Reducing Poverty and Saving the Poor

My favorite person and big thinker discovered over the last couple of years has to be Deirdre McCloskey. The clear and convincing manner in which she writes as well as the almost inhuman way in which she has command of economics, literature, history, philosophy, religion, sociology, to name but a mere few, makes her defense of free markets, open societies, equality of the law and opportunity (as opposed to equality of outcomes) palpable and a tremendous delight to read. I have posted elsewhere detailing some of the key ideas in her latest book, Bourgeois Equality, but for those who want a Cliff’s Notes version, fortunately McCloskey has provided it in the form of a New York Times op-ed in what Economist Dan Mitchell has called “the most compelling article of 2016” in his International Liberty blog.

McCloskey provides a helpful reminder that growth and lifting people out of poverty, not inequality per se, is what our focus should be on:

….will we really help the poor by focusing on inequality?

Anthony Trollope, the great English novelist, gave an answer in “Phineas Finn” in 1867. His liberal heroine suggests that “making men and women all equal” was “the gist of our political theory.” No, replies her radical and more farseeing friend, “equality is an ugly word, and frightens.” A good person, he declares, should rather “assist in lifting up those below him.” Eliminate poverty, and let the distribution of wealth work.

Economic growth has been accomplishing exactly that since 1800. Equality in the most important matters has increased steadily, through lifting up the wretched of the earth. The enrichment in fundamentals for the poor matters far more in the scheme of things than the acquisition of more Rolexes by the rich.

What matters ethically is that the poor have a roof over their heads and enough to eat, and the opportunity to read and vote and get equal treatment by the police and courts. Enforcing the Voting Rights Act matters. Restraining police violence matters. Equalizing possession of Rolexes does not.

Going further, McCloskey explains the futility of the focus on equality of outcomes:

A practical objection to focusing on economic equality is that we cannot actually achieve it, not in a big society, not in a just and sensible way. Dividing up a pizza among friends can be done equitably, to be sure. But equality beyond the basics in consumption and in political rights isn’t possible in a specialized and dynamic economy. Cutting down the tall poppies uses violence for the cut. And you need to know exactly which poppies to cut. Trusting a government of self-interested people to know how to redistribute ethically is naïve.

Another problem is that the cutting reduces the size of the crop. We need to allow for rewards that tell the economy to increase the activity earning them. If a brain surgeon and a taxi driver earn the same amount, we won’t have enough brain surgeons. Why bother? An all-wise central plan could force the right people into the right jobs. But such a solution, like much of the case for a compelled equality, is violent and magical. The magic has been tried, in Stalin’s Russia and Mao’s China. So has the violence.

From there, McCloskey draws a creative conclusion on why people are sentimental and psychologically drawn to socialism. She observes that people make connections about central planning and sharing learned in the home and from there taking an illogical leap that government enforced sharing is therefore of the same moral equivalence.

Many of us share socialism in sentiment, if only because we grew up in loving families with Mom as the central planner. Sharing works just fine in a loving household. But it is not how grown-ups get stuff in a liberal society. Free adults get what they need by working to make goods and services for other people, and then exchanging them voluntarily. They don’t get them by slicing up manna from Mother Nature in a zero-sum world.

McCloskey lands with the defense of and the superiority of the classical liberal model:

It is growth from exchange-tested betterment, not compelled or voluntary charity, that solves the problem of poverty. In South Korea, economic growth has increased the income of the poorest by a factor of 30 times real 1953 income. Which do we want, a small one-time (though envy-and-anger-satisfying) extraction from the rich, or a free society of betterment, one that lifts up the poor by gigantic amounts?

We had better focus directly on the equality that we actually want and can achieve, which is equality of social dignity and equality before the law. Liberal equality, as against the socialist equality of enforced redistribution, eliminates the worst of poverty. It has done so spectacularly in Britain and Singapore and Botswana. More needs to be done, yes. Namely, more growth, which is sensitive to environmental limits and will require a proliferation of rich engineers. Let them have their money from devising carbon-fixing techniques and new sources of energy. It will enrich all of us.

To borrow from the heroes of my youth, Marx and Engels: Working people of all countries unite! You have nothing to lose but stagnation! Demand exchange-tested betterment in a liberal society.

Some dare call it capitalism.

While 2016 was indeed a bleak year for classical liberals, represented largely by the political success of the unfrotunate combination of economic populism and economic nationalism/protectionism, McCloskey’s article represents the ideal of a well-articulated defense of classical liberalism/libertarianism that are extemely important – now more so than ever.

