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Sunday, January 11, 2015

Curing Poverty - chapter 2

I'm currently reading The Poverty of Nations by Wayne Grudem and Barry Asmus that was published about a year ago.  It was on my reading list, and my daughter bought it for me for Christmas.  I've begun to read it and will give a summary as I go.

Introduction was here
Chapter 1 was here

Now for chapter 2
In this chapter the authors discuss approaches that will not lead to prosperity.
They list the following:

  1. Foreign Aid
    1. Foreign aid does not work because it does not build the structures that bring and keep people out of poverty.  Instead this aid tends to become a good that those in power use to enrich themselves or to stay in power.  It encourages corruption.  It eliminates the incentives for hard work, education, and working for one's own success.  Furthermore, the history of foreign aid is that it does not work.  Why does it continue?  Because bureaucracies are more interested in perpetuating themselves than in finding solutions that work.  The authors also point to many of the civil wars in Africa that came about because of conflicts over the control of foreign aid money. 
    2. Emergency aid given to non-government agencies is often useful, but must be done with care.
    3. The Bible teaches help for the poor, but not handouts.  In the Old Testament the poor were given opportunities to glean for themselves, but not to simply receive handouts.
  2. Wealth redistribution
    1. Some countries have large differences between the wealth of a few and the wealth of the vast majority of citizens.  Latin America in places, North Korea, parts of Africa and Russia are cited as examples.  In these cases, simply redistributing the wealth will not raise people out of poverty in the long term because there are problems in society that need to be addressed.
    2. Some countries have wealthy people because those people have worked hard or created services and goods that others will pay money for.  To redistribute these people's wealth is stealing.
  3. Depletion/over use of natural resources
    1. Depending on a few natural resources for a nation's wealth is a mistake.  The authors point to Spain in its dependence on the gold of the New World and OPEC nations today.  It is too easy to depend on the wealth that the resource brings and not use the resources to continue to build wealth.  Norway is a positive example of using oil, but many other nations have not been so successful.
  4. Blaming poverty on external factors
    1. The authors discuss colonialism and contend that although both harmful and beneficial, colonialism is only partially responsible for the poverty of most of today's poor nations. Colonialism has created the conditions that have lead to poverty in some nations, and has led to creating structures in other countries that have led to wealth.
    2. Blaming the past does not create solutions for the further.  While it may be wise to look at the mistakes of the past, staying mired in the past will not lead to solutions in the future.
    3. World Bank and similar agencies.  Should these loans be forgiven?  If so, then we are back to simply giving foreign aid - see above.  How will the conditions that gave rise to the lack of ability to repay be changed?  If they are not, then forgiving debt will not actually change the situation in any country.
    4. The section on commodities in the world market was very interesting.  I would suggest that you read it for yourself  (pages 92-99).  The authors do not favor the "fair-trade" movement.  Nor are they in favor of market manipulation through subsidies and tariffs by large companies or more powerful nations.
    5. Multinational corporations: Again, this is a more complicated section and needs to be read in its entirety.  The authors speak out against monopolies of labor because that artificially lowers or raises the cost of labor.  When companies compete with each other for the cost of labor, then everyone benefits.  Employees should be treated fairly and honestly.
  5. What does cause poverty?  This is complicated and people on both sides of this issue are often too superficial in their understandings.
    1. War, crime, disease, accidents, disasters can all cause or contribute to poverty.  This is often beyond the victim's control.  
    2. Laziness by the poor person
    3. Other factors?

The next chapter deals with systems that do NOT lead to wealth.

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