The disasters of poverty.

The earthquake in Haiti was a magnitude of 7.0. According to Wikipedia, the 1989 San Francisco quake was either 7.0 or 6.9 depending on which scale one used. In other words, the intensities were fairly similar. Haiti is devastated. If the New York Times is correct, the death toll could be in the tens of thousands, current projections put it around 50,000. The death toll in the 1989 San Francisco quake was 63, if you include indirect deaths due the quake.

The difference is wealth. San Francisco is one of the wealthiest areas in our part of the world and Haiti is the poorest. Poverty makes natural disasters worse. Wealth mitigates natural disasters. You would think that those who worry about the poor of the world would promote policies that increase wealth. Instead they push policies that restrain wealth creation and they do it intentionally, knowing those policies will restrict wealth creation.

The Heinrich Böll Foundation, an affiliate of the German Green Party, wrote a report that referred to wealthy areas, like San Francisco, as being areas populated by “over-consumers.” On the other hand, people in poor areas, like Haiti, were called “under-consumers.” But that is a misnomer since they also say, that in their ideal, centrally-planned paradise, the “under-consumers are not to catch up with the over-consumers.” They make it clear, that in the name of equality, the over-consumers have to have their wealth taken from them. They very explicitly attacked those who would try to help develop the poor nations of the world because such people “work at lifting the threshold—rather than lowering or modifying the roof… Poverty alleviation, in other words, cannot be separated from wealth alleviation.” (Note: In a rather ironic twist I worked for some time in Berlin and the office from which I worked was literally a few feet from the Böll Foundation. Our doors were immediately next to one another.)

The truth is that wealthy people can bear the burdens of the worst Mother Nature throws at us. I know the Greens want us all to live in tune with nature but Mother Nature is a bitch. She has no feelings, no compassion, and is quite happy to turn you into fertilizer. Condemn materialism and wealth all you want, but it saves lives. Sure, if you hate humans, then you won’t care. But, whatever problems the process of wealth creation is claimed to cause, pale in comparison to the problems that accompany poverty.

The disaster in New Orleans was a similar example. When the government-maintained dikes failed, during Hurricane Katrina, the city of New Orleans was flooded. The people who suffered were the poor, especially the poor who relied upon government mass transit for evacuation. The better off of the city fled in their cars. However a huge percentage of citizens didn’t own cars. Randal O’Toole wrote:

We have heard that 60 percent of New Orleans residents are black, but it has been little noted that a third of those black families do not own a car -- nor do 15 percent of white families. It is these people who were left behind when those with cars evacuated.

O’Toole notes that in previous years, when wealth was lower in the country, death rates from hurricanes were higher. When Galveston was hit by a hurricane in 1900, people couldn’t escape in time because autos didn’t exist. Now, major cities can evacuate before a hurricane arrives because people have cars. Even mass transit works better to evacuate people when more people own cars since mass transit is then used to evacuate far more manageable numbers.

The quake in Haiti inflicted massive death because poverty magnifies the evil that comes with natural disasters. The San Francisco quake led to few deaths, even with a similar magnitude, because the area is productive and wealthy. And, as I will show in a follow-up post, most the deaths in the 1989 San Francisco quake were due to government failure.

The point that Bjorn Lömborg has made in regards to threats from any alleged global warming is that the “solutions” offered by the Green left tends to push “wealth alleviation” without being able to do much good. The net result is that the future world is poorer because we destroy wealth in order to reduce any alleged warming the computer models predict. Given all the assumptions of the warming crowd that could mean that we make future generations less able to deal with any problems, not more able. Policies that destroy wealth creation today mean a poorer world tomorrow and poverty, not wealth, exacerbates disaster. Of course, instead of thinking about what he says, his critics just pretend he has said something very different.

Lömborg’s point on global warming is similar to what I am saying about the earthquakes and about hurricanes. Wealth reduces the harm of disasters while poverty exacerbates them. The best way to deal with disasters, I dare say even those that some say humans create, is to make the poor of the world richer, not the make the rich of the world poorer.

The Poverty of debate over poverty.

There is a lot of poor thinking going on when it comes to poverty. I hear more absurd or irrational statements made about poverty than almost anything else except, perhaps, the environment.

Here are a couple of common errors about poverty and why they are wrong.

The cause of poverty myth: This one is found in statements that usually begin with “Poverty is caused by....” Now it really does not matter how you fill in the blank. Poverty is not caused. It is the default nature of man. It is like asking: “What causes nudity?” Nothing! We are born naked.

As the saying goes we come into this world with nothing and we leave with nothing. Poverty is the natural state of existence while wealth is artificial. Wealth is created. Wealth, like clothes, has a cause where poverty does not. The proper question to ask is what causes wealth not what causes poverty?

If you understand the wealth creation process then you can see ways to end poverty. And when you realize that wealth creation is a process you can investigate what blocks it. Almost without exception the process is blocked by force. That force can be from marauding gangs who pillage
production or governments who tax it.

The block can be naturally caused or man-made. But roadblocks exist that have to be torn down. People want to make exchanges because through exchange they maximize wealth even when no new wealth is created. If I trade an orange for an apple I am ‘wealthier” by my own standards and so is the person who got the orange. That is because I only make the exchange because I value the apple more than the orange and my trading partner only does so when he values the orange more than the apple. We each walk away from the exchange with an increase in our own well being according to our own values.

But if someone comes along and prevents or inhibits the exchange then both traders are worse off. If they ban the trade, because my partner lives within one set of imaginary lines drawn on a map, and I live within another set, it matters not. We are still worse off. If they forbid the exchange because they don’t like my race or nationality there is still a reduction in well being.

Or if they come in and tax the exchange we are still worse off than we would be. All uses of force to interfere with voluntary exchange, by definition, substitutes the values of the one who uses the force for those of the traders. That inhibits wealth creation. And when this is inhibited the natural state of poverty either continues or the state of things revert. Wealth is man-made, poverty is natural. And that means wealth, once made, must be preserved as later interference with the process can cause poverty to reassert itself. When the process is stopped things revert to their default state.

The "equality matters" myth: If Bill Gates get richer I am supposedly worse off. But I have never heard anyone explain how this is the case. This is called relative poverty. I may be well off but if you are better off then I am relatively impoverished compared to you.

