Bleeding hearts need hard heads

John Edwards is starting a center to study alleviating poverty. Don Boudreaux points out that it's impossible - we've eliminated absolute poverty in the US already, leaving only relative poverty. But 20% of the country will always be in the bottom quintile of income, hence relative poverty, with its constantly shifting definition for "poor", can never be truly solved.

What if the goal was revised? For example, some might argue that while everyone is getting richer, some are getting richer faster than others. Why shouldn't egalitarians direct their efforts to those at the bottom, the current poorest? But our lack of absolute poverty compared to the rest of the world makes this an ignoble goal. Our current "poorest" live in a state that a significant fraction of the world would be delighted to attain. While a truly compassionate soul would focus on those truly in need, these faux-bleeding hearts are merely helping the least rich get richer.

In the interests of those yet to be uplifted to the ranks of nations where "poverty" means having to accept free food from a soup kitchen or church, lets briefly review how countries increase their wealth. The first necessary factor, as aptly demonstrated by Hernando de Soto, is secure property rights and institutions to protect them. The second ingredient won't surprise the libertarians in the audience - its low government spending.

The following graphs are an excellent antidote to the leftist economists who claim that governments provide net value by solving public goods problems and making up for market failure, or liberals who insist that government spending on health care and education has positive externalities which more than make up for its cost. The source is The Scope of Government and the Wealth of Nations[1], and it demonstrates that the benefits of government, if they exist, are certainly not measured in terms of GDP:

Graph of government spending vs. GDP growth
Bar graph of government spending vs. GDP growth

Why do Democrats work to expand government at home in a fruitless attempt to solve the inevitable phenomenon of relative poverty? A true bleeding heart should follow his head, work to establish property rights and shrink government in poor countries, and thus cure absolute poverty. One might even argue that the main difference between libertarian and leftist activists, if acting rationally, would merely be whether they try to shrink government in their own country or in the third world. And if that's ever the split between us, well, I won't feel split at all.

This is a good example of why I firmly believe that our mission should not be to argue the left away from their ends, but educate them away from their means.

[1] Gwartney, J. Holcombe, R. and Lawson, R. (1998) " The Scope of Government and the Wealth of Nations" The CATO Journal vol 18 (2); pp 163-190. PDF

Share this

Ah, he proposes secure

Ah, he proposes secure property rights and low government spending. But what if the two are correlated? What if you can't have secure property rights without a certain degree of government spending, which might be considered "high"?

Educate, hell. Deny them

Educate, hell.

Deny them their means.

It is difficult to imagine

It is difficult to imagine that some poor person from another part of the world would wish to trade places with, say a woman who had to flee an abusive relationship with her children and finds herself living in a car or a box in an alley. Anything can, and does happen to them in such a situation.

There are agencies, and shelters, I know this -- but there often aren't enough. Even the soup kitchens run out of food.

I'm afraid I'm not grasping what it is that your graphs are supposed to educate me on.

--Diana

Actually, if you look at a

Actually, if you look at a larger sampling of countries in the world a plot of government spending on the horizontal axis and GDP growth on the vertical reveals an inverted U shape. Those countries with abnormally low government expenditures also suffer from low growth.

Now there are obviously other factors at work. But raw correlations are rarely as neat and clean as you present them.

You recomend working to

You recomend working to decrease the role of government in poor countries. However, it is exactly in some of those poor countries where the correlation becomes the inverse of the one you described. If you can't keep the peace, you can't have economic growth. These countries need more government revenue to fund the police power in order to establish a capitalist economy.

A quick glance at your charts, which report statistics from OECD nations, should lead one to question your recommendations for poor countries. Indeed, looking at other evidence, the path of action that you decided upon should be rejected.

As to Jacob, I believe the

As to Jacob, I believe the issues you have with Patri's suggestions are answered in the actual study he cited above. I only skimmed over it, but there seemed to be some theoretical suggestion of what government functions produce growth and those which inhibit it, shored by the available statistics.

The amount of government

The amount of government spending needed to secure property rights will be significantly higher as a percentage of GDP in poor countries versus rich countries.

Says who?

The amount of government

The amount of government spending needed to secure property rights will be significantly higher as a percentage of GDP in poor countries versus rich countries.

Also, it may only be that Patri's correlation holds true after a government starts producing non-public goods, but that it is the oppostie when they produce public goods such as roads, schools, and millitary.

Ah, he proposes secure

Ah, he proposes secure property rights and low government spending. But what if the two are correlated? What if you can’t have secure property rights without a certain degree of government spending, which might be considered “high"?

Do you think that when a government spends 40% of GDP, it is merely securing property rights? 50%? 60%?

Certainly that's something

Certainly that's something that can be empirically studied--as it stands, it looks like a great deal of government expenditure has little to do with securing property rights.