Brian Gongol Show on WHO Radio - February 2, 2014
Podcast: Updated weekly in the wee hours of Sunday night/Monday morning. Subscribe on Stitcher, Spreaker, Apple Podcasts, Google Podcasts, or iHeartRadio
The economy as a highway
- The government funds but doesn't build
- Lanes are drawn, but latitude remains
- Easy enough for a 16-year-old to understand
- We can all go in the same direction without sharing the same destination, journey, or method of getting there
Inequality is a distraction from really fixing povertyOxfam released a report, headlining with the claim that the world's 85 wealthiest have the same total wealth as the lower half of the world. Whatever was buried in the rest of the report, it is the factoid about inequality that will stick with people most.
But the inequity is not really a failure of the rich having too much...it's a failure to capitalize on the ideas and motivation of the poor
Bill Gates in his new annual letter asks the world to stop buying into the myths of poverty. Specifically, he calls out the myths that the poor stay poor, that aid never works, and that helping save lives only causes overpopulation and worsens the problem of poverty. It's a compelling read, because those truly are unfounded myths.
Hernando de Soto: Get the rule of law and property rights into the hands of the poor, and they can stop spending time and effort trying to get around the law and get to the business of actually capitalizing on what's theirs
one of the worst things that can happen is for us to accept the notion that the poor are poor because they are lazy or because they aren't being given enough -- more often, it's because the system isn't functioning in a way that rewards the effort that they're putting in
- Poor Americans (at least the young ones) are more likely to be obese than rich ones. Causes include food deserts and cheap (but non-nutritive) calories.
- Poverty extracts a major psychological toll -- and likely a physical one, too. That toll is effectively a highly regressive tax.
- Aid alone isn't the issue abroad, nor is welfare at home the only answer
- Structures and stsysems that enhance and capitalize upon the latent skills, motivation, and intelligence of the poor
- Assuming that genius (entrepreneurial and otherwise) is evenly distributed throughout the world, then getting the world's poorest into the middle class will give us many times more access to the potential Thomas Edisons, Benjamin Franklins, and Bill Gateses who are currently held back by poverty. We need to release the anchors holding them back so those occasional geniuses can rise to the top.
We dislike cronyism of any sort -- but it's a shortcoming that's hardly exclusive to capitalism. There's a risk of cronyism in every system where political power can influence the economy. At the far extreme, you have examples like North Korea, where there's no capitalism, but where the political elite definitely eats better than the rest of the population. There's a reason why the Federal government enforces the Foreign Corrupt Practices Act. Long story short, Americans aren't allowed to bribe foreign officials in order to get business. If there hadn't been a problem -- especially in countries less politically and economically free than our own -- then there wouldn't be need for a law. So we can universally agree that cronyism -- whether it's crony capitalism, crony socialism, or even crony feudalism or mercantilism -- is a bad thing. But it's important not to throw out the baby with the bathwater and link cronyism exclusively to market-based capitalism.
Ultimately, we want people max-performing. We want people in the rich world doing the best they can with what they have, and we want the same in the middle-class countries, and in the poor countries. That's the fastest way to ensure that there are no longer poor countries -- something Bill Gates thinks is possible by 2035. That's going to be achieved, he says (and I agree), by innovation and by targeted efforts to help people at the bottom of the income scale take better advantage of their own resources (through better seed technology, for instance) to help themselves out of poverty.
The only system that really encourages people to max-perform is a market-based one.
- If you have a garden (or a farm) and you never tend to it, it turns to weeds
- If you have a car and you never maintain it, the tires go flat and the engine burns out
- If you have a drawer full of silverware and you never polish it, it goes dull
In the end, what we want to know is whether more has been created than destroyed, and whether well-being has risen for as many as possible. The sad fact is that there's a lot of cynicism about market economics. The emphasis placed by the Oxfam report on the issue of wealth concentration is a political distraction from the real question, which is whether the poor are becoming more well-off. The gap between rich and poor is not as important as the well-being of the people at the bottom of the gap in absolute terms. I prefer to use the measure of relative development over time -- that is, how close different countries are to the same condition in the United States today, or 10 years ago, or 20, or 30, or more. On a global scale, I do not care how much richer we get -- but I care very much whether billions of other people have caught up to our standards today, and if not, by how much they are behind. There will always be gaps between rich and poor, just as there will always be gaps between individuals who are tall and short, or heavy or light, or high-IQ and low-IQ. Nature doesn't give us these things in equal measure, nor do our environments treat them in the same way. But we should very much be interested in seeing as much progress as possible made in absolute terms for the largest number of people possible.