Wednesday, July 09, 2008

Western Affluence: At the Expense of the Impoverished?

This is less of an argument and more of a discussion... For a long time, I always assumed that our affluence in the "West" came at the expense of those in less fortunate circumstances: cheap labour for cheap goods, etc.

Right now I am reading two books:
- A Farewell to Alms by Gregory Clark, which examines the state of the world prior to 1800. Basically, up until the Industrial Revolution, the world was stuck in the "Malthusian Trap," meaning there was no gain to real incomes, since any increase in production was offset by an increase in population. He then examines the causes of the Industrial Revolution, and goes on to describe why some nations are affluent and others are impoverished.
- The End of Poverty by Jeffrey Sachs, which discusses the factors causing extreme poverty, and what we can do about it.

These books may seem different, but they actually cover very similar material. Ironically enough, I had put down A Farewell to Alms last night (since it has many graphs and formulas and I wasn't in that head space) and picked up The End of Poverty, and it was discussing the factors and implications of the Industrial Revolution.

Anyway... all of this is helping me to start seeing poverty in a new way. Sachs, who I would originally assumed would have thought opposite, said explicitly that poverty in underdeveloped nations is not a result of the exploitation by affluent nations.

And, you'll have to bear with my reasoning here... Clark attributes "modern growth" to an increase in innovation... now, theoretically, if there are more countries contributing to innovative ideas and processes, that will simply increase production for everyone!

This is all just food for thought... Any other thoughts out there?

1 comment:

Anonymous said...

I love this post. There is a book by Paul Zane Pilzer (renowned economist) called "the next millionaires" that really opened my eyes to understanding wealth. He says that Conservatives and Liberals have both missed the mark over the past decade because of a fundamental flaw in our assumptions. The assumption is "what is wealth". Most people have believed in the past that wealth is tangible things. Oil, Gold, Silver. If that is true, there are only so many of those things on this planet, and therefore we should split them up equally. (communism) Makes perfect sense.

Pilzer argues though, that wealth is not tangible things, but rather ideas. Gold was just a funny looking rock until an idea gave it value. Oil was a slippery black substance until an idea gave it value. And when we run out, we will think of something new. (already starting to happen)

If you believe wealth is tangible things, then the only way for one country (or one person) to become rich is to steal from everyone else. And when you run out of resources you declare war on other countries (or rob your neighbor). If that is true, then the rich are bad people and rich countries have bad morals.

But if wealth is ideas then all you need to do to increase your wealth is to create an environment that promotes the creation of ideas. (free enterprise) When people are given rewards for creating ideas, the higher the reward the more ideas are created. The more ideas created, the more wealth there is, and the more reward there can be for those who invent. This is the free enterprise system, and the more freedom we give people (less taxes) the more ideas are created and the more wealth is created. The US was one of the wealthiest countries for a long time because the founding fathers understood this. That is why there are more patents, more works of art, and more music that comes from the US than all other countries combined.

The problem is that most people think (like I used to) that wealth is tangible things, and that the rich are crooks. So we ask the government to tax them more and to give money back to people like us. The degree to which we do that is the degree to which we limit the reward to the people who create ideas. As a result, our overall wealth goes down and everyone looses.

The system relies heavily on Judeao Christian principles and works so that people with money donate 10% of their income to where they think it will be best served. A huge difference from the money being taken by force through the government.

I look forward to reading the two books you have mentioned, and I hope that if you chose to you can read Pilzers book. I found your blog through Lisa Brodersen, who suggested that I read it. I am glad that I did!

Have a great day!