Poverty, Not Wealth, Is Unnatural

Is poverty the natural state of human affairs? Megan McArdle believes so.

A while back I had an interesting debate with Laura, of the ever-excellent Apartment 11D, on whether or not "unregulated capitalism" was good for the third world. My answer is that when we look at the third world, our heart cries out, as it should, but that doesn't mean that those in the third world are victims of anything but nature. The appalling poverty of Sri Lanka or Mozambique is not some bizarre aberration that can be tracked to a cause we can cure. We are the aberration; Sri Lanka and Mozambique are the normal state of human history. Trying to figure out how to reproduce those abnormal results in a couple hundred more countries is very, very hard. Fascinating, and unbelievably important. But tricky.

I disagree. Though our forebears lived in squalor of the ancestral environment, present-day indigence requires an altogether different explanation, as whenever and wherever people are left to their own devices to pursue their own ends, reciprocal exchange, enterprise, and financial markets arise. Increases in productivity raise the standard of living.

In third--world countries like North Korea, Zimbabwe, and Bangladesh where poverty is a constant for much of the population, it is governments unnaturally preventing voluntary relations that are to blame. The prescription for much of the third-world is for governments to get out of the way and let nature take its course. The nations of the third world don't have to reinvent the wheel. They don't have to start from scratch from hunter-gatherer level. They can instead used the accumulated wisdom - both technological and economic - of the ages. Knowledge is on their side.

Where governments have allowed markets to function and trade to exist - Singapore, South Korea, Taiwan, and more recently China and India - economies have grown and prosperity has emerged in less than a generation. It is modern poverty, not wealth, that is unnatural.


Update: Follow-up here.

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It's common for cultures to

It's common for cultures to imagine themselves the apex of humanity, putting down all that came before. I agree with Jonathan. In England in the dark ages, even the peasants lived in strong stone houses. In ancient America, the indians had things worth trading thousands of miles. The ice man of the Italian alps, though he apparently spent his whole live as a shepherd in a 40 square mile range, still had the werewithal to buy a copper axe.

Abject poverty only arises in conditions of rapid change, or when governments choke off the return to the natural equilibrium of humanity where almost everyone has the necessities to live well.

In the history of life

In the history of life poverty, or at least near poverty, must be the natural order of things. All life forms will continue to multiply until they reach the limit of their resources and environment ( a "near poverty" equivalent). It could be argued that it is mainly under the resulting conditions of species stress that natural selection was able to operate most effectively.
If one wishes to argue that the human race is sufficiently advanced to enjoy a natural state of wealth then this must surely presuppose that we have total control over our environment and over ourselves. It will be nice to reach this condition one day, but I believe that it is still a long way off.

A nitpick - Mumbai is on the

A nitpick - Mumbai is on the west coast of India, not Bangladesh.

What is Natural

What is Natural Today?
Jonathan Wilde:Where governments have allowed markets to function and trade to exist - Singapore, South Korea, Taiwan, and more recently

Interestingly enough, some

Interestingly enough, some poor schlub in Bangledesh is much poorer than our ancestors 50,000 years ago. 50,000 years ago, our ancestors had freedom to roam, the freedom to work and acquire, the freedom to kill and eat. A poor person squatting in some hovel in Mumbai has none of that, and is far poorer.

- Josh

...meaning that economic

...meaning that economic growth has been staggeringly vertical.

This demonstrates that your “oasis in the desert of time” thesis is false. The pace of growth may be faster, but it is faster at a similar rate as in the past. Increasing growth rates are perfectly natural against the context of the a million years.

Jonathan - I think the disagreement here may be over total vs. per capita GDP. Total GDP is staggeringly vertical, as it has increased with population (giving the lie to the overpopulation fearmongers). But per-capita GDP, which I suspect Will was talking about, as its most directly relevant to "poverty", has very slow growth, then some stuttering jumps, then starts to zoom during the industrial revolution.