“The Silly and Harmful Drug War”

Economist Dan Mitchell captures my sentiments precisely on the issue of the illegalizatoin and prosecution of drug offenders in a recent blog post. His introduction is a succinct summary that I align with:

I’m not a fan of the War on Drugs, even though I’m personally very socially conservative on the use of drugs. Regardless of my individual preferences, I recognize that prohibition gives government the power to trample our rights, that it is borderline (if not over-the-line) racist, and that it leads to horrible injustices.

I’d much prefer for law enforcement resources be allocated to fighting crimes that actually have victims.

Mitchell then goes on to describe how drug illegalization is not only expensive, it is economically counter-productive. Expanding on this, my own additional thoughts on the matter is focused on the strain of social conservatism that opposes drug legalization strictly on moral grounds, which makes it philosophically impossible for them to support legalization as any sort of priority. My counter argument is that there is moral logic to overturning current illegalization approaches that should allow even social conservatives to not have to look at their shoes when professing support for drug legalization. This does not have to be translated into support for the idea for drug use per se, think of it as more of an endorsement in support of compassion for those who get trapped in a cycle of addiction and further support of policies that are actually more effective at getting them out of that cycle. Additionally, think of it as defense of individual liberty and freedom when individual choices do not cause others harm. True crimes and prosecutions should have a victim. In my opinion, the potential and evident harm of power ceded to the government to prosecute this issue is far more problematic than actions of individual choices made by drug users. It is clear from decades of experience that to criminalize drug users’ behavior through aggressive use of the justice system is not only tremendously expensive, it is inhumane and places people into a spiral of poverty, recidivism, and subjugates people guilty of what ultimately amount to minor offenses against society into a prison system that is a veritable petri dish for spawning more malignant forms of lifelong crime.

To put it bluntly, I would submit that there is an inherent immorality in stances that support locking up people for years over drug use and immorality in policies that ultimately support and enrich murderous drug gangs that benefit from inflated drug prices that criminalization fosters. Would it not be far better to spend our justice system and prison dollars on actual hardened criminals rather than locking up drug offenders, a policy which tends to turn more benign people in need of charity and help into the very hardened criminals we are presumably seeking to numerically reduce?

If we want a role for the state in combating drug use, we should spend it on abstinence, mental health, and drug recovery and rehab programs that are far more compassionate and effective as well as less prone to creating hardened criminals who are much more difficult to redeem later on. An added bonus is that this approach is less costly and less prone to creating government abuses.

Government dysfunction so blatant even a progressive calls it out

I’m a progressive, but it seems plausible to wonder if  government can build a nation abroad, fight social decay, run schools, mandate the design of cars, run health insurance exchanges, or set proper sexual harassment policies on college campuses, if it can’t even fix a 232-foot bridge competently. Waiting in traffic over the Anderson Bridge, I’ve empathized with the two-thirds of Americans who distrust government. – Larry Summers

In one of my favorite blogs, Grumpy Economist, economist John Cochrane rather gleefully points to a recent frank admission by Larry Summers in his awakening to the validity of points made by conservatives and libertarians of their distrust of big government takeovers of massive swaths of the economy. This soft mea culpa was induced by his front-row seat to the dysfunction and multi-year long ineptitude and inability to repair a dilapidated bridge.

It isn’t that all of us of the limited government bent are reflexively loathing of government involvement in its properly limited spheres, of which infrastructure would presumably be one. I was in the Army after all, and I hardly advocate for privately paid and financed militias ala Hezbollah. It is just that there is rightfully a great amount of skepticism that funds taken and crowded out from the private sphere will be invested wisely or effectively in the public sphere given all that we have witnessed in America in the last few decades.

What is a sweatshop? Should they not exist?

**FILE**Workers at a Nike factory on the outskirts of Ho Chi Minh City, Vietnam, assemble shoes in this Oct. 10, 2000, file photo. Michigan State, among many schools with sponsorship agreements with Nike and the school will have senior associate athletic director Mark Hollis joining Nike officials for an upcoming tour of manufacturing facilities in Vietnam and China. (AP Photo/Richard Vogel)

The fundamental question on the existence and morality of sweatshops through this podcast, as presented by Economist Ben Powell, who is located in my hometown of Lubbock, Texas at the Free Market Institute of Texas Tech University and happens to be a friend of a friend, provides a thought provoking view of sweatshops and whether we should focus our philanthropic energies on shutting them down, demanding higher wages and better workplace conditions, and/or boycotting the goods produced out of sweatshops. One would expect an economist to point out the unintended consequences of utopian decisions we would like to impose. Powell does a remarkable job of distilling economic frameworks such as price theory and immigration to their reducible and translatable components so that even the layman can enjoy and learn from them, hence my pitch to my friends and followers to give it a listen since one can rarely find economics topics presented with such clarity for the non-economist.

