The Cure for Poverty? Wealth

Sunday, April 30, 2006

“China is lifting a million people a month out of poverty.”

It is just one statement in an interesting new book titled The Undercover Economist by Tim Harford. But it has huge implications.

I haven’t checked out the statistics, but they sound reasonable. If so, this is something worth everyone’s attention.

People on the political left make a lot of noise about poverty and advocate all sorts of programs and policies to reduce it, but they show incredibly little interest in how poverty has actually been reduced, whether in China or anywhere else.

You can bet the rent money that the left will show little or no interest in how Chinese by the millions are rising out of poverty every year. The left showed far more interest in China back when it was run by Mao in far-left fashion—and when millions of Chinese were starving.

Those of us who are not on the left ought to take a closer look at today’s China.

First of all, what does it even mean to say that “China is lifting a million people a month out of poverty”? Where would the Chinese government get the money to do that?

The only people the Chinese government can tax are mainly the people in China. A country can’t lift itself up by its own bootstraps that way. Nor has there ever been enough foreign aid to lift a million people a month out of poverty.

The only thing that can cure poverty is wealth. The Chinese acquired wealth the old-fashioned way: They created it.

After the death of Mao, government controls over the market began to relax—first tentatively, in select places and for select industries. Then, as those places and those industries began to prosper dramatically, similar relaxations of government control took place elsewhere, with similar results.

Even foreigners were allowed to come in and invest in China and sell their goods in China. But this was not just a transfer of wealth.

Foreigners did not come in to help the Chinese, but to help themselves. The only way they could benefit, and the Chinese benefit at the same time, was if more total wealth was created.

People on the political left make a lot of noise about poverty and advocate all sorts of programs and policies to reduce it, but they show incredibly little interest in how poverty has actually been reduced.

Since wealth is the only thing that can cure poverty, you might think that the left would be as obsessed with the creation of wealth as it is with the redistribution of wealth. But you would be wrong.

When it comes to lifting people out of poverty, redistribution of income has a much poorer track record than the creation of wealth. In some places, such as Zimbabwe today, attempts at a redistribution of wealth have turned out to be a redistribution of poverty.

While the creation of wealth may be more effective for enabling millions of people to rise out of poverty, it provides no special role for the political left, no puffed-up importance, no moral superiority. Redistribution is clearly better for the left.

Leftist emphasis on “the poor” proceeds as if the poor were some separate group.

But, in most Western countries, at least, millions of people who are “poor” at one period of their lives are “rich” at another—as these terms are conventionally defined.

How can that be? People tend to become more productive—create more wealth—over time, with more experience and an accumulation of skills and training.

The Chinese acquired wealth the old-fashioned way: They created it.

That is reflected in incomes that are two or three times higher in later years than at the beginning of a career. But that, too, is of little or no interest to the political left.

Ultimately, the left is about the left, not about the people it claims to want to lift out of poverty.

The content of this article is only available in the print edition.