Monday, May 15, 2006

Edward Lucas Applies Pure Smithian Good Sense

Hat Tip: to Stephen Pollard ( for drawing my attention to Edward Lucas on poverty in today’s Times: ‘The Starving at the West’s Gate’.

“CHRISTIAN AID WEEK is rightly a time for warmheartedness. But that is no excuse for softheadedness. It is sloppy thinking, for example, to believe poverty in one place is caused by wealth in another. To share the wealth of the rich world evenly among the poor would temporarily dent poverty, not end it. Redistribution invariably destroys wealth in one place; it rarely creates it in another. The redistributed money would mostly go on short-term consumption or be stolen by corrupt officials. The root cause of poverty, above all injustice, would remain.

Hernando de Soto, the Peruvian economist, has shown convincingly how abuse of property rights by the powerful and corrupt prevents subsistence farmers and shantytown dwellers from getting on to the first rung of the wealth-creating ladder. No property rights mean no collateral for loans, no mobility and no investment.

Nelson Mandela said last year in a speech of uncharacteristic foolishness, that “like slavery and apartheid, poverty is not natural. It is man-made.” Actually, poverty is all too natural: not so long ago a nice flint axe and a dry cave was the summit of human material ambition.
But, tragically, anti-poverty campaigners in the West have allowed themselves to be conned by the protectionist arguments of rich people in poor countries. The protection of corrupt, incompetent and uncompetitive producers and providers of goods and services in poor countries levies yet another tax on the weakest. Yet the poor above all need the best choice of goods and services at the lowest possible prices.”

Read the article in full at The Times at,,6-2180706,00.html

Edward Lucas speaks pure Smithian market economics, linked to honest government, the rule of law and the protection of property. We should never forget that Smith took a holistic view of society and recognised social malformations (laws that irked the poor, discriminated against women and protected the property only of the rich) stood in the way of the spread of opulence to all classes.

Hernando de Soto, the Peruvian economist, appears to be an economist worth reading too. This is an example of the beauty of the blogosphere: it spreads the word.


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