That’s like calling someone who is 6’ tall “relatively short” because someone else may be 6’4”. A person who weighs 150 lbs is “relatively” fat compared to a person who is anorexic.

This concept of “relative poverty” is absolutely irrational. It tells us nothing. You can make almost any case you wish by using a “relative” comparison. I could argue that the average American is “relatively poor” if I use the wealth of the top 10% of the population as my point of comparison. Or I can argue they are “relatively rich” if I compare them to the average income of people in the developing world.

And the Left, who are notorious at stripping words of any rational content, does this all the time. If they want to attack capitalism and make Americans feel “exploited” and envious they will compare the average working income to that of the average CEO. From this they conclude that Americans are made worse off by capitalism because “relative poverty” or wealth inequality is growing.

But when they want to make the average worker feel as if he is an exploiter, and appeal to his guilt, they compare the same income to that of poor people. One day you can be “too poor” and the next day you can be “too rich” simply by shifting the goal posts.

Such concepts add nothing to a discussion. But they are not meant to. They are used precisely because they allow one to make any argument anytime.

The poor as a static group myth: This has two variations. One is that there are X number of poor people in nation in one year, and then X number later down the road, indicating that no progress has been made. The assumption is that the people, who were poor, say in 1990, are the same people who are poor in 2005.

In fact people who are “poor” in any one year are mostly a changing group. A university student can be poor in his 20s because he is a part-time employee while studying. But with a valuable degree he may become one of the rich 20 years down the road. The category “poor” is not necessarily static but may be a changing one.

Another variation of the static concept is to define “poor” as some arbitrary percentage of the population. A popular definition of poverty is one where the “poor” are defined as anyone in the bottom 10 or 20 percent when it comes to income. The problem is that this definition means it is impossible to eradicate poverty. Even in a community of millionaires someone will be in the bottom percentage.

While this is a static definition it really is a fallacy that is similar to the first one discussed—that of “relative poverty”. This is so because the bottom percentage is always determined in relation to the income of others. This is a popular theory with some special interest groups because you cannot eradicate poverty since you cannot abolish the bottom percentage no matter what you do. It is always there. And that justifies the existence of the antipoverty group or its programs for eternity. That appeals to them.

Just clearing up the poor thinking around poverty can do a lot to clarify what needs to be done, or needn’t be done, when it comes to wealth creation. And poverty will only be ended when wealth creation is allowed to flourish.

For some information on the actual state of American poverty go here.

Planning the world to death. Hubris and the New York Times

The New York Times has an interesting editorial regarding the food crisis in the world. And they have come to some important and rare conclusions. I say the conclusions are rare because they are correct. And, unfortunately, when it comes to economic issues, the Times rarely gets it right. Of course, old habits die hard so they do manage to get parts of the editorial wrong.

The very correct point they make is that the food crisis “could push tens of millions of people into abject poverty and starvation” and that it is largely “man-made --- the result of misguided energy and farm policies.”

Let us be a bit more precise. To call the crisis man-made spreads the blame to all of humanity, much the way the “man-made global warming” scare attempts to pin the blame on humanity in general. That sort of interpretation would be incorrect here. This crisis is politically-made. The culprits were elected officials like Barack Obama, Hillary Clinton, George W. Bush, Dianne Feinstein. The politicians of the European Union were involved as well.

Politicians intentionally foisted policies that provided them with political benefits but which would clearly result in world hunger. None of this was unpredictable. It was simple economics. This blog has been screaming about these policies long before the Times and the politicians realized there was a problem. And I did so, not because I have some sort of psychic abilities, but because the ramifications of the disastrous policies that the political class was pushing, including the New York Times, were obvious.

Just a little bit of Economics 101 is enough to predict that government policies like biofuels subsidies would push food prices higher globally. The problem is that the Times and the politicians both seemed to believe that if the bureaucrats had “good intentions” they could “rationally plan” the market in ways that abolish basic laws of supply and demand.

In any other field they would be laughed out of office for doing that. Imagine them thinking that rational, central planning could reduce the effects of gravity. But economics, more than the hard sciences, has the ability to attract charlatans who believe in the economic equivalent of alchemy.

We saw a concerted effort a few years ago to push for biofuels. That policy taxed consumers to redistribute wealth to farmers and big energy companies. The energy companies got the millions to produce biofuels which were worse for the environment, more costly to produce and which needed food, like corn, in the production process.

The European Union, the British government, the US federal government and many of the state governments, set up subsidies and mandatory requirements that companies produce these biofuels. In a short period of time those companies were getting rich producing a product that consumers didn’t want and which had to be subsidized to be competitive. They also purchased tons and tons of food. The more food they purchased the less food on the market and the higher the prices went.

The fat cats with political pull were living easy off these politically-created, artificial profits. The environmentalists were thrilled that a “clean” energy source was being used and many lobbied for greater subsidies. Big energy was thrilled as they were making record profits from the subsidies. The politicians could buy votes in the farm regions, while claiming to be concerned about global warming everywhere else. All in all that would increase their votes. They also got nice contributions from the big energy companies who were rolling in subsidized profits: just ask Obama and Hillary how much they got.

The Times, and many of their reporters and editorialists, has always had a disdain for free markets. They have preached the gospel of economic interventionism for as long as I’ve been alive -- and longer. They have believed that politicians, and the political process,, should take control of the vagaries of the market and manipulate things through various policies, in order to get politically-acceptable results. Market economists have long noted that such policies and plans always come with unintended consequences. What is particular shocking is that these consequences are not necessarily hard to predict.

But there is a hubris on the Left, or perhaps I should say among politicians in general, that they can somehow, through the sheer force of their own “innate goodness”, will, and government force, manipulate markets so that the results are politically desirable without bad consequences. Over and over they try to accomplish that, and over and over they create disasters. Their current disaster is resulting in millions of people starving to death because politically-planned markets don’t work.

Make no mistake about it, the current food crisis is almost entirely the result of political planning. The Left-of-center British newspaper, the Guardian, recently wrote that: “Biofuels have forced global food prices up by 75% -- far more than previously estimated -- according to a confidential World Bank report obtained by the Guardian."