Will - yeah, growth was slow

Will - yeah, growth was slow back then. But there are 2 reasons why that does not contradict the basic point.

First, the argument is just that people have always been getting richer. The fact that they used to be getting rich more slowly does not contradict this. Slow or not, the derivative is clearly positive - and that means that people naturally move away from poverty.

Second, if we are talking about total GDP, the percentage differences are really not that dramatic. If we are talking about per-capita GDP (which seems more relevant), we have a period of slow growth followed by a period of fast growth. While you claim that this is an anomaly, I don't see how we can know that it isn't natural.

That is, it may be normal for growth to be sluggish until some critical point is reached, at which point it explodes. One could imagine all sorts of social and technological reasons for this. Hence that slow growth in the mesolithic was absolutely necessary to get us to the agricultural revolution which was necessary to get us to the industrial revolution. I'd want to see analysis across countries of growth rates *by GDP* to see if western growth rates were truly unusual. ie are China and Latin America's growth rates at X GDP different from western growth rates at X GDP?

If this argument is true, then looking down at the slow Mesolithic growth is like looking down at the tiny investment returns of a 21-year old's 401K. Both are necessary to set up huge returns down the line.

FWIW: "Throughout history,

FWIW:
"Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded -- here and there, now and then -- are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right thinking people. Whenever this tiny minority is kept from creating or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty." -- Robert A. Heinlein, here: http://FreedomKeys.com/gap.htm

Poverty is

Poverty is unnatural
Jonathan Wilde of the admirable libertarian group blog, Catallarchy, argues that poverty, rather than wealth, is "unnatural", in as much as it is the stupidity of governments, rather than some ineradicable feature of our world, that prevents humans f...

I disagree with Jon because

I disagree with Jon because of how he separates governments as being unnatural. It is unfair to look at the commonalities among many times and places, and take some commonalities and label them natural (the power of markets, creativity, and trade) and take others and not include them (the power of despotism and regulation). Difficult though it is for us libertarians to accept, the state is clearly a natural part of the human condition. Everywhere there are people, people invent states. Hence the limitation on growth that states bring is just as natural as the growth that creativity brings.

I was not trying to imply that governments are unnatural. I realize that governments have existed, in one form or another, throughout history. I simply disagree that there is something "unnatural" about the modern, complex, division of labor economy in some parts of the world while poverty in the third world is labeled "natural".

Patri, You’re right that

Patri, You’re right that GDP has been going up forever. But, if I’m reading it right, DeLong’s estimates show that the difference in GDP in 1,000,000 BCE and 300,000 BCE is less than the difference between this year and last year (maybe even month?) Economic progress has been GLACIAL until the last millisecond of world-historical time.

If you look closely at DeLong's graphs, you will see one particular graph titled "Word Real GDP" which charts GDP from a million years ago till today. Taking DeLong's figures at face value, it is clear that GDP growth has been following a secular trend for the last million years. The appearance of the function is broadly linear on what appears to be a log-log graph; thus, on a linear plot, the appearance would a secular power law curve - an extremely steep curve (though not quite as steep as exponential curves) - of the form y = a * x ^ b. In fact, the reason engineers use log-log charts in the first place is to plot a huge range on a single graph, meaning that economic growth has been staggeringly vertical.

This demonstrates that your "oasis in the desert of time" thesis is false. The pace of growth may be faster, but it is faster at a similar rate as in the past. Increasing growth rates are perfectly natural against the context of the a million years.

But Anarchy Shiraz, I

But Anarchy Shiraz, I imagine?

Will, Jonathan, I think this

Will,

Jonathan, I think this is over-simple, though sort of sweet.

Thanks, buddy. I'm a sweet guy.

Advanced extended markets aren’t everywhere just fittin’ to bust out, if only the state weren’t bottling up all that markety goodness.

