Jeremy Seabrook will make you believe that markets can’t solve poverty problems the world is facing, and that governments must play a greater role in distributing the resources to people justly. Free markets, he argues, can’t lead to ‘equal societies’ because of their tendency to ‘lavish prizes on those they favor.’ He would make you believe that the global economy is coordinated out some central location by people or institutions which seek to enrich themselves while keeping the rest of the world in poverty…on purpose(!).
He couldn’t be further away from the truth.
It has been extensively documented that poverty is more often the result of ineffective governance rather than the failure of free markets. Misery of people in Zimbabwe today is not due to free markets. It is not that markets can’t put food on the table or get the right medicines to people, it is bad policies that won’t allow this to happen; and its the same bad policies that make the money you have to buy food and medicines worthless.
Studies estimate that in many developing countries the cost of medicine is increased significantly by tariffs, corruption, and overregulation. Famine in Africa is not linked to draughts alone – its linked to the inability of countries to diversify production, create incentives that make possible and reward entrepreneurial activity, and get rid of corruption that distorts the distribution of resources. Draughts make famine possible because of these governance failures. There are many other examples.
Free markets, of course, is not an overnight solution. Simply declaring a market economy will not get it done (just as imposing it from a ‘central location’ on other countries through the World Bank or the IMF will not get it done). Before playing the blame game, however, we must be able to distinguish free market economies from the look-alikes that have nothing in common, such as crony capitalist economies. Further, market economies don’t operate in a vacuum, and they do require the presence of government in order to function. Such a government, however, is not a monolithic redistributive Leviathan, arbitrarily making decisions on what is just and what is fair, looking down upon the people and making decisions for them. There is a role for government in making sure markets actually function, such as enforcing contracts, protecting economic and political freedoms, and placing the burden of decision-making in the hands of the individuals.
I agree with Jeremy Seabrook that realistically poverty may never be eliminated. However, unlike him, I do believe that poverty levels can be drastically reduced and the people can be “lifted out of poverty” by the power of markets as well as economic and civil freedoms, not by the authority of governments blindly redistributing resources from one pot into another.
Free markets don’t perpetuate poverty. They reduce it!
Published Date: August 09, 2006