A Poverty of Good Ideas
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I usually try to avoid using blog posts to highlight dumb ideas – simply because it tends to draw more attention to such ideas than they deserve. However, some things are so misguided that they deserve special attention.
A group called the World Development Movement claims that it "tackles the underlying causes of poverty" and lobbies decision makers to "change the policies that keep people poor." I spent a number of years working on projects in very poor and very difficult countries. While there are many, many reason why particular countries are poor, history has shown us a few general truths about development strategies:
- Traditional government aid programs do not help developing countries very much, if at all;
- Poor countries stay poor, in part, because local economic systems work well for small groups of entrenched elites – elites that government aid and multilateral development agencies are unable or unwilling to challenge;
- Free enterprise is the only force capable of radically altering entrenched economic disparities and create real wealth in a poor country.
The World Development Movement claims to have been in existence since 1970, but they appear to have not learned very much. They recently started promoting a "10 point plan" for regulating business activity in developing countries. If acted upon, this plan would be a great way to stop development altogether.
- Stop lobbying the EU, US, Japan and other rich countries to prise open markets in developing countries; recognise that that all our interests will be better served in the long run by ensuring developing countries can use the same trade policy tools industrialised countries used to get rich.
It is not even clear what this means. The policy tool used by industrialized countries to get rich which was … trade. Ricardo proved long ago that trade enriches both trading partners. A truly wonderful way to keep countries poor is to shut off their markets to outside influences, and make local consumers the captives of entrenched local interests – who, accordingly, are under no pressure to invest or improve their products. Just look what years of fierce protectionism did to make the Brazilian computer industry successful!
- Stop demanding strict enforcement of intellectual property rights in developing countries; recognise that strict patent laws may not be appropriate for all countries in all circumstances.
This is a beauty. Allow companies in developing countries to steal intellectual property and use it to make competing goods with cheaper labor! If developing countries don't respect IP rights then that will just lead to extraordinary measure to make sure that those countries don't get access to IP in the first place. This is a truly great way to set-back development.
- Support radical government action, starting in rich countries, to tackle dangerous climate change; recognise that left unchecked, climate change will roll-back progress that is made towards the MDGs.
Ok – but climate change is, by definition, a global problem. Cutting back carbon in developed countries while expanding it in developing ones won't help the earth.
- Support the creation of legally binding international rules to regulate multinational companies in order to minimise the adverse social and environmental impacts of their operations; recognise that voluntary initiatives have failed to deliver and binding rules offer a level playing field for all companies.
Is this just regulation of multinationals – or do local and third country firms have to play to? In most places, the factories owned and operated by multinationals are many times safer and more environmentally friendly than those owned by local companies. Focusing only on multinationals would just be another way of shifting more activity to less regulated local players.
- Stop capitalising on legal loopholes that enable companies to avoid paying taxes in both developed and developing countries; recognise that corporate philanthropy to the poor is simply hypocrisy if the company is avoiding paying what is due.
In other words, pay more taxes than you legally owe – and certainly more than local companies pay. That would, in fact, constitute "philanthropy."
- Support government measures to clamp down on tax havens and tax avoidance by multinational companies and the super rich; recognise that healthy tax income is a critical part of good government in developing and developed countries alike, and good government is in all our interests.
Unfortunately, "healthy tax income" in often badly wasted – in developing and developed countries alike. Further, what governments tax, and how they collect taxes, is often completely irrational and arbitrary – and not reflective of legitimate governmental claims on economic activity. There is nothing wrong with legal tax planning.
- Stop lobbying for privatisation and deregulation; recognise that 'free market globalisation' is contributing to increasing inequality and instability which is only likely to serve the long term interests of arms manufacturers.
This is one of the best ones. In other words, please protect developing countries from the only force that is likely to help them climb out of poverty.
- Support tighter regulation of financial markets by governments wishing to place controls on the movement of money in order to curb potentially damaging speculative financial flows that have been strongly linked with previous financial crises.
Sound monetary policy? Good. Actions to avoid needed economic restructuring of local markets? Bad.
- Support the creation and implementation of strong labour rights and minimum wages in developing countries; recognise that many major social advances that we now take for granted are the result of these rights.
Labor law is and should be a matter of local decision-making – provided that there is fair enforcement and local companies are subject to the same rules.
- Support much greater transparency in the activities of lobbyists (both companies and NGOs); recognise that behind-the-scenes lobbyists have an increasingly influential role in policy-making and the public has a right to know who is saying what to who on whose behalf.
Most of the "increasingly influential" part has come from NGO lobbying. Legitimate businesses usually have no trouble making it clear what they stand for. Interestingly, there is nothing here about stopping local officials from asking for bribes to help with their "policy-making." Endemic corruption is a much greater challenge to development than absolutely anything else noted on this list – and it is something that all multinational corporations would like to be fully free of.
The bottom line is that while free enterprise has its costs and benefits, like anything else, it is the only strategy that has proven to actually work in helping countries to climb out of a well of poverty. Strategies that turn countries away from the changes that free market systems demand, also turn countries away from their only proven option for success. The World Development Movement’s 10-point plan is a sure fire way to ensure the continuation of poverty around the world.