The examples I gave - Singapore, SK, Taiwan, China, and India - have demonstrated that governments which have allowed freer trade and promoted liberalized economic policies do indeed let out the markety goodness just fittin' to bust out by golly gosh darnit. North Korea and South Korea shared the same genetics, natural resources, and culture a mere 50 years ago. Today South Korea looks like an island on nighttime satellite images. Somehow, North Korea is "natural" and South Korea is "unnatural"? Baloney.

Similarly, the staggering growth of India's economy has come largely after the early 1990's economic liberalization policies.

If you think about it, it might occur to you that advanced capitalism and the nation-state historically coincide.

Ahh. That must have been the problem. I simply wasn't thinking about it. But now that I do think about it, I realize that you are arguing against a position that I never took.

If you were right, one should have seen complex extended high-growth economic orders tens of thousands of years prior to the advent of the Westphalian system of nation-states. But you don’t. Why all those hundreds of thousands of years of no economic development? Because it doesn’t come naturally. There are institutional antecedents to extended markets, and many of them are established only by states or things that look a lot like them (or developed into them).

Economic growth has been following a secular trend for all of human history. To state that there were "hundreds of thousands of years of no economic development" is wildly inaccurate.

I have always maintained that any and every political order needs "institutional antecedents" to support it. I am a fan of liberal democracies. I believe that liberal democracies allow economic growth to occur more rapidly that in non-democratic societies because they allow a more egalitarian distribution of resources in the politcal marketplace.

In any case, Megan is right. We are an aberration. The last 200 years of economic growth in the west is a bizarre, wild, off-the-charts anomaly, and you can understand nothing if you think the modern condition bears any resemblance to the human norm. Western liberal democratic capitalism has hit a kind of institutional sweet spot, and this doesn’t just spring from the earth and the natural cooperative, proto-capitalist impulses of untutored humanity. Indeed, we don’t even know for sure how it happened to us, which is the problem for development. In any case, unless one is drunk on anarchist wine, it is pretty clear from the historical record the state is involved in making capitalism go.

Again, you are arguing against something I never wrote. Look back again at the examples of countries I stated were examples of 'good' economic policies. Certainly nobody would call China a non-state, much less a democratic one. I agree with you and Jane that the current modern condition does not bear any resemblance to the human norm. But that does not make it any more unnatural than the eradication of polio. The exponential natural growth of human knowledge also plays a part in what types of societies we create. Based of the economic and empiral knowledge that we have, there is absolutely no reason to think that in the 21st century, North Korea and Bangladesh are "natural" but South Korea is "unnatural".

There is a difference betweeen steady-state and a trend; between thermodynamics and kinetics. It is very natural for human societies to learn, adapt, grow, shift, and change their underlying structure. This trend has been going on throughout history. It is the same trend that gave rise to liberal democracies and markets. There are people in the third-world who would work to produce goods for trade and raise themselves from poverty if a few basic policy changes were adapted by their governments (and those of the first world), including but not limited to getting rid of trade barriers, removing red tape obstacle from entrepreneurs, and deregulating/privatizing public industries.

And I much prefer a glass of Shiraz.

Patri, You're right that GDP

Patri, You're right that GDP has been going up forever. But, if I'm reading it right, DeLong's estimates show that the difference in GDP in 1,000,000 BCE and 300,000 BCE is less than the difference between this year and last year (maybe even month?) Economic progress has been GLACIAL until the last millisecond of world-historical time.

I think I agree with the

I think I agree with the idea that statistically speaking, we are an abnormality, but this discussion seems to be about the "natural-ness" of dictatorship or freedom. And I think that freedom is the natural state, hence our belief that certain rights such as freedom are inalienable.

Will -

"If you were right, one should have seen complex extended high-growth economic orders tens of thousands of years prior to the advent of the Westphalian system of nation-states."

