Tuesday, October 17, 2006

John Tierney Does a Bastiat!

The best comment I have read so far on the Nobel Peace Prize going to Muhammad Yunus for his Grameen Bank is penned by John Tierney of the New York Times (17 October).

He puts a fresh slant on it and takes on the ‘professional’ aid lobbyists who, despite 50 years of failed policies, still hanker after making poverty history by unintentionally perpetuating it. They are anti-market to boot, the one proven method of development from grinding poverty of 18th century Britain, 19th century Europe and America, and 20th and 21st century Asia. Presently that leaves Africa to the mercies of bandits, thieves and boss men, and South America to enoy the doubtful virtues of Right and Left tyrants.

Here are some extracts from his OP ED column (read it at http://select.nytimes.com/2006/10/17/opinion/17tierney.html?th&emc=th)

“The Grameen Bank has done more than the World Bank to help the poor, and Yunus has done more than Jimmy Carter or Bono or any philanthropist.

But has [Muhamad Yunus] done more good than someone who never got the prize: Sam Walton? Has any organization in the world lifted more people out of poverty than Wal-Mart?
The economist William Easterly … calls the bank’s prize “a victory for the one-step-at-a-time homegrown bottom-up approach” to development. That approach is a welcome contrast to the grandiose foreign-aid schemes that do more harm than good.

Making toys or shoes for Wal-Mart in a Chinese or Latin American factory may sound like hell to American college students — and some factories should treat their workers much better, as Strong readily concedes. But there are good reasons that villagers will move hundreds of miles for a job.

Most “sweatshop” jobs — even ones paying just $2 per day — provide enough to lift a worker above the poverty level, and often far above it, according to a study of 10 Asian and Latin American countries by Benjamin Powell and David Skarbek. In Honduras, the economists note, the average apparel worker makes $13 a day, while nearly half the population makes less than $2 a day.

Some of them prefer to keep farming or to run small local businesses, and they’re lucky to get loans from the Grameen Bank and its many emulators. But other villagers would prefer to make more money by working in a factory. If you want to help them, remember the new social justice slogan proposed by Strong: “Act locally, think globally: Shop Wal-Mart.”

Note the reference to ‘the one-step-at-a-time homegrown bottom-up approach’, a pure Smithian approach to development. Forget all the guff about ‘balls-breaking capitalism’, so-called ‘laissez-faire’, minimal government, imaginary invisible hands masquerading as theories of markets, and other errors from Chicago’s version of Adam Smith.

Such interpretations bury Adam Smith’s social evolutionary model of how societies develop from ‘savagery’ (the human and proto-human state for two million years) towards civilization through shepherding, agriculture, and (‘at last’) commerce.

It was the slow and gradual process from the human propensity to ‘truck, barter and exchange’ and the division of labour, that led to the discovery of capital stock and then, from a slow and gradual accumulation of capital and knowledge of science and technology, to mass consumer societies on a scale never before seen on the planet.

Affluent onlookers of the realities of development – what their own predecessors went through – who try to ‘speed it up’, ‘humanise’ it with their ‘compassion’, usually makes things worse or at best leave them as they are.

The ‘sweat shop’ kids who, under pressure from anti-globalist campaigners, lose their jobs that pay them and their families a few dollars a day, and are forced them to revert to their earlier prostitution and ‘rent boy’ careers instead. I read other day of why a Vietnamese woman worked in a foreign factory even at a few dollars a week – because the alternative for her and her children was 18 hours a day in the fields scraping her living.

To right social wrongs requires capital from wealth creation processes, not pittances plus ‘pity’ from people living in the richest countries in the world, who bleat about ‘lost US/UK jobs’, whose politics perpetuate high subsidies to farmers that prevent developing country farmers from selling into their markets and who denounce ‘free trade’ under the guise of ‘fair trade’ (Jagdish Bhagwati).

John Tierney hits a sensitive target in his comments on the opponents of Sam Walton and Wal-Mart (often the same people who oppose imports from developing countries). Wal-Mart a force for making poverty history? It’s lovely! It’s beautifully ironic! It is in the great tradition of Bastiat! Congratulations John Tierney and The New York Times!

This takes nothing away from Muhammad Yunus and the Grameen Bank in lifting poor people out of poverty by helping them to be become wealth creators, while Sam Walton helps poor people in the richest economy in the world raise their real incomes by importing the products of poorer people further up the development ladder in poor countries.

What the developing world needs is many more activists like Muhammad Yunus and Sam Walton and fewer following the lead of Bono and Gedolf (except in music), if the transformation to economic development is to materialize for the poorest people on Earth.


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