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Saturday, September 30, 2006


Global Solution to Poverty? Part 2

I wanted to respond not only to Sean's comments but also to a quite that I found in the link on Professors Eubanks link.
"This point bears repeating. Poverty has no causes. Wealth has causes."
I think if we are to take this quote into consideration we must go back to Olson's Logic of Collective Action. Both poverty and wealth have causes, what seperates them is the mentality of a large lantent group that finds a way to organize itself and become the upper class versus the group that see's nop reason for persuing anything beyond the bare essentials.
"A world characterized by "poverty" as we think of this term today really is the default position, or it really can be thought of as the starting point. It is the creation of wealth that means people can escape from poverty. People will make the choices that create wealth if government acts to enforce private property rights and contracts, and further if government avoids supporting predatory activities, people will prosper all that much more."
It is usally these nations that are plagued by war, disease, and the constant state of governament changing hands quite frequently that are said to live in poverty. I would have to agree that for the most part, poverty is the "default" mode for many of these types of countries. We can see several example from around the world of volital rise and decline in living standards. We can also see several countries around the world with an ever growing uneven income distribution. It is in this inequity that that the problem lies. But then we are left thinking, how do we distribute the income more evenly? By looking at the above quote we can see that it is all a problem of motivation. Within these poverty stricken countries it is nearly impossible for the comman man to own any private property without the new government in power siezing it. It is nearly impossible for the comman man to take any legal action against another because of the ever changing laws. The comman man in these countries amounts to a large latent group with neither the power or the desire to mobilize to achieve a common good. By the government supporting predatory actvites and not taking control of their nation, they are keeping their own citizens in the horrible poverty that has plagued them for centuries.
This takes us back to a recent class discussion and chapter 3 in The Rise and Decline of Nations. Olson talks about how a firm (or in this case a government) has two options when trying to obtain more wealth and income. It can either 1. enlarge the entire economic pie and therefore create for wealth for the entire society, or it can 2. choose to enlarge only it's piece of the pie. What the governments in these poverty stricken countries has choosen to do is enlarge only their share of the pie. Why? First of all because it requires less input and resources than it would to enlarge the entire pie. It is by far less costly and less of a daunting task to act rationally and only be concerned with how much you are recieving of a collective good. Second, if Olson is correct in his definition of rationality, a rational person would not want to provide a collective good for the entire society because he would get only a small part and would most likely have to put far more time and energy into achieving the collective good than a majority of the others who also recieved it. So by this logic, it is much more rational for those in control of these poverty stricken countries to act in the opposite way of what would actually benefit their people.
So how do we comabt this so called rationality? We find a new form of government for these nations. Here I would have to agree with Sean that we cannot hope to transfer our political ideals without our economic ideals as well. The only problem here is that, as the U.S. has found on a couple of occasions, is that not all other cultures support our ideals and our values. Democracy gives rise to materialism and wealth, but this is not something that all other nations value. This is why I think it is important that we keep economics and psychology close together. Further more it is impossible for those nations that have capitalism forced upon them to experiance the idealism that our nation felt when democracy and capitalism joined together. Even if we could force capitalism onto these poverty stricken nations would we really want to? Would we really want to force upon them the red tape, the beaurcracy, and the snake of corruption that has somehow become intertwined in our government? It is through these things that many dictators can take a guise of capitalism and turn it into a perverted authoritarian nation. We are potentially heaping upon these nations just another period of revolution and war.
Finding the right government to match a certain culture of people is indeed a dauting task; that is why many countries are still plagued with poverty today. They have all tried to make better lives for themselves and to oversome the opression, but without the correct form of government to provide the right incentives, all we have is several nations ending up back in their "default" mode. To borrow a few words from Olson, it will take a strong leader and the right circumstances to pull these countries out of opression. Until then they will remian in their "default" mode of poverty.

I'm not sure "finding the right government" is quite the best way to frame the questions and issues. I think we will learn in Power and Prosperity that good government is government that uses force and coercion to enforce private property rights and contracts, and that doesn't use force and coercion in predatory ways. I think we see in the economies of the world that have not prospered government that uses force and coercion in just the opposite ways. So, conceptually we know "good government" is government that does these things. But, even knowing the attributes of good government, we certainly don't automatically know how to get good government in economies that do not prosper.

I'm sure there are quite a few variations on the theme of good government. For example, is there any other government formed like ours? All good government does not have to mimic our system of political economy. But, still, the question seems to be "how to get there from here?" I wonder if we can anticipate one aspect of getting from here to there. And, that is, can we hope to get from bad government to good government without force, given that bad government is using force and coercion in ways that are predatory?
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