusiastic about this.
Neither should buyers of coal and oil. Or anyone else, since these two energy sources undergird so much of modern life and progress.
And progress -- material progress -- matters. Poverty is reduced through economic growth, not through redistributing wealth from rich to poor countries.
So of course the United Nations intends to ignore the policies that lead to economic expansion -- stable rule of law, property rights, minimal government interference in normal work and trade -- and concentrate, instead, on dramatically increasing redistribution.
Posted by Brett at 3:13 PM