Poverty, Debt, Subsidies, and Social Movements

Stephen Pollard, senior fellow at the Centre for a New Europe, criticizes the popular Make Poverty History campaign in a Times op-ed.

The aim of the Make Poverty History campaign is, of course, laudable. There is, however, one problem. The sheer wrong-headedness of the campaign’s proposals to eliminate poverty leads one to think that Moss, Clooney et al are not mere adornments but have been responsible for the analysis underpinning them. The campaign could more accurately be renamed Make Poverty Permanent, such would be the effect of its proposals being implemented.

The group’s manifesto has three aims: “trade justice”, “drop the debt” and “more and better aid”. They are, respectively, dangerously misguided, pointless and counterproductive.

While Pollard's criticism of the movement is generally correct, the issues are more complicated than his article acknowledges.

In rightly criticizing calls for additional foreign aid, Pollard fails to explain why cancellation of Third World debt is "pointless." Surely there is little to be gained by maintaining an expectation that poor countries tax their citizens to transfer funds to rich nations. The lending nations are unlikely to ever be repaid, and to the degree that debt stifles development, maintaining that expectation actually reduces its likelihood of fulfillment. There are a number of good reasons for free market advocates to favor debt abolition.

Both Pollard and Make Poverty History misunderstand the issue of protectionism. Each blames rich countries' farm subsidies for exacerbating Third World poverty. Pollard writes:

If those behind Make Poverty History were serious about ending poverty they would be campaigning for property rights and the rule of law — for better governance, in other words. And they would campaign not to abolish free trade but to extend it — attacking, for instance, the EU Common Agricultural Policy and its immoral tariff barriers against the developing world.

The case against protectionism is not so simple, however. As Arvind Panagariya has repeatedly argued, LDCs will actually be hurt by the abolition of the EU CAP's agricultural subsidies. Thanks to privileged market access granted under the Everything But Arms Act, extremely poor countries import food at subsidized prices but sell their exports within the EU at tariff-inflated prices. The end of this preferential protectionism is a terms of trade loss for the poor nations who have GSP access. This harms them, contrary to the claim by Pollard and Oxfam.

Social Movements
As the Economist notes today, the liberalization of tariffs would do more to "make poverty history" than the abolition of agricultural subsidies:

The paradox of the Doha round is that the members fighting hardest to retain subsidies, such as the EU, are those with most to gain from abolition. Poor countries, on the other hand, stand to gain more from cuts in tariffs. According to Mr Tokarick, the abolition of rich-world tariffs would yield $12.5 billion for poor countries, with no regional losers. If they also liberalised their own agricultural trade, they would reap another $21.4 billion.

America's cotton subsidies deserve to be addressed “ambitiously, expeditiously and specifically”, as the WTO agreed last summer. But no less ambition and expedition must also be mustered in the fight against tariffs.

It's unfortunate that Make Poverty History has succeeded in generating so much activist energy in regards to development issues, only to channel it in the wrong direction.

(In related news, the Sunday Times has an interesting piece by Kenny Farquharson about the hijacking of the anti-poverty movement by anti-capitalist activists.)

Share this

Team America is all you need

Team America is all you need to have seen to understand the type of morons who endorse these kind of ill fated, facist/altruist adventures.

I've always been behind debt

I've always been behind debt forgiveness, because it seemed to me that the loans were typically given so the local strongman in power would be on our side instead of the Russians'. Giving bribe money and then expecting that bribe money to be paid back after the very strongman supported by it was overthrown strikes me as a good example of chutzpah. No real comment about the other topics, still reading the links.