They say the report is “based on the most detailed analysis of the crisis so far.” They also note that this contradicts the claims made by politically bodies. For instance, the US government pretends that their policies are only responsible for “less than 3%” of the rise in food prices. But a report for the British government apparently backs up the World Bank study and says that biofuels played a “significant” role in the food crisis. This report challenges a central plank of the Labour Party’s environmental agenda. So there is no surprise that the release of the report to the public has been delayed by the government.

One idea of how major an influence these political-boondoggels are in regards to the world food market is that “over a third of US corn is used to produce ethanol, while about half of EU vegetable oils go towards the production of biodiesel.” The UN World Food Program has been arguing that these policies were pushing 100 million people into starvation.

What is particularly sickening is that the very politicians who tend to portray themselves as advocates for the poor, are the leaders in the campaign for the policies that are killing millions of poor people. Can anyone say Hillary and Obama?

The root cause for this is hubris, their belief that they have the ability to second guess markets and plan massive economies. That is what the socialists have been advocating for centuries. It is no accident that the first nations to adopt these short-sighted energy and agricultural policies were the Left-wing welfare states. In the US the Democrats have been the major proponents. In the UK it was the Labour Party. In nation after nation the Left-of-center parties have been pushing central planning in the name of protecting the environment.

We saw centrally-planned economic policies regularly produce famine. Political planning under the Soviets killed millions of Russians, Ukranians and others, as food production was destroyed. The socialist planning ideals of Mao led to massive famines in China in the late 50s and early 60s. State regulation in India was responsible for widespread hunger. Yet, when China allowed markets to work, the hunger ended even as the population grew. When socialist Vietnam stopped centrally planning agriculture, food production turned around and the nation became a food exporter. When India undid their socialist controls, and allowed markets to operate, they too became a net exporter of food.

Now, mainly in the name of the environment, governments around the world are once again centrally planning markets. Politicians are using carrots and sticks, penalties and subsidies, to force markets to fit their agenda. The result is 100 million starving people. Politicians kill. They don’t mean to kill but they do it anyway. Their inherent need to tinker with, and regulate people, means that they must destroy the private plans of the people and impose their own plans instead.

One of the great myths about central planning is that politicians impose planning where only chaos existed. On the contrary, government planning destroys the plans of millions of people. And those millions of people are planning with information they have which no government has, or can have. They are using the local knowledge of their own situation and conditions to plan for their future. The politicians come in, and smash those rational, individual plans. In their place the politicians impose a political plan, based more on wishes and whims than on reality and facts. The only possible, long-term result of such economic planning is disaster.

As long as people believe that politicians can solve problems, these sorts of disastrous results will keep accumulating. The problem is that, even while these results are staring them in the face, advocates of central planning are ideologically blind. They offer more of the same rot that caused the problem, as the solution. So the Times, while it acknowledges that political planning caused the problem, demands that governments “vastly increase aid to the poorest countries.”

Where does that aid go? It goes to the governments of those countries in order to allow even dumber, more corrupt politicians, to dominate more of the local economy. Anyone who has lived in Africa knows that agriculture is dominated by the State. Many African nations have food marketing boards. Farmers are required to sell to these boards at below market rates. These government boards then sells the food at world prices keeping the profits for the state and passing it around to the political elite. The net result is that many food producers don’t wish to produce for the market, but only for their own personal consumption. Peasant farmers who attempt to sell their products in the open market can face jail.

Robert Mugabe intentionally destroyed the agricultural sector of his own economy and was applauded by the other African governments while doing so. He did much of it with the vast amount of foreign aid he was receiving at the time.

The Times get much of the editorial right. They want the end of agricultural subsidies in the United States, the end of biofuel subsidies and the end of tariffs. They have recognized that central planning didn’t work in the rich nations of the world but created world-wide disaster.

But they seem to believe that central planning in the Third World will solve problems there. Foreign aid creates central planning where it might not have existed otherwise. Aid funds are giving to central governments which then use the money the way governments everywhere use money. On one hand it is used to punish activity the government wants to stop and on the other hand it is used to provide subsidies to projects the government wants to encourage. Somebody has to decide which projects fit which category. Government-to-government aid forces the very kind of central planning on Third World nations which the Times is now condemning in the West.

But the Times dare not see the principles involved. To acknowledge that political planning doesn’t work would destroy the very foundation of their entire political belief system. So they entertain the fantasy that old failed planning policies can be replaced with new planning schemes. They will continue to endorse politicians and policies which thrust government bureaucracy into the market and they will continue to propose the abolition of local, individual planning with central, political planning. The Times, and Left-thinking politicians, will continue to pretend that such proposals mean that they are “compassionate and caring” while the advocates of markets are proposing “a dog-eat-dog kind of world.” And more disasters will follow.

Postscript: As a perfect example of the problems I mention in this piece consider this news from the BBC. Argentina's lower house of Congress has "approved a controversial package of taxes on agricultural exports. ...Argentina is one of the world's top producers of soya, grains and beef and the government wants a bigger share of the profits, it says to fight poverty."

Oxfam --- dragging people into poverty.

Bravo for Oxfam, they got this one right. The BBC reports that "Oxfam says so-called policies in developed countries are contributing to the world's soaring food prices, which hit the poor hardest." They report that Oxfam says fuels won't combate climate change.

A spokesman for Oxfam said: "Rich Countries... are making climate change worse, not better, they are stealing crops and land away from food production, and they are destroying millions of livelihoods in the process." The BBC says that the Oxfam report shows that "biofuels have dragged more than 30 million people worldwide into poverty."

I've lived in the Third World and written about how conditions were improving there dramatically for some time. But in a few short years greedy politicians, pandering to Big Agri and Big Energy managed to produce a policy that is good for no one but the politicians and the corporations who benefit from the subsidies and hand-outs. These people are literally starving people to death.

Meanwhile that great advocate of the poor, Barack Obama, is in bed with the very corporate interests who are helping starve people to death. The New York Times reports that Obama has close ties to the ethanol scamsters.

