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Source link: http://archive.mises.org/8783/blog-action-day-poverty/

Blog Action Day: Poverty

October 15, 2008 by

Today is “Blog Action Day;” here’s an apparent mission statement from the official website:

“Today thousands of bloggers will unite to discuss a single issue–poverty. We aim to raise awareness, initiate action and to shake the web!”

I’ve been telling people for weeks that economists are the wet blankets of the world, so keeping this in mind I thought I would offer a few ideas about what we can do to reduce poverty around the world.

1. Free Trade and Open Borders. Let’s open the borders to trade with anyone and everyone without strings attached. Economist Lant Pritchett argues that open immigration is one of the most effective ways we can improve the plight of the world’s poor. One of the principles of economics is that there are gains from exchange, and these gains from exchange do not stop at international borders. Stopping trade at gunpoint enriches special interests, but it oppresses the poor.

2. Competition in Education. Competition encourages innovation and leads to better educational outcomes. Affluent suburban schools and private schools have to compete with one another because the students they serve are mobile, but the geographic immobility of urban students gives large urban schools a lot of monopoly power. For example, a relatively affluent family in the Memphis area could choose where they live based on school quality and thus can choose between schools in Germantown, Bartlett, Southaven, Marion, Cordova, or any of the region’s private schools. A poor family in the Memphis city limits can choose from…Memphis City Schools. And that’s about it.

3. If you’re criticizing a “sweatshop,” make sure you have a good reason for it–i.e., criticize a sweatshop if it is actually enslaving people, committing fraud, or something like that and not because it pays “low wages” or offers lousy working conditions. Most of us in the developed world would recoil in horror at the idea of working in a “sweatshop” for pitifully low wages and in relatively unsafe working conditions. That is because we have better options. Many people around the world, however, are not so fortunate, and their working conditions have roused the indignation and anger of many around the world. These sweatshops are better than poor workers’ next-best options, which is always a job that offers either lower wages or worse working conditions. In the case of some laid-off child workers in Bangladesh, the next best alternative was prostitution or starvation. Economists Benjamin Powell and David Skarbek have studied sweatshop wages and conditions around the world and have found that sweatshops usually offer higher wages and better working conditions than average for the countries in which they operate. The road out of poverty can be long and arduous, and closing off opportunities for the very poor only makes that road more difficult to travel.

4. If you’re criticizing Wal-Mart, criticize them for the right reasons (like their aggressive pursuit of local government subsidies). I’ve studied Wal-Mart at some length, and I think the company gets a bum rap. In their book The Wal-Mart Revolution, Richard Vedder and Wendell Cox report an admittedly back-of-the-envelope calculation that the social saving from Wal-Mart is roughly 5% of US GDP–in percentage terms, that’s roughly the same impact as railroads in the nineteenth century. Even if their estimate is twice as large as the real effect, 2.5% of GDP is roughly a year’s worth of economic growth. Economists Jerry Hausman and Ephraim Leibtag have argued that the benefits of Wal-Mart’s policy of “Every Day Low Prices” have accrued disproportionately to poor households. If you want to alleviate poverty, protesting Wal-Mart isn’t the way to do it.

5. Protest less, produce more. Economics Nobel Laureate Robert Lucas has argued that no society ever got rich by redistributing resources. Production alleviates poverty. Carrying a sign, shouting slogans, and chucking a brick through the window of a Starbucks might feel great, but at the end of the day it either accomplishes little or hurts exactly the people the protestors are trying to help. Informed dissent is critical to the health of a free society; uninformed dissent, however, can be grotesquely destructive. I stress that it is very important and certainly noble to fight for those whose voices are silenced by oppression and coercion, but we have to be very careful about what we fight for and what we fight against. Voluntary exchange is not a human rights violation, and treating it as such has led to horrific consequences.

6. Drug Approval Denationalization. Here’s Dan Klein.

7. Look for private rather than political solutions. While I harbor no rose-tinted illusions about the unfettered marketplace producing utopia, I’m very skeptical of trying to use government to control it. Evil will always be with us, but I agree with George Washington: government is not eloquence, beauty, or poetry. Government is force, and it will tend to be co-opted by the special interests, for the special interests, and of the special interests. Experimenting with voluntary solutions like cruelty-free, fair-trade, and “green” certifications might be far more effective than agitating for more government policy.

