Capitalism: The Cure for Poverty


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John Blondell - Economist - not to be confused with the actor who played 'daddy' Banks in a "controversial movie" Scum.

26 February 2009

Capitalism: the cure for poverty

Latest article by John Blundell in The Scotsman. THE New Testament says: "The poor are always with you". It is too resigned. The Bible seems to limit its poverty policies to the duty of alms-giving.

I was encouraged to learn then that "the poor" really only means the Gentiles, as they are impoverished in not being a party to the Lords Covenant.

I usually find it prudent to avoid religious quotations. They invite correction and friction. Yet poverty, its causes and consequences, remains central to both politics and economics.

It seems to me those of the Left have co-opted it as "their" topic. The representatives of capitalism - the CBI or the Chambers of Commerce or even the Institute of Directors - avoid the theme, beyond suggesting that companies exist to be creamed for taxes so the state can help the poor.

I argue it is bold, liberalizing projects that will invest those on the most modest incomes with dignity. Poverty, at its core, is about more than relative income streams. It is about extending choices that make life better and probably longer.

It is markets and capitalism that will lift everyone out of poverty - if it is opened up in ways that we seem too timid to touch.

I acknowledge the good intentions of many left-wing thinkers. I repudiate the results of their policies. One definition of poverty involves the proportion of income spent on food. A wealthy professional may eat very well, but his or her food budget is no more than 10 per cent of total budget.

For those at the bottom of the spectrum, 40 per cent goes on food. Yet the cost of our groceries is grossly too high because of the autarchic policies of the European Commission. The European Union protects the agricultural sector so tightly that the cost of food in our supermarkets is acknowledged to be at least 25 per cent higher than it need be.

That agreed sum may understate matters. If the commission lowered its tariff barriers, vast acres of land on other continents would come back under husbandry and prices would fall further. It seems plain to me that prices would fall immediately by 40 per cent and in many foodstuffs it would be 50 per cent. In the case of some commodities, such as sugar and bananas, falls would exceed 50 per cent.

This is a tangible and vivid way to dilute poverty yet who speaks out clearly against the inequity of the common agricultural policy? All the candidates in the Euro-elections in June are mute on CAP reform. Above all, why does Labour not scream from the rooftops? The Left, alert to the truth, ought to be tireless in abusing the malignant CAP.

The prospect of GM foods is treated as a threat of some nature. In fact, GM techniques will be a great blessing to the poor of the planet. The Green Revolution has enhanced the harvests more than the incremental improvements of the past 2,000 years. It is agronomists whose names we never know who have done more to mitigate poverty than high-minded European socialists.

The other dominant expenditure for those at the lower end of the income spectrum is housing - usually expressed as rent because ownership is usually not an option. Every community in Scotland is seeing the price of homes surge, whether it be in urban Edinburgh or remote rural communities.

The poor are marginalized even further. Often they are locked into the worst municipal housing schemes where life is grim and bleak. Scotland has no shortage of land. Prices are high only because of the constrictions we preserve.

If you want to make life easier - or cheaper - then land use has to be liberalised. Supply and demand is an equation we all know works in every other market, but in housing the principles of economics have to be suspended to preserve the ritual or ceremonial roles of councilors and planning officials.

Agronomists have done more to mitigate poverty than high-minded European socialists

Scotland€™s Labour establishment seems blind to the notion of permitting many more new homes. Some would be on new sites, but much of it would be adaptation of present structures. It is simply ludicrous rural Scotland pretends it has no space.

Another cause of sustained poverty seems to me to be dreadful schooling. A poor education makes for a poor life. At its most simple if, after ten years of state schooling, you emerge unable to read or write or count your life chances are stunted.

Chancellor Gordon Brown can pour billions into "education", but success eludes him as the system crushes any element of choice. I believe that a legal test-case brought by an 18-year-old graduating from an Edinburgh school without elementary skills might transform the opportunities.

We need a mechanism that allows pupils to select strands of education and also one that rewards teachers that show real merit. I think our more dreadful schools stunt the lives of millions of kids. They are as bright as the rest of us, but are repelled by grottier schools.

There are some strands to the phenomenon of poverty that may be more intractable. Many people may seem slothful or incapacitated from normal work routines not because they are lazy or inept but because they have psychological or psychiatric problems - mostly undiagnosed.

Nonetheless, it would be feeble not to agree that the social-security system is nourishing a class of professional welfare beneficiaries who are adept at avoiding work. I was arrested by the Newsnight Scotland disclosure that one-third of Glaswegians now live off benefits. I am not contesting legitimate claimants, but I do think a high proportion of "the poor" are choosing not to work. This may be entirely rational behavior. Why work if you are no better off after income tax and national insurance?

So, I offer three policies to liberate the poor: free trade in foodstuffs to halve the price of groceries; relaxing land-use impediments to dissolve the cost of housing and radical reform of schooling to break the cycle of stunted learning.

I can understand why politicians prefer to preserve the present systems, but the more imaginative must see that capitalism will lift the poor. It is socialism that keeps people crushed.

• John Blundell is the director general of the Institute of Economic Affairs

Fascinating argument.


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Supply and demand is an equation we all know works in every other market

Supply and demand is a generalization made from observations in the animal and plant kingdoms. If we apply animalistic principles to humans we risk suffering the same harsh lives that animals are subject to. Observe the wild price fluctuations in the price of oil, for example. This leads to boom or bust economies which cause tremendous upheavals in people's lives.

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That's an interesting thought, but it doesn't apply well. The context of "supply and demand" within a market is trade.

Animals don't trade. They take.


I think it applies. When the demand is high (hungry animals) the price goes up (animals have to expend more energy to get food) etc.

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Not necessarily. They can organize like wolves/sled dogs [see Eight Below - great movie] and utilize teamwork. Or the little chimps in 2001 or was it Connecticut? This would expend less energy.

Or, they could form a marxist government or a Canadian one and everyone can chill out because everything will be FREE! Hosanna - glory be to the great O'Biwan.

Meanwhile, back at the revolution...


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Not necessarily. They can organize like wolves/sled dogs [see Eight Below - great movie] and utilize teamwork. Or the little chimps in 2001 or was it Connecticut? This would expend less energy.

The point is that animals and plants are at the mercy of nature - they can't control their environment, they cannot reproduce any more than their food supply will allow. Mankind is different, he can reproduce in tremendous numbers because of his ability to do agriculture, etc.

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So much for beavers - they are out of work now too!

Can Canada start defending itself so we can cut our defense budget?

And you know, you guys have a lot of land and not a lot of people therefore I think O'Biwan should deport all the producers so we can make Canada the best country in the world.

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Yep - I had no problem taking out Iraq as part of encircling Iran and interrupting the terrorist ground trade routes to Syria, Lebanon and Israel, [syria should also be taken out (see nuclear facility they were constructing in the Bekaa Valley which should be basically in the hands of our surrogates in Lebanon)].

What flabbergasted me was not having an occupation plan. We should have vetted, as well as we could, the Bath Party Nazi's and used the ones we could to purge the Warrens in Sadr City and oops kill the black turbaned dude Beni Sadyr and the Jets.

Instead we managed to miss-manage the occupation of an insurgency prone Gerrymandered "state" called Iraq. Amazing, can you imagine Ike or MacArthur f- - -ing up that badly?

Turned two years into five years with ridiculously higher casualties.

Thank God for General P! Patton would have loved Petraeus.


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