"this doesn’t just spring from the earth and the natural cooperative, proto-capitalist impulses of untutored humanity"

I think these two statements are the crux of the debate. My disagreement is on whether the modern nation-state is actually more powerful than before. I think you are confusing complexity with power. Certainly the post-Westphalian states were more complex (and perhaps possessed greater external power), but I do not think they held more internal power over their citizens, which is is what I believe is correlated with freedom and economic success.

I would propose that state power has been on the decline (on average, of course) since the beginning of history. The earliest "tribes" or governments had unlimited power. There were no laws, no restrictions on their power at all. They did not simply rule their people, but in many cases were considered to be the definers of right and wrong, true and false. Some primitive societies considered them gods.

As time progressed, their power waned, sometimes due to insurrection (revolting peasants forcing them to do something), laws (the code of Hammurabi restricted the power of governments to change the law) or simple physics (society becoming too large and complex to control easily). Technology has certainly played a big part in this, with new weapons and communications giving the rebels more tools, writing enabling the objective codification of law, and transportation and agriculture enabling larger, wider communities.

I think "governmental power over citizens" is inversely related to freedom and economic success, and since governmental power has, on the average, gone down, the corresponding freedom and success has improved.

I think I agree with Scott in that the definition of natural is really what's being debated.

In the same way that sabertooth tigers and tsetse flies are natural negatives that exist in our world, so are oppressive governments "natural". We will combat these menaces in the same way we always have -- human ingenuity.

I have 2 points, one each

I have 2 points, one each disagreeing with Jane and Jon.

I disagree with Jane because the pace of progress in the world has been continuous and positive. While the high growth rates in the west since the Industrial Revolution are certainly unusual, the world's GDP has been growing for hundreds of thousands of years. And GDP growth has been speeding up too, as inventions pile on inventions, as technology gives people more time to invent more technology. If you look at poor countries today and think they aren't progressing, you are on the wrong time-scale. Try zooming out. The process of accumulating good ideas is very natural, and those good ideas reduce poverty.

I disagree with Jon because of how he separates governments as being unnatural. It is unfair to look at the commonalities among many times and places, and take some commonalities and label them natural (the power of markets, creativity, and trade) and take others and not include them (the power of despotism and regulation). Difficult though it is for us libertarians to accept, the state is *clearly* a natural part of the human condition. Everywhere there are people, people invent states. Hence the limitation on growth that states bring is just as natural as the growth that creativity brings.

Trust - who do ya? On the

Trust - who do ya?
On the surface, this seems to me to be a classic chicken/egg conundrum. Trust is necessary for the market to function well, and the market seems to produce institutions that facilitate trust...

See this post for my take on

See this post for my take on this.

Wealth is Weird I've got a

Wealth is Weird
I've got a blog post-length comment on this post by Jonathan Wilde over at Catallarchy. This is what you get today. I've got all sorts of interesting things stored up to report on ruminate about. Gruter Institute conference on the...

In any case, unless one is

In any case, unless one is drunk on anarchist wine...

*HIccUp!*

I think one problem here is the definition of the word "natural" people are using. Will seems to peg it as the most widespread, both physically and temporally, conditions. Jonathan seems to use it in the sense of "this is where people would be at this time and place, but for some obstacle preventing them." It's almost in a Thorea-esque sense. My feeling is generally that there are probably clearer ways of framing the issue.

What Will said. While I

What Will said. While I agree that a major problem in the Third World is failed states, that isn't the only problem. Advanced capitalism also requires all sorts of cultural supports, educational supports, and so forth. If you think about it, the fact that we trust random strangers we've never met to sell us food without poisoning us is pretty damn amazing. Cultural mores about things like whether it is "moral" to hire your family members, or hire strangers who are better qualified, matter. Geography matters, particularly access, at least by river, to warm water ports. It matters if most of your country is in an area where sleeping sickness is endemic, or if your country is tropical without money (or electricity) for air conditioning. Values about what the government should do matter--Germany's state isn't failed, but it's sure hurting their economy. At the behest of voters. If you live in a country that never got rich, the same sorts of political preferences could be deadly.