Pandering to the Big Agri Mr. Obama has been endorsing ethanol and the massive handouts that greedy corporations are getting at the expense of taxpayers. Obama's favorite welfare queens wear business suits. Former Democratic Senate majority leader, Tom Daschle, often travels with Obama. Daschle went from the halls of Congress straight to serving on the board of "three ethanol companies" and "works at a Washington law firm" where "he spends a substantial amount of time providing strategic and policy advice to clients in renewable energy." The Times also notes that one point Obama was criticized because he flew at "subsidized rates on corporate airplanes, including twice on jets owned by Archer Daniels Midlands, which is the nation's largest ethanol producer" and, I might add, one of the biggest recipients of corporate welfare around.

Apparently Obama does love poor black folk provided they can vote in the election. Then he has compassion. When his pandering to the ethanol lobby leads to pushing millions of black folk in Africa back into poverty Obama doesn't give a damn. Obama's concerns about poverty and hunger don't go far. He's a fraud.

Which national leader really hates the poor?

What would you call a government that intentionally promoted a policy that increased world hunger and gave subsidies to the better off at the expense of the poorer members of their own society?

If you’re thinking George Bush think again. It is the left-wing Labour government of New Zealand. Helen Clark’s Labour Party is a relatively nasty bunch and Ms. Clark is never one to shun getting in bed with the most disreputable members of parliament in order to form a government. That is why she happily signed on with a Religious Right Party along with one run by an outspoken xenophobic, homophobic authoritarian.

None of this worries Ms. Clark and her followers. All these groups are fairly similar in that that love two things. One is the hold power for themselves and bask in the perks of office. The other is to micromanage the lives of others. Which they love the most is open to debate.

The most recent proposal the government is making is to push the anti-poor biofuels that were promoted stupidly by certain special interest groups: mainly agribusiness, big energy, and their allies in the environmental movement. These biofuels take grains and other food stuffs and coverts them into fuel. There are several problems with this.

First, they cost more to produce than the alternative so they require subsidies to exist, which is why agribusiness and big energy corporations love it -- guaranteed income from the state. Next, the consumption of so much food for fuel is driving up world prices for food. The net result of this is increased starvation in the Third World -- so much for compassion for the world’s hungry! And finally much of the biofuel that is produced is actually more harmful to the environment than the petrol that it replaces.

New Zealand’s Labour Party was never one to allow facts to get in the way of policy. So they are pushing heavily on the biofuels program. Labour is intent on using state force against people to make them switch to the biofuels. Of course they will brag about the pittance they give in foreign aid neglecting to point out that their biofuel policy will kill poor people. But they are poor people who can’t vote for Labour in the next election so they don’t matter.

But the poor in New Zealand will also get screwed over. Of course Clark and her acolytes in Labour will blame that on capitalism and the reforms that took place 20 years ago. Those market reforms, by the way, are credited with taking a moribund economy and putting life back into it. But Clark has used them as the scapegoat for any problem that crops up. I think she evens blames her bad teeth on the reforms.

What Clark and Labour want to do is to lower the cost for the biofuels while adding extra taxes on regular petrol. Older cars can’t use the biofuels. Newer cars can use it. But people buy older cars because they can’t afford new cars. So Clark is lowering the taxes on the petrol purchased by the wealthier drivers in her country and raising the taxes on the poorer drivers who can’t afford new cars. This is about the dumbest tax idea she has come up with since she tried to tax cow farts.

The new biofuels can harm older cars and if people don’t understand that and use the fuel they may have to fork out money they don’t have for repairs. But Labour will spend lots of money on an ad campaign to tell everyone how wonderful biofuels are and that it may pose a risk in older cars. So the owners of the older cars will just have to buy more expensive petrol.

I am always surprised at how often Left parties around the world propose policies that redistribute wealth from the poor to the rich. They do it constantly. I remember when I used to take the train into work, in Chicago. I discovered that the average commuter on the train had an income considerably higher than people who drove to work. Yet what did the Democrats who ran the city do? They subsidized the train rides of the wealthy by putting extra taxes on the fuel of the poor. Oh, that makes lots of sense.

So come next year New Zealand’s Labour Party will point to the biofuel program as a great accomplishment. They will manage to starve some people in developing countries to do so. They will help hand billions in subsidies over to Big Energy and the Big Agriculture in the process. They will not help the environment one bit and most likely will actually increase the amount of green houses gases being emitted. They will lower taxes for the wealthier drivers in the country will imposing higher taxes on poor drivers. And they will do this because they care about the poor and they care about the environment.

Helen Clark just loves them to death.

Wealthy and healthy leads to decline in infant mortality

As someone who spent a decade of my life living in the Third World I have long challenged the gloom and doom advocates. The reality was never as dim as the pessimists made it out to be. For the most part, in most places, the poor of the world have seen vast improvements in their lives.

The new Matlhusians, like Paul Ehrlich, had a tendency to be wrong. Wrong would be a vast understatement. They have been spectacularly wrong. Even phony psychics had better “hit” rates. But then “psychics” know they are frauds and make educated guesses. The neo-Malthusians are blinded by ideology and thus unable to digest unpleasantries such as facts.

Today’s New York Times has an article based on the most recent data from the United Nations Children Fund which confirms that reasons for optimism are still strong. The paper reports, “For the first time since record keeping began in 1960, the number of deaths of young people around the world has fallen below 10 million a year....”

This achievement is more spectacular when you realize that the size of the childbearing population has grown significantly since 1960. The report notes: “In 1960, about 20 million children died annually, but the drop since then has been steeper than 50 percent because the world population has grown. If babies were still dying at 1960 rates, 25 million would die this year.”

UNICEF says they expect further massive drops in infant mortality rates in the next few years. There are storm clouds on the horizon, however. The report notes that “malnutrition is an underlying factor in 53 percent of all child deaths, anything that feeds children — whether that means large-scale aid during famines or simply better seeds and fertilizer — reduces deaths.”

Actually this is partially right, about the role of hunger in mortality, and massively wrong in suggesting food aid is necessarily a panacea. Not everything that is done, in regards to food aid, helps. Sometimes it is counterproductive. Here are a few reasons.

1. Food aid is bureaucratic and often takes so long to arrive that it becomes available only after the underlying cause for the aid is over.
2. The aid, if it arrives after the problem is mitigated, tends to suppress or destroy local food production making future food problems more likely.
3. Food aid is often channeled through national governments who use the aid to cement power for themselves. Yet these governments, through various policies including armed conflict, are often the underlying cause of the malnutrition. Food aid helps these regimes remain in power which allows them to inflict higher death rates on their people for decades to come.
4. Food aid is periodically channeled by corrupt national regimes to the world market where it is sold. The revenue from the sale of the aid has been used to purchase arms used to attack the very people it was meant to help.