One of the chief insights in the podcast is that we must not fail to keep philosophy (in this case, perhaps we should call it humanism) from a connection to economics when evaluating policy and what we advocate for and support. While those of us in the West might get tremendously squeamish about sweatshop conditions and profess a knee-jerk reaction that of course they should be shut down (our humanism instincts), we must consider the unintended consequences of what would happen if we could in fact enact our plans. Economics + Philosophy must guide our knowledge, thoughts, and responses to such issues.  This ultimately forces us to consider what the next best alternative of the sweatshop worker is and to more critically examine why the individual chooses employment there. It must be stated that nobody should support slave labor, so let’s put that red herring to rest since in the vast majority of cases individuals choose to work in these factories that we in the West would admittedly deem abhorrent conditions. Thus, there is in fact an element of localized choice in these cases that we must consider. The great challenge and the deeper level to focus on is the fact that the overall range of employment options for these individuals is remarkably poor and sweatshops likely offer the best alternative on hand for them to be able to feed themselves and their families. In essence, the choice can often be working in a sweatshop or working in subsistence farming, which often offers far less money and far more grueling conditions, nor does farming provide a step onto the industrial skills ladder that sweatshop work often provides. While we may reflexively want to attack a symptom, the broader disease is nations with venal and corrupt government that have little institutional foundations that support an open and growing society that would facilitate the individual escaping their condition. The essential foundations for such a dynamic society can be summarized as limited and competent and non-corrupt government, individual property rights, the rule of law and freedom from arbitrary prosecution and perspection, freedom of contract, and a strong and impartial judicial system.

As it relates to individual choice, one might easily be led to believe that sweatshop workers should be given better working conditions such as more time off, more vacation, and safer and more elegant working conditions. Such a simplistic analysis would miss the point of economic tradeoffs. One might ask anyone in this world whether they would like more pay and better working conditions and all except for the world’s few true masochists would provide an invariable “yes” as an answer to that trite question. When pressed as to whether workers would trade off lower wages in order to receive those benefits, the vast majority of people working in sweatshops would invariably say “no” given their high dependence and relative value of cash in hand. Furthermore, to explore and get to the heart of how a worker in Bangladesh could get paid substantially far less pay than a textile worker in North Carolina, it is also absurdly simplistic to compare hourly wages. A true analysis must look at wage rate/productivity ratios for the differences between these two types of workers. Intuitively, the highly paid North Carolina worker is going to produce a tremendous amount more than their Bangladeshi counterpart through a combination of higher skills and better use of capital, dictating a higher relative wage. If a Bangladeshi is not paid significantly less, then their alternative choice to the sweatshop becomes unemployment.

Another interesting insight from the podcast is the alcohol prohibition analogy of Baptists and Bootleggers in grouping the cast of characters in the sweatshop debate. Baptists are the NGOs and philanthropists who are actually committed to the cause of reform, at least making them morally principled. They just often have wrongheaded and misinformed notions of policy prescriptions that should be pursued as a result of their convictions and their effectiveness. Bootleggers are the Unions and others who have a tremendous vested interest in pushing sweatshop wages to a higher point such that they are rendered uncompetitive, thus boosting their own wages. Bootleggers will thus remain unrepentant hurdles to reform while cynically acting as if they have the sweatshop worker’s interests at heart. The intent of the podcast is implicitly to convince the “Baptists” that they will do more harm than good with their approach and to direct their energies elsewhere.

This begs the question of where the concerned over the plight of sweatshop workers should direct their focus. As Powell indicates, the most effective policy reforms would be to support more open forms of immigration. This simple act of changing one’s domicile from a nation lacking the foundations I listed above to one that does (i.e. from Bangladesh to America) increases their wage earning potential 1000% overnight, according to Powell. In the long run, policies that support institutional and government reform will greatly aid in lifting millions from their plights within their native lands. What is clear is that demanding higher wages could very well result in no job and is therefore the opposite of what we should be advocating. Similarly, demanding safer workplace conditions will result in lower wages, which will harm those most in need of straight up cash.

As an aside, I can’t help but notice that Libertarianism.org uses some of the same visuals that I do for this blog – Washington’s crossing of the Delaware and Plato’s Academy. I am not sure whether I should feel validated or concerned that people will assume that I am a copycat, but I assure you that the usage is purely coincidental. I began the blog back in October and just recently picked up the podcast. Great minds think alike…