Cross-posted at The Mises Blog, The Beacon, Division of Labour, Lifehack.org.

{ 18 comments }

Jeffrey Tucker October 15, 2008 at 4:55 pm

All excellent points but a couple of provisos. The immigration point about economics is sound but very much complicated by politics: the welfare state, voter registration drives, guaranteed educational rights, tax-funded infrastructure strains and others issues are not illusory and produce backlashes among the overtaxed for a reason.

As for school choice, this is really a local matter and is very much complicated by the extent to which school funding is paid for out of property taxes and tied geographically to home prices. In any case, changes in who can hop school zones is really a decision about the management of public property that has nothing to do with free enterprise as such. A free enterprise solution would be to privatize the schools, and let them include or exclude whomever they wants on whatever basis they want.

P.M.Lawrence October 15, 2008 at 8:09 pm

‘If you’re criticizing a “sweatshop,” make sure you have a good reason for it–i.e., criticize a sweatshop if it is actually enslaving people, committing fraud, or something like that and not because it pays “low wages” or offers lousy working conditions’.

If that “i.e.” (“in other words”) had only been an “e.g.” (for instance”), that would have been right. As it is, it’s wrong because it leaves out a very common case: the sweatshops themselves aren’t doing that sort of thing, but the local kleptocrats are, and the sweatshops are what gives the kleptocrats an incentive for it, through the kickbacks, taxes, dispossessions/evictions of peasants so their land can be sold to the sweatshops, and so on that they provide. The sweatshop managers on the spot know this full well, and it’s only wilful ignorance of the globalising owners that keeps them from knowing it too. How common was a case like “…[for] some laid-off child workers in Bangladesh, the next best alternative was prostitution or starvation” in the days when outside interests hadn’t taken up local resources, like turning land and water resources over to factory or cash crop use? It still happened, but rather less (British understatement there).

As it happens, factories are usually much less harmful that way than cash crops, even so called “fair trade” versions, because “fair trade” only helps those locals who still have a stake in it. It hurts those who were squeezed off subsistence plots, both by forcing them to race to the bottom for paid work in the cash economy (the “Iron Law of Wages”) and by bidding up the local price of staples because of a reduced supply. With factories, there would be almost no problem if it weren’t for the kleptocrats putting on the squeeze.

KY Leong October 15, 2008 at 11:08 pm

“Most of us in the developed world would recoil in horror at the idea of working in a “sweatshop” for pitifully low wages and in relatively unsafe working conditions. That is because we have better options…”

We have better (& more) options because of the thrift and entreprise of our forefathers, who patiently and diligently built up the huge capital structure upon which we now draw our economic wellbeing, and that which the state is constantly trying to distort/dismantle/destroy. If we are not careful we just might well end up back in the sweatshops ourselves soon.

Brent October 16, 2008 at 12:37 am

Unfortunately, I’d say 99% of the population wouldn’t have a clue what you’re saying, Art. Worse yet, I’d say a majority of people believe that government could “end poverty” if only government “really tried hard”.

Peter July 23, 2010 at 5:44 am

Certainly they could. They wouldn’t even have to try hard. They have plenty of nukes.

Lyons October 16, 2008 at 11:36 am

I’ve often suspected that Wal-Mart — and all big boxes — couldn’t exist without federal subsidies of transportation. That is, without government paying for the roads and airports to get cheap crap from China to Main St., it wouldn’t be cost-effective, and local mom-and-pops would thrive.

My point? If you hate Wal-Mart, big boxes, suburbanization, etc., blame Uncle Sam.

Michael A. Clem October 16, 2008 at 1:23 pm

Good points, especially about sweatshops and Wal-Mart. I suspect that Wal-Mart became the target that it is simply because they became the largest retailer. Worse, I suspect Wal-Mart of doing truly bad things simply because they’ve already been accused of them and have nothing to lose by not doing them–that is, accusing Wal-Mart of evil has become a self-fulfilling prophecy.

