Response to Poverty essay, by David Cohen

This is NOT AN ESSAY BY KENNY FELDER: I don't want to take credit for someone else's writing!

The story is, I wrote my essay on Poverty and David Cohen sent me this in response. It was so long that I felt it should get its own Web page, instead of being buried in the comments to my original.

Cohen starts by quoting key phrases from my essay, and then proceeds to his response.

I live a lifestyle that is comfortable to the point of extravagant. I send my kids to a private school, as well as piano and other outside lessons... I live in a pretty big house with heating and AC, TV and stereo, and three computers... So the point of this essay is explain the deep sense of hypocrisy that I feel about my entire life. Imagine a science fiction story where ...outside the walls are teeming masses of dirty, hungry people, clawing at the walls, dying in gutters....Try to imagine, for a moment, that among those people is your mother, or your brother, or your best friend, or your child... And meanwhile, just a block over, people like you and me sip their cappuccinos and worry about their love lives.

I can't help finding something insidious about this line of reasoning, something that undermines forward movement in life, plants a nay-sayer deep in the psyche that turns pleasure to ashes and accomplishment to guilt.

The alleviation of poverty is a complex problem, but the first thing to observe is that such progress as has been made has come from economic policy and not noblesse oblige.

If you look at a graph of world income plotted against time, it is a flat line extending leftward hundreds of thousands of years, at an abysmally low level, and shooting up almost vertically starting with the Industrial Revolution. I won't bore you (or me) with stats but they are easy to find.

England sky-rocketed into prosperity during the 19th century, along with the United States and Europe; in the middle 20th century Japan, South Korea, Hong Kong, and Taiwan followed suit. In the 21st century China and India are springing into life. None of this happened because sanctimonious middle-class professionals bemoaned their "glaring failure to live up to ideals". Their failure in fact doesn't glare. It goes more or less unnoticed because using your labor to serve your personal goals is normal and in fact socially useful. What matters is that social institutions be in place to channel this effort in ways that make wide-spread prosperity possible. In Europe, southeast Asia, India and China, they have been able to use markets to alleviate poverty (although this is just starting in the latter 2 countries).

One reason Africa is still poor is because of constant inter-tribal warfare: people with the means to start a business won't take the chance in such an environment. Another is that the governments that superseded the withdrawing colonial powers came into ascendancy at a time when socialism was fashionable among intellectuals. Socialism with an honest government is problematic enough; with a kleptocracy it simply adds a dimension of life to the state's portfolio.

Now, here is a fable. A space ship lands. The pilot hands a document to the president of the United States. It says "We have recently discovered your existence. We have hundreds of billions of inhabitants. We have an average income of a dollar a year. You have more and we consider it unfair. We estimate that if you distribute your income equally with us, both our inhabitants and yours will have 2 dollars a year. We claim this on the basis of justice and await payment."

What would you answer? Based on your essay, I believe you would acquiesce.

Here is what I would answer.

"You are making a fundamental error. You are considering the end-state but ignoring the process. We are more wealthy than you because we are more productive than you. We do not owe you the fruits of our productivity. You're claim is not based on justice. Justice must be a set of rules that promotes prosperity, freedom and harmonious cooperation. Your claim is based on an ethic that would undermine prosperity, make us in effect your slaves, and sabotage cooperation by making your gain our loss.

"Here is what we owe you: the knowledge you need to duplicate our success."

At this point we can tell them about markets, contracts, rule of law and the ever-present danger of government attempting to fine-tune a process with clumsy fingers.

So what do we owe the poor? Knowledge, advice, trade and a moral framework in which to evaluate the benefits of prosperity. Is it arrogant to proffer a "moral framework" to another culture? Perhaps. But without such a framework, a market economy cannot endure. It is, in fact, one of the institutions that undergird prosperity.

In the long run, people can only maintain prosperity if they believe that the process by which they succeed amplifies their efforts for the benefit of others.

To put this another way, we must solve the primary intellectual problem of our economic future: understanding the fact that economic prosperity is not a zero-sum game; that one's success does not necessitate a reciprocal failure of anyone else; that the ultimate natural resource is intellect; and that it is the role of the government to maintain institutions that permit the free flow of creative effort.

