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Promises, Promises

Okay, in keeping with the promissory note below, there are an awful lot of reasons to think that massive global redistribution of wealth and income aimed at promoting well-being by taking advantage of the diminishing marginal utility of money is not a good idea. Most obviously, it's simply infeasible. You're never going to get the citizens of the rich world to give up the large majority of their stuff in order to send it to the third world. In practice, any effort to do anything like this would have to involve the massive application of violence and end in no good for everyone. Besides that, even if you could get people to give their stuff up peacefully, there's still no way to bring it off. Wealth transfers only make any kind of sense on a pretty small scale. Even here there are, of course, real questions about the extent to which foreign aid can actually be useful. But without taking an extremist anti-aid line on that question, it's still clear that you can't just pick up the immense wealth embodied in a rich region of the rich world (Milan, say, or Connecticut) and then plop it down in Chad or the Gobi desert. By massively disrupting the terms under which the world operates, all you'd be doing is rendered huge amounts of already-made investments in physical and human capital totally useless, destroying most of the wealth you were trying to distribute.

On top of all that, you've got basic institutional problems (what would the mechanism of such redistribution be?) as well as serious questions of political legitimacy. And when you were all done, it seems that the egalitarian distribution of wealth would be highly unstable for "Wilt Chamberlain example"-type reasons.

The point of the musings that started this all off was really just to say that insofar as we have reason to believe that much smaller-scale foreign aid projects (like what Jeffrey Sachs is putting on the table) actually are somewhat workable, the moral case for implementing them is incredibly strong. I've read some critiques of Sachs, and they have some force. But at the same time, much of the line of criticism seems awfully cramped. Like if $200 billion could end global poverty it'd be great, but if it turns out that half the $200 billion would be lost/stolen/whatever and global poverty would only be cut in half then it magically turns into a wasteful and silly thing to propose. Well, yes, if there's a less wasteful way to spend the money, then obviously that would be better. But if nothing else recommends itself, you do what you can.

April 6, 2005 | Permalink

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Most obviously, it's simply infeasible. You're never going to get the citizens of the rich world to give up the large majority of their stuff in order to send it to the third world.

But you don't HAVE to get citizens of the rich world to give up the large majority of their stuff in order to send it to the 3rd world. Rich people don't have to give up their cell-phones, DVD players, computers, or drugs. They have to serve as 'early adopters', paying for the development of these things until they become cheap enough for the 3rd world to afford--which, in the case of electronics, happens very quickly. Even with drugs, it is really only the newest drugs that have not yet gone off patent that there's an issue. In many cases, the 'riches' of western countries are in things where the cost of production is very low (movies, music, software, drugs) and it makes economic sense to sell in third world countries at very low prices.

Like if $200 billion could end global poverty it'd be great, but if it turns out that half the $200 billion would be lost/stolen/whatever and global poverty would only be cut in half then it magically turns into a wasteful and silly thing to propose.

But what if the $200 billion is not just wasteful, but harmful? What if the half that is stolen goes to enrich and entrench dictators and their cronies? What if local producers are driven out of business by aid (which, in the West, we would consider illegal dumping)? What if the aid is provided as an alternative to rich countries opening up their markets? What if the transition of the poor countries from poverty to rapid development is prevented or delayed?

Posted by: mw | Apr 6, 2005 10:39:57 AM

Government to government aid has an abysmal track record where one or more of the governments involved has as its modus operandi a system whereby government officials skim or divert all resources that go throught their hands. The same applies to some, but not all, of UN aid. Witness Unscam. NGo's and churches have a better but by no means perfect record. You do what you can, but that means bypassing the government scam operations wherever possible. Not always an option for government aid.

Jeffrey Sachs, of course, could not have said that 200 billion dollars would eliminate povert worldwide. Or if he did, he takes us for fools.