Peter October 16, 2008 at 9:56 pm

I’ve often suspected that Wal-Mart — and all big boxes — couldn’t exist without federal subsidies of transportation
So government can provide transportation cheaper than the market? That would be a good argument for government…though I’m disinclined to believe it. What else can government provide cheaper than the market, pray tell?

P.M.Lawrence October 16, 2008 at 10:08 pm

Peter, you’ve misread that. By subsidising transport, it becomes cheaper to the user, not cheaper in total cost; it’s making someone else carry part of the true cost. Your mocking is precisely the reasoning of statists who think that if they intervene to make things have lower prices, they really are helping make things cost less.

Peter October 17, 2008 at 12:56 am

But the claim is that it’s cheaper for Wal-Mart. That might be true if roads were funded out of general taxation, but that’s not the case: taxes on fuel hit WalMart as hard as any other user, and road charges (per mile) for commercial vehicles hit WalMart but not you and me (private citizens) – WalMart is subsidizing our use of roads, not the other way around. The total cost of roads, and thus the cost to WalMart would almost certainly come down in a free market.

M E Hoffer October 18, 2008 at 2:59 am

Peter,

There are many studies that support the idea that, while ‘Trucks’ do pay road usage and fuel taxes/fees, their damage to said roads is hardly recompensed.

see: In 1991, the late Bobby Green, who was then Director of ODOT, explained it this way: “The Department (ODOT) and the Federal Highway Administration believe the trucking industry should pay the costs of the damages its heavy trucks cause to the state’s highways, roads and streets. The industry has never paid its fair share of such costs, leaving the lion’s share to the average taxpaying motorists who are imperiled by sharing the roadways they support with the heavy trucks they must also support…”

“As a result of the continual increases in truck sizes and weights, as well as the phenomenal growth in the numbers of heavy trucks using these major routes (a 38% increase between 1980 and 1990), Oklahoma’s highway facilities are deteriorating at a rate which exceeds our financial capacity to replace or even repair them.”
from this advocacy group:
http://advancedtransport.org/Articles/1125.htm

past that, amazingly, point #4 misses point #3.
WMT is a huge ‘employer’ of Slave labor, partnered w/ The People’s Army in the PROC, among other unsavory outfits..
see:
http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=walmart+slave+labor

you know, it really amazing to see this article, I was just thinking, to myself, earlier this evening, “ya know I really love those guys (LvMI), I just can’t believe they’re so willing to give WMT such a pass..” I guess you can file it under: Ripley’s.

cheritycall October 27, 2008 at 3:13 am

Hello, Do something to help those hungry people in Africa and India,
I added this blog about this subject:
in http://tinyurl.com/5hu74e

D. Frank Robinson March 16, 2010 at 12:03 am

The Interstate Highway system was originally sold as a national security infrastructure so we could move troops and weapons around quickly and cheaply. It was a corporate boondoggle. Eisenhower may have eventually realized he had been snookered, but it was too late. Someone perhaps will explain why the railroads fell out of favor with Wall Street and corporate America. Of course, the rationale was used for railroads in their early days, but I am curious why one cartel was mostly abandoned to create another. Did it have anything to do railroads not using enough oil?

Telpeurion March 16, 2010 at 4:03 pm

Eisenhower saw the effectiveness of the Deustch Autobahn.

website June 21, 2010 at 3:09 am

The industry has never paid its fair share of such costs, leaving the lion’s share to the average taxpaying motorists who are imperiled by sharing the roadways they support with the heavy trucks they must also support…

talkpc June 21, 2010 at 3:15 am

How many wars did we enter? Clinton is a moron. Didn’t you just hear him say that the bill doesn’t do enough because it includes too much tax breaks! He said there are hundreds of studies that say tax breaks don’t help an economy.

BioTube September 14, 2010 at 10:12 pm

And how many of them were done by Marx, Karl?

eoccupywallstreet November 19, 2011 at 12:16 pm

They help the economy much in the same way a credit card helps someone pay their bills.

If they don’t produce more than they spend, eventually, the bill becomes due.

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