Without such a framework, markets will eventually implode. If you have wealth that you do not feel is deserved, you will contrive to lose it. This is why children of millionaires end up alcoholics and drug addicts; why lottery winners go broke.

Our job as intellectuals is to achieve moral clarity about wealth. Prosperity is not a smooth process; people leap-frog over each other; progress is discontinuous. It is not helped by moping over your latte: that is cheap romanticism, not progress. Inequality is an essential part of the process; differences in wealth reward innovation and put funds in the hands of those who can use them most effectively.

Now here is another fable. An ancient tribe, expending all their effort on subsistence; some years they don’t succeed and people starve to death. One of them figures out a new way to catch fish. He acquires more than he wishes to consume and so exchanges the remainder with other members for meat and nuts; the whole tribe is better off by a modest amount, but he becomes quite rich. The village philosophers hold a council: they announce that this is inequitable. The villagers agree and the riches are redistributed. The philosophers show that by this means the total utility of the tribe has been enhanced; they win tenure. Other members of the tribe, who had been playing with their own innovative ideas, quietly drop them. Finally a new generation of philosophers grows up. They sense that something is wrong. They send a delegation through a time machine to you. "You are a mathematician, versed in the secrets of logic. How can we emancipate ourselves from this poverty?" "Rawls", you say. They smack their foreheads. "Of course!" Refuting Rawls had become a freshman pastime, and they had actually forgotten the simple truth he had promulgated, the Difference Principle: A transaction that increases anyone’s wealth, by any degree, is just, if it advances the position of the poorest by any degree. It is perhaps not the best philosophical approach to this question, but it is sufficient to undermine the claim for total equality.

It is true that a man can become a millionaire by catering to the rich—as a lawyer, an architect or a guava instructor. But to become a billionaire (Bill Gates, Henry Ford) you must make a revolutionary product available to the person of modest means and in so doing increase the wealth of a generation by an order of magnitude.

This is not an argument against charity or even foreign aid, intelligently applied. It is an argument against the notion that no one is permitted—until everyone is able—to enjoy life. This is a totalitarian idea, an inhuman abasement of the self on the altar of abstraction. Pleasure taken in creative work honestly done radiates beneficence in a thousand directions. To contaminate this pleasure with imaginary guilt is to throttle it. Do you really mean to teach your students that success in the world comes at the price of assuming this lugubrious posture of self-abnegation?

Personally, I think that staying up all night to help a friend is more meaningful than helping a million people a thousand miles away: what you can do for a million people is a drop in the bucket; what you can do for your friend might be life-changing.

It is true that there are those that can help the millions in a meaningful way. These are statesmen, entertainers, and philanthropists, who follow a calling that operates on a mass basis. But for others to neglect their own callings and torment themselves about goals which are outside of their purview could very well be a net loss to the world.

If you want to educate yourself about economic development and international trade, read P.T. Bauer, Deepak Lal, William Easterly, Jagdish Bhagwati, Paul Krugman. A good development textbook is Economics of Development by Gillis et al. There is an excellent online international trade text by Steven Suranovic:

A good point of departure is macro-economist Brad DeLong's review of Easterly: For a more heartening look at trends in world income see this, from economist Xavier Sala-i-Martin: Evolution of the World Distribution of Income.

Export oriented growth (as opposed to isolation), relatively free trade, market based policies, democratic or at least honest governments, reliable legal institutions, participation in the global economy are the prerequisites for prosperity.

Now consider this quote from international trade economist Keith Maskus:

How could rich countries improve prospects for reducing poverty in poor countries? This is a no-brainer. If Europe, Japan, and the U.S. would open their markets to agricultural goods even marginally (say 30% more than now) the impacts on agricultural incomes in poor countries would be in the hundreds of billions of dollars annually (dozens of studies find these kinds of outcomes). Here's an example: it is estimated that EU and U.S. protection against sugar imports (and the EU's practices of subsidizing sugar exports to poor countries) cost sugar farmers in developing economies around $30 billion per year. That is in the same ballpark as the annual flows of development aid to all developing nations.

When Warren Buffet contributed 40 billion dollars to the Gates Foundation it made headlines. But you can see that this is a minor quantity compared to the benefits of intelligent policy.

Now that you've read David Cohen's response, you can head back to my Poverty essay that sparked this comment, or you can return to my general page of Essays and Commentaries.