A poor view of poverty

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Many people wish there was a nicer model of economic development than captalism. In reality, the best thing they can do is encourage Western firms to raise their standards.

Any decent thoughtful person is upset by conditions in factories in poor countries – and by the knowledge that many are run by western firms that supply the goods we buy in our western shops. Typically, workers put in far longer hours than we could manage. They do jobs that are at best repetitive and are often far worse. They live and work in an environment that we would find intolerable. They do all this for very little money.

Many of the Genoa protestors are malevolent individuals for whom one excuse to throw Molotov cocktails is as good as any other. But their activities are possible because they have found a cause which attracts the support of many well-meaning people. Modern states can take vigorous actions against organized crime, but are vulnerable to terrorism if the professed objects of the terrorists are shared by many who would not themselves engage in terrorism.

At London’s May Day demonstration, one bicycling demonstrator carried a placard demanding that ‘capitalism should be replaced by something nicer’. It captures exactly the incoherence of anti-capitalists in the post-socialist world. But who does not sympathize with the thought?

Perhaps poor countries would have been better off without globalisation – without modern technology and without exposure to modern consumer goods, and without knowledge of the extraordinary material standards of living which have been achieved in western economies. That view involves a misty-eyed view of the idylls of peasant life. It is held mostly by those whose own everyday lives are very different. Still, the argument that we were happier when ignorant of other countries can be dismissed, not because it is necessarily wrong, but because it is no longer relevant.

Countries which have tried more recently to reject outside influences – like Burma, Cambodia, and Afghanistan – are countries with the most unpleasantly repressive regimes anywhere. They have to be, to maintain ideological zeal in the face of the impossibility of their policies, and to continue to suppress the aspirations of most of their citizens.

It is not feasible to pretend the modern economic world does not exist. But it certainly is feasible for both developed countries and poor countries to restrict the impact of globalisation by limiting trade and investment between them. The economist’s usual answer is that this would make both the rich and the poor worse off. After all, unpleasant though working conditions are in Indonesian sweatshops, people choose to work there in preference to the grinding poverty that otherwise awaits them.

There is some truth in that but we should not be too sanguine about it. The decisions of semi-literate thirteen year olds are not necessarily the choices of rational economic men and women. Family pressures and naïve dreams of wealth lead people to take jobs in the market economy. Still, the blunt fact of economic history – the fact of Britain’s industrial revolution, the background to emigration to the United States, and the reality of modern shanty towns – is that wherever industrial jobs have become available, people have left the land in large numbers to take them. And that makes it hard to argue that we would make these people better off by denying them the opportunity.

But isn’t this only because the alternatives available in poor countries are so bad? That may be true, but what does it imply we should do? The depressing history of fifty years of aid projects is that there is not much to show for them. Not enough to suggest that the distribution of world income would be very different if aid packages had been much larger. The development models of South Korea and Taiwan are not particularly admirable. Their extraordinary growth happened under despotic governments, corrupt and nepotistic business sectors, and transformed rural environments into grubby industrial landscapes. And, although most of the population of these states is now materially much better off, there are gross inequalities of income and wealth.

One would like there to be nicer models of economic development. But there do not seem to be any. The governments of South Korea and Taiwan have been content to allow their citizens to be victims of globalisation. And, taken as a whole, they have not done badly out of it.

Could we allow western firms to operate in poor countries, but require them to operate to western standards of conditions and wages? This is tantamount to stopping them from operating at all (as the trade unionists who advocate such policies well know). And the effects of establishing rich enclaves in poor societies would be equivocal. Almost nothing is so destabilizing and debilitating, both economically and politically, as the immediate juxtaposition of rich and poor. You see that when pursued by beggars as a tourist in a poor country, or in the illegal traffic in people from eastern Europe or across the Rio Grande.

The best we can do in a hugely imperfect world is to encourage western firms to operate in poor countries, and require them to operate, not to the standards we would ourselves expect, but to the best standards that exist locally. And use our economic pressure as consumers and political pressure as voters to impose our will.

We should also honestly debate the problems and opportunities of economic development. The opponents of globalisation cannot be defeated by steel fences or by lectures on the theme that you cannot buck the market. If capitalism’s presentation of itself is so hectoring and unappealing that only economists, investment bankers and well-paid executives subscribe to it, public opinion will buck the market however uncomfortable the results may be for everyone concerned.

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