Posted by: John | Apr 6, 2005 10:59:12 AM

Sooner or later there will be some form of global government in which a redistributive scheme would have sovereign authority. Until then, we will have to rely on voluntary charity, both individual and institutionalized. Is it reallly beyond human management to be able to devise a international system of taxation that will not be overly abused and/or corrupt? Right now, national governments tax trade. Besides a legitimate global government, what needs to be in place for an international regime of taxation to be workable? Consent. Institutional norms. Governance. Enforcement. Of course, it's all a non-starter as long as we Americans continue to toe the exceptionalist line. How many years has G.W. Bush & Co. set us back, assuming the way forward is global institutionalism?

The interesting question is what compelling, global circumstance will make members of our planet identify as global citizens. Maybe after rapid development by other countries so that the United States finds itself an ordinary member of global society in terms of wealth and power. But perhaps inter-societal cooperation will not be the way. Perhaps it will be global calamity. In Star Trek, it took global nuclear war and for Reagan it was alien invasion, ha-ha.

Posted by: hyh | Apr 6, 2005 10:59:20 AM

"But at the same time, much of the line of criticism seems awfully cramped. Like if $200 billion could end global poverty it'd be great, but if it turns out that half the $200 billion would be lost/stolen/whatever and global poverty would only be cut in half then it magically turns into a wasteful and silly thing to propose."

I have to second mw's question. What if the half siphoned off ends up doing lots of damage?

Posted by: Sebastian Holsclaw | Apr 6, 2005 11:13:17 AM

Err, John - Oil For Food was remarkably effective in cutting Iraqi child malnutrition and mortality rates *even though* assorted crooks at various levels of the value chain nicked about 25% of the money. This is an excellent argument in favour of Matthew's original point...

Posted by: john b | Apr 6, 2005 11:25:01 AM

mw and SeaBass,
If the $200 Billion is going to do damage I would be against it, and I presume Mr. Yglesias would as well.
There is a coupling of questions that are better left uncoupled for clarity on this post: Empirically, how much good or damage would Sach's proposal and $200 Billion to fund it do? And, how much to we value the improvement of the impoverished? [There is a more difficult empirical question in determining how much improving the lives of the impoverished will affect us directly in less/more terrorism, better labor force in the global economy, etc.]

Posted by: theCoach | Apr 6, 2005 11:25:53 AM

Sorry, forgot the associated stats. While the UNICEF figures may be wrong, the onus is very much on people who disagree that OFF was an effective relief scheme to show *why* they're wrong...

Given that oil-for-food is the most crooked example of a major post-Cold War aid program that there is (the notorious failures of the 1970s and 1980s were not aid, and we knew perfectly well that they weren't - they were bribes to Very Very Bad People to be on our side), demonstrating that aid does more harm than good is going to be a challenge.

Posted by: john b | Apr 6, 2005 11:29:32 AM

Another problem is your implicit assumption that the utility vs. money curves are fixed--that there's no hysteresis or memory effects depending on your path taken. But this isn't true.

Even if it's true that the marginal utility of income above 12,000 is fairly small, that doesn't mean the marginal utility lost by decreasing someone from 30,000 to 12,000 is similarly small. To out it another way, you'd probably be happier at 12,000 if you always earned that than you would be if you used to earn 50,000 and suddenly lost your good job and were forced to work at Walmart.

Posted by: DT | Apr 6, 2005 11:34:35 AM

Sooner or later there will be some form of global government in which a redistributive scheme would have sovereign authority. Until then, we will have to rely on voluntary charity, both individual and institutionalized.

Aaargh! Did South Korea escape poverty via redistributive schemes or voluntary charity (both institutional and individual)? Are those the secrets to Taiwan's development? Hong Kong's? Chinas? Indias? We have many examples of countries that have escaped poverty through development and many of countries that have remained basket-cases despite large amounts of aid over long periods of time. And yet we keep looking to aid to solve problems of poverty? Isn't that the form of insanity that involves doing the same thing over and over and expecting different results?

Posted by: mw | Apr 6, 2005 11:44:15 AM

Given that oil-for-food is the most crooked example of a major post-Cold War aid program that there is (the notorious failures of the 1970s and 1980s were not aid, and we knew perfectly well that they weren't - they were bribes to Very Very Bad People to be on our side), demonstrating that aid does more harm than good is going to be a challenge.

