Friday, July 15, 2005

The Cure of Poverty

Also in today’s Times another reference to Adam Smith, this time with more justification because its author, Tim Montgomerie, editor of, correctly notes what might seem to be obvious but which is often missed, that Smith wrote about the causes of wealth while many other focus on the causes of poverty. Creating wealth cures poverty and only sure way to create wealth is to let markets and the division of labour flourish.

We cannot tax our way to wealth, the fallacy of today’s politics, or pray our way to wealth, the fallacy of yesterday’s religions. The lilies in the field are not a role model for humans, contrary to what our anarchist friends tell us.

Smith noted that people are interdependent; they depend totally on others for their every need. Allowing others to supply those needs we acquire our needs by exchanging our contributions to the needs of others in ‘truck, barter and exchange’. We grow wealthier as the extent of and the complexity of markets increase. The absence of viable divisions of labour and facilities for the exchange of contributions is the abiding image of poverty, whether it is a rundown neighbourhood or an African village.

Understand how wealth is created (and by wealth I mean what Smith meant, the aggregate annual product of a society or, what amounts to the same thing, the aggregate annual revenue obtained from producing the annual product), and the practical remedies for poverty are apparent.

Look how Tim Mongomerie puts it in today’s Times:

“Finally . . . a breakthrough idea for the ToriesTim MontgomerieTo slim down a bloated State the obvious answer is to cut spending. But wait, that's the wrong end of the stick

PROGRESS DOES NOT just depend upon the invention of things. The discovery of new thinking can also drive societies forward. Adam Smith’s 1776 book The Wealth of Nations, and its inquiry into the causes of prosperity, produced one intellectual leap forward. Earlier economists had obsessed over the causes of poverty. That was a fruitless inquiry. The worthwhile question was Smith’s ‘What causes wealth?’ ”

The rest of his article is about how the British Conservative Party (the Tories) could re-establish themselves as a government if they adopted certain strategies (concentrate of wealth creation) and applied them to practical policies.

Read his article: for 15 July in the Opinion section.


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