Posts Tagged ‘redistribution’

Do you believe poverty is worsening?

November 28, 2015

UnknownThe global population living in extreme poverty has risen in the last 20 years – indeed has almost doubled – say two-thirds of Americans in a recent survey. Nearly all the rest guessed poverty has merely stayed the same.

“Rising poverty” is a pessimist idee fixe, so ubiquitous that most folks unthinkingly consider it an obvious truism, to be sanctimoniously deplored. I have actually seen people’s eyes sparkle when talking of “rising poverty;” puffing up one’s moral vanity feels good.

Unknown-1Well, sorry to be a killjoy, but global poverty has in fact plummeted in recent decades. If world poverty were a stock, you’d have lost your shirt on it. The 95% of Americans who believe otherwise are misinformed.

This little known secret was revealed by Nicholas Kristof in a recent New York Times op-ed, citing World Bank figures: since 1993, the proportion of world population living in extreme poverty (defined as earning less than $1.00-$1.25 daily) fell by more than half, from 35% to 14%. Adding insult to injury, Kristof also noted the child death rate, before age five, dropped by more than half since 1990.* And whereas in the ‘80s only half of girls in developing countries completed elementary school, now 80% do. Literacy is rising and disease rates are falling. And so on. (Bill and Melinda Gates similarly argued in the Wall Street Journal in 2014 that pessimists are wrong and global conditions are improving markedly.)

imagesYet still there’s rising inequality, we’ve still got that for moralizing lamentation, no? Well – Kristof’s data refute that “the rich get richer and the poor get poorer.” The rich are getting richer, yes, but so are the poor, though not as fast, which does increase wealth gaps. However, globally, inequality between poor countries and rich ones is indisputably lessening, simply because the former have higher economic growth. (Even with today’s big slowdown, the Asian Development Bank projects 5.8% 2015 growth for the region, minus Japan. For advanced countries, 3% is considered sizzling.)

images-1The left, wedded to a mantra of rising poverty and inequality, is all about wealth and income redistribution to fix it. But part of why developing economies are growing faster than advanced ones, reducing the gap between them, is because wealth is in fact being redistributed from the latter to the former. This is what Trump yaps about with his China bashing. And, ironically, the left hates it too – all the whining about “shipping jobs overseas.” That redistributes wealth from richer to poorer people. Shouldn’t the left love it?

Unknown-2But of course poorer countries aren’t simply sucking our wealth away. To the contrary, a more integrated global economy with fewer artificial barriers enables goods and services to be produced where it is cheapest and most efficient, and this makes the whole world richer – including us. Cheaper production in China or India or Vietnam reduces prices for U.S. consumers (to the tune of trillions of dollars in fact), enabling more spending on other things, which stimulates job creation, making up for jobs lost. Everybody wins.

Further illuminating what is happening and why, author Ronald Bailey provided a commentary (on Reason.comon Kristof’s piece. What has enabled many developing countries to improve by taking advantage of global trade opportunities is better economic policies – in a nutshell, more economic freedom for their people to do so – phasing out dysfunctional old socialist nostrums (this is the “neoliberalism” lefties condemn). Bailey cites a 2015 Fraser Institute report giving countries economic freedom ratings, based on various measures. The 102 countries continuously rated averaged 5.31 in 1980, rising to 5.77 in 1990, 6.74 in 2000, and 6.86 in 2013.

Bailey notes that such economic freedom, and its handmaid, rule of law, tend to flourish in politically and economically stable countries. And it should be no surprise that all those conditions combine to unleash human ingenuity and enterprise, creating wealth and reducing poverty. Bailey also cited data showing that such nations tend to have markedly reduced fertility rates (thus controlling population growth), better environmental stewardship, and higher life expectancies than in more repressive and misgoverned lands.

Bailey concludes by saying that it is in “democratic capitalist countries that the air and water are becoming cleaner, forests are expanding, food is abundant, education is universal, and women’s rights respected.”

images-2Free market capitalism admittedly produces uneven results – as will any economic system – but is far better than any alternative for giving the greatest number of people the best opportunities and quality of life. The gigantic poverty reduction and welfare improvement of recent decades was not the product of socialism, but of getting away from such economic folly. And a market economy is also ethically superior because it works by increasing freedom rather than restricting it. That’s what I call social justice.

(All of this was already covered in my own very excellent 2009 book, The Case for Rational Optimism. I thank Scott Perlman for pointing me to the cited articles.)

*Meantime, Bernie Sanders saying America has the world’s highest child poverty rate is ridiculous. We measure it in relation to average U.S. incomes – which top worldwide scales. Of course child poverty is much worse in many countries that still are much poorer.

The Feckless Poor Versus the Selfish Hogs

June 10, 2013

images-2A 2012 worldwide Pew survey asked whether success is due to hard work or forces beyond one’s control. Most Brits, Germans, and Czechs agreed that success can be achieved through your own efforts. Guess who disagreed? The French, Greeks, Italians.

This is important to economic policy debates. We’ve been hearing much about inequality. Now, if you believe prosperity and hard work are correlated, you’re apt to think the best answer for inequality lies in broadening opportunities for people to be productive. images-3But if you’re in the other camp, believing success and wealth are matters of mere luck and not merit or effort, then you may favor just taking from those with more to give to those with less. (Especially if you yourself have less.)

This is indeed the mindset in countries like France, Greece, and Italy. They have simply lost sight of the connection between what’s in their wallets and someone, somewhere, somehow producing something. They march in the streets demanding to be maintained in their lifestyles, regardless.

What about the U.S.? Now here’s real American exceptionalism. Whereas Brits, at 57%, topped Europeans in linking work with success, in America it’s a whopping 77%. This strong consensus cuts across wealth classes and both political parties.

UnknownThis doesn’t mean Americans are social Darwinists who believe the poor should be left to their fate. Nor even, for that matter, do Republicans, despite insistence to the contrary by President Obama and his party. No; Americans of all stripes strongly back the social solidarity of a safety net for those less fortunate (and do recognize that Dame Fortune plays some role). But what Americans mostly do not buy into is the left’s idea of social justice a la Robin Hood, plundering the rich to benefit the poor. Americans don’t think robbery serves justice.

The Pew poll was discussed recently by The Economist’s “Lexington” columnist (who covers America and its politics). Unknown-1Comparing against Europe, Lexington opined that the heart of the Euro problem, with all the bailouts of grasshoppers by ants, is that they don’t like each other enough to make their economic union work. And, Lexington says, “America should fear the spread of the crudest poison paralyzing Europe: mutual dislike between citizens.”

In Europe, it’s regional. The Germans don’t like the Greeks and resent having to bail them out, and the Greeks resent the Germans for bailing them out. images-5In America, it’s ideological; hardened zealots demonizing opponents as motivated by evil, stymieing any compromises to address the nation’s problems.

Both parties are at fault. Republican sin is exemplified by Romney’s “47%” comment, branding almost half of Americans as unwilling to be responsible for themselves. (This in a nation where 77% believes success and hard work are linked!) images-6But Lexington considers Obama and Democrats equally guilty, stirring up division and resentment against richer people cast as selfish hogs.

You don’t have to believe wealth is ill-gotten, and should be equalized, to justify taxing the rich more than the poor and helping the less fortunate. images-1Nor must you deem them feckless and irresponsible, to justify believing that a society where the successful can enjoy wealth is a better society for everyone.