But oil for food was not aid at all, it was a highly regulated (and highly corrupt) form of trade.

As for demonstrating aid does more harm than good, it is a question of what one measures. Suppose one finds that, over the course of several years, food aid decreases average rates of child malnutrition in some sub-saharan country. Is that evidence of doing more good than harm? What if it strengthens the grip on power of the local autocrat? How does one measure that? What if said autocrat uses control of the aid to reward supporters and punish opponents, so that improvement in nutrition is uneven? And how does one determine what would have happened otherwise--that under a 'trade not aid' approach, during a 10 year period, the country would have experienced enough economic growth to generate wealth to more than offset the aid received during the same time?

We can't very well run controlled experiments, but we can readily observe that countries that have emerged from poverty have done so through economic development rather than aid.

Therefore, "How much would it cost to eliminate global poverty" is just the wrong damn question and is harmful merely by virtue of diverting effort and attention from the right question, which I would argue is, "How can we foster economic development in poor countries to eliminate global poverty?"


Posted by: mw | Apr 6, 2005 11:55:15 AM

"Sooner or later there will be some form of global government in which a redistributive scheme would have sovereign authority."

And, sooner or later, I'm gonna die; Bad things tend to happen eventually, no matter how careful you are. But as I like to say, with one global government, we wouldn't have any refugee problem anymore... because there wouldn't be any refuge from such a government.

Posted by: Brett Bellmore | Apr 6, 2005 11:59:58 AM

Don’t sweat it Matt. Most economists are utilitarians like you are, and don’t obsess over “deserving the money they made” as much as what will make the best eventual world outcome. The arch-traditional model of economic growth, the Solow model, even follows this. It a) has the goal of optimal labor/output ratio and b) says for all societies eventually further investment will not be needed. A lot of people just have trouble with the concept that a couple hundred years from now things will be radically different, and we can contemplate actions then that are absurd now.

To be fair, Marx and his “revolution shouldn’t happen for a hundred years and only in the most advanced societies – wait, I mean now and in the poor countries” didn’t really help this, for philosophy majors everywhere.

Posted by: Tony Vila | Apr 6, 2005 12:08:16 PM

JohnB,

excellent posts on your part. It will be helpful if you cite links to back up your stats. This may seem unfair, but the burden of proof is on you.

As for the best way to reduce poverty, Amartya Sen is surely right to suggest that the elimination of tyranny and totalitarianism are essential.

There is a remarkable consensus developing around democracy promotion as priority #1 in international affairs. Differences persist concerning the means to use to topple tyrannies, but not that they are the number one cause of poverty and hopelessness around the world.

Posted by: John | Apr 6, 2005 12:18:49 PM

What about the Latin American alternative? Democratic (minus Cuba) socialism as a response to capitalist exploitation by the rich nations. Latin America is embracing the idea that Western style economics will only make you rich, if you found them first. The developing world is by definition not developed. They will always lag behind, with exception to the occassional break out growth that can come with explosive innovation. (I'm thinking mainly about Taiwan and South Korea) There are not enough breakthroughs to go around though, so many countries caught on the short end of the development stick are better off taking their ball home than continuing to play the game. Brazil, Argentina, Venezuela, and Uruguay are joining Cuba in a leftist alternative to development capitalism. The democratic seizure of power in these countries has not been violent, and the poor are better off.

Posted by: Scott Lewis | Apr 6, 2005 12:27:10 PM

"Latin America is embracing the idea that Western style economics will only make you rich, if you found them first."

Kind of like Hong Kong did? The only "explosive innovation" that's really needed, is to allow a higher level of economic liberty, and the rule of law, than governments are usually comfortable permitting. Kind of like the only "secret" to losing weight is to eat less and exercise more, the "secret" to economic success is just too unpleasant for most governing elites to be willing to follow it. Governments can always find some BS reason to not allow their citizens liberty, and they'll almost always claim it's for their own good.

