Thursday, August 16, 2007

How To Really Make Poverty History

1. Fire all charity and aid workers. Cancel Third World Aid.

2. Remove all car bumper stickers such as 'Make Poverty History' and 'Fairtrade not Free Trade' and 'Dump The Debt'.

3. Ensure your government implements these four vital steps.

i) Maximise freedom for their citizens.

'The highest form of economic freedom provides an absolute right of property ownership, fully realized freedoms of movement for labor, capital, and goods, and an absolute absence of coercion or constraint of economic liberty beyond the extent necessary for citizens to protect and maintain liberty itself.'

ii) Ensure the rule of law and order.

iii) Ensure checks and balances are in place to minimise corruption and cronysim.

iv) Refrain from doing anything else.

Norwegian economist Tor Dahl passionately made these arguments in his keynote presentation at the World Future Society's annual meeting. Dahl is the chairman emeritus of the World Confederation of Productivity Science. He asked,

'Why are South Asians more productive outside of India and China? Why do Russians have the highest per capita income of any ethnic group in the U.S., but very low per capita income in Russia? Why are Mexicans five times more productive in the U.S. than in Mexico?'

The answer is that productivity flourishes when people are free, safe, and justly treated. Dahl calls this the framework for prosperity. So what's the evidence?

Maximise Freedom
Dahl showed the correlation between the Index of Economic Freedom and each country's GDP. This Index encompasses trade freedom, investment freedom, freedom from corruption, and the protection of property rights. The top 10 countries' scores cluster around 80 on a 100 point scale. The U.S. is No. 4, after Hong Kong, Singapore, and Australia. The poorest countries are also the least free, e.g., Zimbabwe, Burma, Libya, Turkmenistan, and Chad. They generally scored in the 40s. Around 55% of prosperity (R2 = .55) can be attributed to the prevalence of economic freedom.

Ensure the rule of law and order
Dahl then looked at lost years of life per 100,000 population due to hunger, disease and conflict in each country. He got an amazing R2 of .51, which he said means that about 51% of prosperity can be attributed to people living in safety. The safest countries included Iceland, Japan, Israel, Singapore, and Australia. The U.S. was number 31 on the list.

Minimise corruption
Using a freedom from corruption index, Dahl got an R2 of .83, which he interpreted as meaning that approximately 83% of the variation in prosperity across countries can be explained by good governance. The least corrupt countries included Finland, New Zealand, Singapore, Canada and United States. Among the most corrupt were Nigeria, Madagascar, Indonesia, and Moldova.

The least corrupt countries included Finland, New Zealand, Singapore, Canada and United States. Among the most corrupt were Nigeria, Madagascar, Indonesia, and Moldova.

via Reason. Additional comment at Jack Lacton