And the dark clouds include the so-called global warming “solution” of biofuels. As I have pointed out in Save the Planet, Starve the World, biofuel programs, pushed by the political elites in Europe and the United States, are consuming vast amounts of food to produce biofuels of questionable advantage. At least with oil consumption drivers weren’t directly taking food off the plates of the world’s poor.

Now to make matters worse the Stalinists who run the current Russian government are pushing to create an “OPEC” of grain producers to cartelize grain production the way the OPEC governments control the supply of oil. I suspect this measure is likely to fail as the US is the Saudi Arabia of grain and unlikely to join such a cartel.

China is so worried about the use of food to produce fuel that it has stopped the building of new biofuel production facilities. Yet wealthy “environmentally active” governments in the West are throwing billions in subsidies to produce this fuel, which has little advantage over normal fuels. The net result is that politicians in the West are using the confiscated wealth of their taxpayers to bid food away from the world’s poor to turn that food into fuel for other wealthy people to use. They call this “caring”.

And this ill-conceived “solution” is only going to get worse as the U.S. presidential candidates jockey for position. They will use biofuels as a way to throw money at America’s prosperous farming community, in order to buy support. And then they will coo about how “environmental aware” they are in addressing “the global warming crisis.”

Environmental disasters like Al Gore promised to drive up food prices to “protect our vital agricultural lands” (which weren’t under threat to begin with). And they did. Gore says “I’ve always supported ethanol, I have a consistent record of shoring up the farm safety net.” This translates into policies that starve poor people in order to subsidize rich American farmers. As vice president he promised, “Our administration’s goal is to triple the use of biomass technologies, ethanol, gasoline additives, plant-based textiles and other environmentally friendly products by 2010.” He got his way, biofuel is the new rage and people are dying because of him. So much for the compassion of this sanctimonious sermonizer.

Keep in mind the UNICEF figure that 53% of all child deaths are the result of malnutrition. Diverting food from tables and into fuel tanks is contributing to the death of almost five million children per year.

We should also note that almost 1 million infants die from malaria every year. One of the most efficient methods of preventing malaria was DDT which, after the hysteria whipped up by Rachel Carson in 1962, was eventually withdrawn from the market. Infections from malaria skyrocketed as a result of the ban and millions more died every year. After several decades of shunning DDT various governments, along with the World Health Organization, have realized that the ban, once touted as a “solution” to problems, actually made the situation worse. The ban is being lifted and we should see more improvement in the infant mortality rates as a result of ignoring the greenies on that issue.

Apparently the politicians learn slowly. While realizing that the DDT “solution” of the past created problems worse than the problems they were meant to solve they are still embracing new policies which have similar results.

UNICEF says that “public health” measures are the reason infant mortality rates have declined. And no one disputes that such measures are a contributing cause. But UNICEF, which funds such measures, is also blowing their own horn to the exclusion of the other instruments in the orchestra.

A large degree of improvement in the life span of individuals is caused by changes that are not normally seen as health measures but as wealth measures.

There is a direct correlation between economic freedom and individual wealth and a direct correlation between wealth and health. Prof. James Gwartney, of Florida State University says: “Free economies grow faster, have a cleaner environment, a lower infant mortality rate and less political corruption. The per capita gross domestic product is about 10 times the income level of the least free quartile. Further, the life expectancy of the freest group is 77 years, compared to 52 years in the least free group."

Nowhere is this more apparent than in places like China, India and Vietnam. All three nations experienced famine -- though in Vietnam is was much less severe -- when their populations were significantly smaller. Yet, in spite of increased populations they are more food secure today than in the past. All three instituted major reforms which liberalized the economy and all three have seen food production increase along with massive declines in poverty.

Public health measures in these nations are minimal, especially compared to West. But economic liberalization has improved individual prosperity and that has resulted in better health, including lower infant mortality rates and longer life expectancy.

UNICEF, however, can’t take credit for changes in economic policies so one can understand them ignoring the role of prosperity in reducing infant mortality. After all the purpose of the press release is also to promote UNICEF. But the role of economic freedom in improving living standards can’t be ignored by those who are truly concerned about the poor of the world. Nor should we ignore the reality that “environmental solutions” that once were chic and politically popular inflicted a great deal of harm and that it took decades to remove those policies. The DDT ban may now be removed but it took the deaths of millions and millions of people for that to happen. I suspect deaths caused by the ethanol craze will continue to climb for decades to come before this disastrous program is finally taking off political life-support.

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Poor thinking about poverty rates.

The most recent poverty rate figures for the US were released recently. Some wag at Huffington Post, which is so far Left they need crutches to stop from falling over, thinks he is witty to compare the US poverty rate to that of Iran. He then notes that since Iranian policies are to blame for the poverty rate there then George Bush’s policies are responsible here.

I long for the days of such simplistic thinking. Alas, I outgrew them somewhere around fifth grade. There are few people who hold Mr. Bush in as much contempt as I do, but this sort of statement is irrational. The poverty rate wasn’t much different under Bill Clinton. In fact it has been relatively steady for some decades, ranging in the 11% and 12% area for some years now. Apparently the Huffington Post writer used the wrong poverty figure for the US. He said it was 13.3% when the report, on page 11, says: “The official poverty rate in 2006 was 12.3 percent, down from 12.6 percent in 2005.” He got his number from an inaccurate summary -- it really does help to read the actual report before commenting on it.

Congressman John Rangle, always looking for an excuse to blow off hot air, claimed that the numbers show "poverty is higher" even though that is not what the numbers actually show. The Left-of-center Guardian newspaper in England went even further with falsifying the facts. One columnist there urged Democrats "to represent the swelling ranks of have-nots" and claimed "that since George Bush came to power the poverty rate had risen by 9%." As we shall see the ranks of the have-nots is not swelling at all but declining. And the report they cite says as much.

We should also note that America’s “poverty rates” are a far more complex thing than some recognize. Actually life is often far more complex than simplistic theories, Left or Right, generally accept.

