The View From 1776

G8 Socialist Gospel Redux

More evidence of the futility of liberal-socialists’ faith that poverty can be ended simply by shoveling money into third-world economies.

In G8 Socialist gospel I wrote: Socialists, which includes all of Western Europe and nearly half of the United States, sincerely believe that redistributing private property will magically transform human nature, end poverty, and bring peace, tranquility, and prosperity to Africa.? In the real world this is dangerous and wasteful sentimentality.

The August 31, 2005, issue of the Wall Street Journal carries an op-ed article by C.K. Prahalad, Distinguished University Professor at the Ross School of Business, University of Michigan, which adds some interesting perspective to the issue.

It can be accessed here if you are a Journal online edition subscriber.

The following is an excerpt:

By C.K. PRAHALAD ?August?31,?2005

There is an inherent paradox in the debate about poverty alleviation that escapes even the most sophisticated observers in the West. Consider the conventional thinking about China and India: They are seen as a threat to the West. The fear is not only about “exporting well paying U.S. jobs” but also about competition for resources such as oil and commodities. Yet India is home to more than 500 million people who live on less than $3 a day. In China, the number may be around 400 million. Just these two countries represent 900 million people in poverty, a larger number than the entire population of Africa. There are about 600 million in Africa who live on less than $3 per day. Why, then, do China and India evoke fear and anger, while Africa elicits pity and guilt?

Despite the magnitude of their respective poverty problems, China and India may have a chance of meeting the Millennium Development Goals established by U.N. Their economies are following the lead of other countries that have raised their populations into a middle-class economic base. For example, between 1975 and 2004, GDP per capita in South Korea increased fourfold. Over the same period, Malaysian incomes rose threefold.

On the other hand, in those decades, per capita incomes in Nigeria declined by a tenth. Why? During the period 1955-2004, the West and multilateral institutions invested more than $1 trillion in aid and subsidies in emerging economies. But poverty persists. It would seem, therefore, that we need to challenge the role of aid and subsidies in promoting sustainable economic development. If poverty cannot be eradicated with humanitarian handouts alone, what is the alternative?

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The G-8, led by Tony Blair and supported by Jeffery Sachs and Bono, believe that debt relief and a doubling of aid from rich countries to poor, especially in Africa, is the way to go. A less popular alternative focuses on the involvement of the private sector in poverty alleviation through the development of market-based ecosystems.

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