Thursday, August 4, 2011

Misconception: It is important for us to understand the causes of poverty

Dr. Madsen Pirie of the Adam Smith Institute gives an interesting perspective in his book Freedom101 which can be read online

No. There are no causes of poverty. It is the rest state, that which
happens when you don't do anything. If you want to experience
poverty, just do nothing and it will come. To ask what causes
poverty is like asking what causes cold in the universe; it is the
absence of energy. Similarly poverty is the absence of wealth. For
most of humanity's existence on this planet, poverty has been the
norm, the natural condition. People hunted to survive or lived by
subsistence farming, and they were poor. In some parts of the world
this is still the case.
The unusual condition is wealth. This is what changes things. We
should ask what are the causes of wealth and try to recreate and
reproduce them. When you ask the wrong question, “what causes
poverty?” you end up with wrong answers. People fall into the trap
of thinking that the wealth of some causes the poverty in others, as if
there were a fixed amount of wealth in the world and that rich
people had seized too large a share of it.
In fact wealth is created, and it is only during the last 250 years or so
that we have found how to do this on the grand scale. Wealth is
created by production and enterprise, by the specialization of labour,
and most of all it is created by exchange. Instead of trying to take
wealth away from rich people and redistribute it, we should be
seeking to implement the conditions in which as many people as
possible can join in the wealth-creating process for themselves.
Poor countries will not become wealthier because we give them
some of our riches. They will climb out of poverty the same way we
did, by producing and selling goods and services and by creating
wealth in the process.