One issue is that not all nation use the same formula to measure poverty rates. Change the formula and you change the outcome. Other nations discuss poverty only after all welfare payments of all kinds are added into the equation. So their poverty rate, as an example, might be 14% without the payments, but only 6% with the payments factored in. The US calculates the rate prior to the payment of any government benefits. Often when anti-Americans compare poverty rate figures they are unaware that they are comparing apples and oranges. This is regularly brought to their attention yet they persist in the false comparison for reasons of their own.

Also ignored is that the “poor” families are doing very well when it comes to the comforts of life. That is not to say some aren’t in terrible conditions. But most poor own their own car, own major appliances (which my grandparents never had in their middle class existence of 50 years ago). Poor families own color televisions, DVD players and so forth. If we look at the comforts of life alone the poor in America would be middle class in much of the world. This fact is ignored.

The Boston Globe editorialized that “poverty persists” and “only some people are doing better”. Income for white Americans, they say only increased by 1.1 percent while that for African-Americans, Asians and Hispanics there “has been no statistically significant change in income.”
This isn’t quite the case as this census chart shows. Consider the median household income in the US in constant dollars, meaning adjusted for inflation. It went from $36,847 in 1967 to $48,201 in 2006. The census report notes: “Compared with 1967, the first year for which household income statistics are available, real median household income has increased 30.8 percent.”

We should also look at the actual poverty rate, always remembering this is prior to any benefits. The first year it was calculated was 1959 when it appears to have been around 22.5%. As this chart from the report shows there is a drastic decrease throughout the Sixties, bottoming out around 1968/1969. Since then the rate has fluctuated within a very narrow range. Oddly what is ignored is that the most rapid decline in poverty numbers took place before the massive welfare programs of the Johnson/Nixon era.Even the total poverty rate of 12.3% is a bit misleading. Left of center economist Robert Samuelson looked at the numbers and concluded that things would be very different were it not for illegal immigration. Take illegals out of the equation and the poverty rate would have declined. From 1990 to 2006 the number of poor increased by 2.9 million people. Since population grew significantly during this period this meant a poverty reduction from 13.5% to 12.3%. But of the 2.9 million additional poor, “Hispanic accounted for all of the gain.” White Americans saw their poverty rates decline slightly. African Americans saw poverty rates cut dramatically.

Samuelson says that the issue of immigration and poverty can’t be ignored. He also says some people are being untruthful about the state of poverty in the US.

It's usually held that we've made little, if any, progress against poverty. That's simply untrue. Among non-Hispanic whites, the poverty rate may be approaching some irreducible minimum: people whose personal habits, poor skills, family relations or bad luck condemn them to a marginal existence. Among blacks, the poverty rate remains abysmally high, but it has dropped sharply since the 1980s. Moreover, taking into account federal benefits (food stamps, the earned-income tax credit) that aren't counted as cash income would further reduce reported poverty.

The reality is, that if we remove the newly arrived poor from the statistics, then poverty rates in the US have fallen. Unlike many wealthy nations the United States absorbs millions of poverty stricken, uneducated poor people each year. In spite of that the poverty rate has remained relatively steady for decades.

More importantly we need to consider whether a slight increase would actually mean things are getting worse. It all depends on where we see the increase. It would be regression if the poverty rate for native born, or naturalized citizens, increased. But that hasn’t happened. Their poverty rates have declined. So they aren’t worse off.

The only place where the overall number of poor has increased is among illegal immigrants. This is due to larger numbers of such immigrants in general. But are they worse off? No. These immigrants are also richer than they were before their arrival. Certainly if they are “worse off” they could return to their previous conditions with much less effort than it took to arrive where they are now.

In many ways the poverty rate is like the average height of a family. You really need to know what is going on before it holds any meaning. If you had a family with an average height of 71 inches in 2005, but only 53.5 inches tall in 2007 does that mean they shrunk? If you discovered that in 2006 they adopted two children each of whom was 36 inches tall that explains the decline. You needn’t conclude that there is some horrific medical problem.

Americans are not poorer but wealthier. In terms of steady dollars, income for the average family has increased at a relatively steady pace for decades. America’s poverty rate, for native born, is continuing to decline.

The average appears relatively stagnant only because of newly arrived poor people. The great miracle of America for generations is that poor people can arrive in vast numbers and become wealthier without making others worse off. The increased “poor” are people who have improved their lives significantly in recent years. If anything they are making even more rapid progress than everyone else. That is why they immigrated under such difficult conditions.

The poverty rate in the US, under natural market conditions, would probably be even much lower. But nativists and bigots have tampered with the market to prevent poverty alleviation for the newly arrived poor. There has been a concerted effort, mostly based on abysmal ignorance of how markets work, to legislate lower wages and worse working conditions for immigrants through legal sanction for hiring such individuals. This racist approach makes it more difficult for these immigrants to find work with decent pay and decent working conditions and makes them more vulnerable to exploitation. Absent this effort ,I suggest that the “poverty rate” (by US standards) for these people would be even lower than it is.

The US poverty rate is widely misunderstood and often intentionally so. By itself it tells us little until we break it down into individual components. When we do a more detailed analysis we find that all the groups represented within that average are generally better off than they were a few years ago. The native born and naturalized citizens saw incomes rise steadily over the years. And the illegal immigrants, who are poor in America today, are much wealthier than the were before their perilous journey to the United States. On a whole that number shows America at its best, not at its worst.

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Globalization haters out of tune with the world's poor.

Every so often some international conference dealing with world trade and issues revolving around globalization takes place. Without fail the organized forces of the anti-globalization movement appear outside the gates. They whine, they protest, they frequently riot and attack. If you ask them they’ll tell you that what they do is justified because they represent the world’s poor.

What is clear is that rarely are the protesters themselves poor. These protesters tend to come from wealthy nations and tend to have been born in families that are more economically advantaged than the people on who’s behalf they pretend to speak. Critics of the anti-globalists have long contended that they don’t represent the poor at all but are more in tune with politically fashionable views among the more wealthy of the world. Now an on-going poll of world opinion seems to back this up.
The Pew Global Attitudes Project surveyed some 66,000 people in 44 nations. Generally the results have been met with much interest and little anger. But the anti-globalization movement itself is rather unhappy with the results and with good reason.