I think the issue here is

I think the issue here is confusing human history with human nature. Slavery was omnipresent through most of human history, does that mean slavery is a "natural" human institution? And what does the fact that mass poverty was the norm for the first 15,000 years of humanity have to do with humanity today? Is the implication that some "lucky" or "superior" peoples can "figure it out" but others are doomed for all eternity?

Hogwash.

Slavery took about two centuries to eradicate from the planet; the liberation of women about one century (not quite there yet, but almost). The stopwatch is still running for the end of despotism, gay equality, the eradication (through capitalism) of global poverty and other goals. But it's completely arbitrary and capricious to suddendly yell "time's up!" and pronounce sweeping eternal judgments on the fate of humanity based on the state of the world today.

Also, I see no discussion here of the role of autocratic religion, especially medieval Catholicism and modern Islam, in frustrating the development of the human condition. No "grand unified theory" of human history is worth anything without incorporating that.

The stifling dominance of

The stifling dominance of the State -- or Tribe or Clan or whatnot -- is the natural condition. It is liberty that is unnatural.

Hobbes, alas, had it backward. Instead of the refreshing chaos of the war of all against all, the state of nature is that of dominant authority, omnipresent society, and the cold grip of endless tradition.

Jonathan, I think this is

Jonathan, I think this is over-simple, though sort of sweet. Advanced extended markets aren't everywhere just fittin' to bust out, if only the state weren't bottling up all that markety goodness. When people are left to their own devices, they form little tribes and try to predate on each other.

If you think about it, it might occur to you that advanced capitalism and the nation-state historically coincide. This does not appear to be an accident. If you were right, one should have seen complex extended high-growth economic orders tens of thousands of years prior to the advent of the Westphalian system of nation-states. But you don't. Why all those hundreds of thousands of years of no economic development? Because it doesn't come naturally. There are institutional antecedents to extended markets, and many of them are established only by states or things that look a lot like them (or developed into them).

Think of states as bacteria. If you didn't have bacteria that aided in digestion, you'd die. But if you take in the wrong kind of bacteria, you might get an infection or die. It makes life possible and kills millions. If you don't have the right kind of state, you don't get anything resembling modern capitalism in all its glory. But if you've got the wrong kind of state, it crushes everything. The world makes much more sense if you see the possibility that the state can be a symbiote, and not just a parasite.

In any case, Megan is right. We are an aberration. The last 200 years of economic growth in the west is a bizarre, wild, off-the-charts anomaly, and you can understand nothing if you think the modern condition bears any resemblance to the human norm. Western liberal democratic capitalism has hit a kind of institutional sweet spot, and this doesn't just spring from the earth and the natural cooperative, proto-capitalist impulses of untutored humanity. Indeed, we don't even know for sure how it happened to us, which is the problem for development. In any case, unless one is drunk on anarchist wine, it is pretty clear from the historical record the state is involved in making capitalism go.

I agree with Will that the

I agree with Will that the state is necessary for capitalism, and somewhat paradoxically for liberty in general, insofar as the state protects individuals and individual choices. The chief problem with anarchy is not that it is bad, but that it is impossible. "The state" is just another name for a bunch of individuals who use violence or the threat of violence to coerce other individuals. If those individuals have a small effect, they are just called thugs. If those individuals have a large enough effect, they are called "the state". If you tear down one "state", then other individuals, as history has shown, will probably band together to form a new one. The reason why the current dominant Western idea of a state has been so successful in increasing prosperity is that its role has largely been defending individuals from violence, whether that violence is from an armed robber or from the government itself. Western governments have not moved nearly enough in this direction, and they still commit many egregious and unnecessary violent acts themselves (such as, from a libertarian point of view, anti-drug laws, wealth redistribution, and market meddling), but they are about as good as history has had to offer thus far. And without the existence of a state that values liberty and is strong enough to protect it, an illiberal state will always rise up.