The poorest nations have populations more supportive of globalization than do the wealthiest nations. The survey noted that: “Only one-in-ten Americans and Canadians (10%, 11%) characterize globalization as a very good thing, and fewer Europeans agree. By comparison, nearly six-in-ten in Nigeria (58%), and more than four-in-ten in Kenya (46%), Uganda (44%) and South Africa (41%) see globalization as a very good thing.” Only Jordan has a majority that says globalization is bad.

It is true that in all 44 nations a majority of the people said globalization is either “somewhat good” or “very good”. But those who see globalization as “very good” are significantly more likely to come from poorer nations.

Even when it comes to contentious “cultural” issues majorities, especially among the young, see globalization as good. And most agree that they have a better selections of food and medicine as a result. When anti-globalization forces target “fast food” restaurants like McDonald’s for their ire it again appears they reflect the values of the world’s economic elites. German’s, by a six-to-one margin, think that fast food has a negative effect on their life. In Canada and the United States significant margins share the German view. But more than seven out of ten, in the Philippines, Vietnam and China, give fast food a thumb’s up.

“Commercialism” and “consumerism” are further favorite targets of the anti globalist. And while 63% of the French say both are threats to their culture the poorest countries, on a whole, don’t see it that way. The survey reports that this criticism is not prevalent “in the Middle East/Conflict Area. Majorities in Lebanon (64%), Uzbekistan (57%) and Jordan (54%) say commercialism is no threat to their culture. Pluralities in Turkey, Egypt and Pakistan agree.” In Vietnam 66% say commercialism doesn’t threaten their culture. In Nigeria its 65% and in Angola its 56%.
Multinational corporations are another favorite target of the anti-globalist. Again this is at odds with the views of the world’s poor. The survey reports: “In 33 out of 43 countries in which the question was asked, majorities think that foreign corporations have a generally positive influence on their countries. Majorities in every African country surveyed say major foreign companies have a good influence.” The survey also notes that: “Dislike of foreign firms is mostly limited to people in the major advanced economies of Western Europe, the U.S. and Canada.” Once again anti-globalist attitudes are more in tune with those of the wealthy and well-off. For instance 93% of the Vietnamese and 78% of South Africans view multinationals favourably while only half of Americans and half the French do so. What is particularly ironic is that in every single nation surveyed multinationals have more favourable support than do the anti-globalists themselves.

Support for international markets tends to indicate support for domestic economic freedom as well. A majority in 33 of the nations surveyed agreed that people are better off with free markets. The highest level of support was found among the residents of Vietnam, ostensibly a socialist state, where 95% agreed. And while the United States is often seen as being the most “free market” country in terms of ideological support the fact is that the free market has higher levels of support in Lebanon, Vietnam, South Korea, Nigeria, Ivory Coast, Ghana, Uganda and South Africa.
The anti-globalists have denounced global capitalism and domestic free markets. They claim to do so on behalf of the world’s poor. But it appears that globally most people disagree with them—most espeically the poor themselves.

Photo: The photo is from a free trade demonstration held at the UN Summit on Sustainable Development. The poor people of South Africa marched demanding freedom to trade. Only a few of us, who were delegates to that conference, joined the poor on their march (I was about half way back in this crowd). Most the delegates never strayed from the luxury hotels and restaurants though they loudly claimed they were speaking for the poor. What they actually meant was they speak for the poor because the poor are too stupid to speak out for themselves properly and don't hold the "right" views as the elite at the conference see fit.

SOURCE: A source for this information has been requested. The information in question was found in this report: Views of a Changing World.

Workers, poverty and Marx

May 1st is of little significance in the United States. Other nations, however, still have a holiday rooted in old Marxist nonsense. It is sometimes called International Workers’ Day. Those with a particularly strong faith in the Church of Marxism toss the word “Solidarity” into the mix along the way as well. Basically it is a day for the most dogmatic members of the Marxist cult to strut around, sound pompous and show their ignorance about basic economics.

In essence they use the day to propagandize in defense of socialist theory and promote the idea that it will improve the lot of the workers. Marxists argued that socialism was required because under the “whip” of capitalism the economic plight of workers would continually decline. Workers would be forced into abject poverty.

One of the prominent socialist groups pushing that idea was the Fabian Society. A few years back I saw a BBC show called Big Ideas. And in it they interviewed Michael Jacobs, general secretary of the Fabian Society. I thought this would be interesting to watch since he was supposed to be talking about the plight of workers under capitalism.

Since his socialist group is more than 100 years old I figured it would be interesting to see how he dealt with the issue of the deteriorating condition of workers since workers in fact are vastly more prosperous today than at any time in history. The Marxist theory was about as wrong as one could be on that issue.

Jacobs, of course, excoriated capitalism quite loudly. But his complaint was the polar opposite his predecessors in the Fabians. His complaint was that under capitalism people had so much material wealth they lost sight of the “important” things in life. They failed to stop the roses (red no doubt) along the way. The BBC described the exchange this way, Jacobs “argues that although Britain has become more prosperous, we have sacrificed our quality of life. We are working too hard, buying too many useless luxuries, and destroying the environment.” Of course, he argues that the way to prevent this sort of materialistic prosperity is socialism.

What has to be embarrassing to the Marxist is that the more capitalist a country the higher the living standards of workers. We have had one of the most extensive, longest running, social experiments in the world when Marxists took violent control of multiple nations. They had the power to mould those nations anyway they saw fit -- and did. The result was poverty not prosperity.

It didn’t matter where you looked you saw the same results. East German couldn’t hold a candle to West Germany. North Korea can’t even come close to the prosperity in South Korea. The long term results of socialism is dismal compared to the “anarchy” of the market.

Consider the recent history of the Chinese people. Under Maoist dogma the economy was centrally planned. Collectivism was imposed and private property abolished, profit seeking was a criminal offense. And millions of people starved to death. Jasper Becker, in Hungry Ghosts, outlines exactly how the Maoist regime’s inability to understand the economy condemned millions of peasants to death by starvation.

But a few years back Chinese communists did something odd. They redefined their socialist ideology to include massive free market elements. And the more they freed the market the more prosperous the Chinese people have become. Each wave of market liberalisation has propelled the economic boom in China even further. For thirty years now that nation has witnessed massive growth rates. In that time hundreds of millions of people have been lifted out of poverty -- not by welfare and redistribution of wealth but by the prosperity-creating nature of free markets.

Now much is made of the rural poor in China. Rural farmers have not done as well. And they haven’t. But it was not the reforms that harmed them but the lack of reforms for them. One very real problem is that the Chinese government has not yet created secure property rights for farmers. Land has often been confiscated from the farmers to build factories or housing and the farmers have seen little or no compensation from that. Their only means of earning a living is taken from them by state action not by market forces.

In a market the factory that wants this land would have to value the land higher than the value the farmer places on it in order to secure it. He would have to pay the farmer for the property. This would enable the farmer to relocate his enterprise elsewhere or to use his profits to start a business himself.

This illustrates the driving force of poverty in the Third World. The fact is that hundreds of millions of people, if not over a billion, have insecure property rights. Throughout the world people live in housing they don’t own and which may be taken from them any time the government wishes. Without secure property rights they don’t invest in expanding the value of the property and can’t use it as collateral. They have assets but they technically don’t own them and therefore are hampered in how they can use them.

The best method for alleviating poverty is through true markets where the State can’t allocate privileges to anyone and where property rights are secure.

Rain clouds behind every silver lining.

There are always some people who find rain clouds behind every silver lining. There are always negative nabobs of doom wanting to cause despair and depression on the happiest of moments. These are the people who show up at your birthday party reminding you that it only means you are one year closer to dying.

The negative nabob I’m after today is Haruhiko Kuroda of the Asian Development Bank. Now what has been happening in Asia? Economic prosperity! Yes, poverty is plunging. Millions and millions have been lifted out of poverty. And this is a reason to mourn?

It is according to Kuroda. Here is the logic of this bureaucrat:

“Rapidly growing economies like China and India have shown that although absolute poverty has been reduced substantially, the income gap between the poor and the rich has widened," he said.

"That means that in coming years many Asian economies must be mindful of this big problem."

As Penn & Teller might put it: Bullshit!

Now pay attention to what he is actually whining about. People are better off across Asia today. Life is improving across the board for all people, “absolute poverty has been reduced”. But some people saw more improvements than others so an “income gap” “has widened”. It isn’t that some went backwards as a result. It is that they didn’t improve as fast as others.

Why should they? No answer is given to that question. Exactly why should all groups advance at the same rate? Should all runners in a marathon be required to run at the same speed? I have yet to hear an explanation as to why improving life for everyone is a “big problem” just because the improvements are not at the same pace in all places.

This is really just Marxist bullshit wrapped up in new packaging.

Consider a village where, for the ease of argument, everyone produces trinkets which are sold in the nearby market. In fact the village is famous for the trinkets. And each villager earns $100 per year as a result -- which is sufficient for them to live but not well.

Now one of the villagers is making the trinkets when he has an idea. He realizes that with a little ingenuity he can double his output of trinkets by using some machinery he invents. He can now earn $200 a year doubling his income. So he does.

Now the other villagers come along and realize he has this new machine but they aren’t sure how to build it. They beg him to produce machines for them. But he tells them, “If I do that I won’t be able to make my own trinkets and I will starve.” He then suggest that each of the other villagers buy his machine from him for $10 per machine. That $10 investment will earn them an additional $90 ($100 extra in sales less $10 for the machine) taking their incomes up to $190.

Now that is a phenomenal jump in the standard of living for the villagers. And the smart man who made this all possible? He sold 99 machines for $10 each and earned $990 instead of the $200 he would have made if he kept his machine for himself.

And what has happened! A “big problem” according to the advocates of equality. Sure this guy improved the life of everyone in his village but now there is more inequality. If you don’t like obscenity skip to the next paragraph: BIG FUCKING DEAL!

The BBC reports that Karoda wants government to spend more money (the predictable response of a bureaucrat) to “address the gaps between rich and poor.”

Now consider what all this claptrap really means. The gap between rich and poor is a “big problem”. But previous to this explosion of entrepreneurial activity everyone was very poor -- except for government officials of course. Then there was no “gap” that anyone worried about since only the political class was doing well. Everything was just fine. Only by improving the income of most people is a gap created. Why is equality of income a virtue? Should we strive for the past where all were equally impoverished? Or accept a world of unequal prosperity?

And what is Kuroda suggesting? He wants government programs to redistribute wealth in one form or another. That is all he can suggest since any program, no matter what it does, has to be paid for by someone. And obviously he wouldn’t be suggesting the people at the low end of the “gap” pay for the bill. So he wants to tax those who did well to benefit those who did well but not as well.

And he assumes that the increased taxation will have no impact on the ability of the economy to continue lifting people out of poverty. There is always an assumption that is falsely made by such bureaucrats that the distribution of income is unrelated to the increased prosperity of the entire nation. So they conclude they can change the distribution without having any negative impact on the wealth creation process. But the evidence is strong that as you redistribute wealth you inhibit wealth creation.

Go back to our village example. Say some local politicians comes in and tells the machine builder that he will tax the income from the machines so that in the end the man is making as much as he if remained a trinket producer himself. That way no inequality is produced. Why then would this man bother? He is making $200 instead of $990 and the other villagers are earning $100 instead of $190. But, and this important, there is LESS inequality as result even though everyone is poorer as a result.

You diminish the increasing prosperity for the poor as well as the rich but you do achieve more equality. Socialism inherently is about equal misery since it can’t produce the goods -- never has and never will.

If I were to make $100,000 per year (and don’t I wish!) there are places in the world where I would be a pauper -- like a meeting of top intragovernmental bureaucrats addressing inequality for instance. But am I in bad shape merely because while I’m earning $100,000 while someone else is earning $250,000?

If my standard of living is improving it is improving. If for that to happen the standard of living of others is improving as well, but at a slightly faster rate, then so what? I’m still better off. And I’m glad of it.

The “big problem” is not a problem. It is an excuse for bueaurcrats to increase their ability to manipulate outcomes so as to increase their own power and prestige -- and their wealth as well I might note. Sure inequality will result but they will be on the top of the heap and that is how they like it!