Posted by: Brett Bellmore | Apr 6, 2005 12:39:04 PM

Jeez, I blinked and missed Matt's brief Communist phase. This was apparently his equivalent to Reagan's Rejkyavik moment, when Ronnie basically agreeed to give up the farm.

At least Matt isn't in the kind of position of responsibility which would require dozens of aides to go around behind the scenes taking everything back.

Posted by: John Emersonj | Apr 6, 2005 12:39:06 PM

To a large extent, as the first poster stated, rich countries do provide an enormous amount of benefit to poor countries just by existing and doing business.

Differences persist concerning the means to use to topple tyrannies, but not that they are the number one cause of poverty and hopelessness around the world.

Definitely. I've always wondered: people seem to be pretty against the United States running around toppling tyrants, but what about private groups? Take, say, 20 billion. Buy a GPS/communications satellite, a few transport helos and an AWACS aircraft. Train up a few thousand ex-commandos, buy a bunch of guerilla weaponry. Bribe a few dozen professional news teams to 'happen' to be in country. Your best bet would be a country with lots of hazardous terrain, credible native opposition and relatively unorganized governmental military.

Drop yourself on the border of one of these tyrannies. Start knocking off oppressive local barons and arming some friendly opposition members. Film the protesters (preferably with some beautiful women in the crowd) waving the national flag. Make up a name for your revolution. (I really like the 'Daisy Revolution')

Use 4th generation style guerilla warfare (make it obvious you're avoiding killing civilians!) against the eventual governmental backlash. Conduct break-outs of political prisons, knock over government vaults and Robin Hood the money. Keep knocking off the most hated government bureaucrats.

Eventually you take over. Have the local opposition members you install as leaders contact the US and talk them up into a free trade policy with the country. (heck, if we can stand Musharraf, surely this'll work) Petition the UN to recognize the new government. Enact liberal laws, dump any money you've got left over on the poorest members of the society. Quietly contact global investors and let them know you'll protect their in-country investments if they play nice and build up the infrastructure for cheap.

I don't know if this would be a good idea, but I know it would work (and be cheaper than 200 billion in aid). Now, as an American citizen, I would never ever publically endorse the illegal subversion of a foreign government. And I don't have the money.

Posted by: Brian Moore | Apr 6, 2005 12:50:03 PM

On mbehalf of all my fellow commie MY readers (hi abb1!) I have to express my disappointment.

Still, Matt, there's hope for you yet -- your current TAPPED posting even ends with a placard-worthy "Don't 'tell corporate America to drop the Hammer,' drop the hammer on corporate America."

Posted by: lemuel pitkin | Apr 6, 2005 12:50:09 PM

...but we WILL fight to the last drop of blood to make sure gays and lesbians have a piece of paper with words "MARRIAGE CERTIFICATE" printed on it - this is not negotiable!

Posted by: abb1 | Apr 6, 2005 1:16:56 PM

There’s a number of no cost things that can be done to encourage growth and wealth creation in the currently poor countries. Amyarta Sen is one Nobel Laureate with good ideas as above. Hernando de Soto (not a Laureate, or at least not yet) is another. Getting rid of totalitariansim and the installation of the infrastructure to allow markets to work are not no cost but they are low cost compared to simply sending the tax revenue over there.
The no cost things are the abolition of the US Farm Bill and the EU’s CAP. Those two, plus the complete dropping of tariff and non tariff barriers to trade from the poor countries are not, even, no cost. They make us a profit, and would benefit the poor countries by vastly more than the $ 200 billion a year Sachs is talking about.
In fact, we could go for a double. If the EU abolished CAP that would save about $30 billion a year of tax money. That’s about 50% of the mooted EU contribution to the 0.7% a year we are supposed to spend on aid. The average family in Europe would benefit by $1,000 a year in lower food prices, the tax money could be spent on aid and the poor countries could get rich shipping us food.
What’s not to like?

Posted by: Tim Worstall | Apr 6, 2005 1:27:08 PM

Why don't we annex countries to the United States? Imagine if we turned Afghanistan into two or three US States and then send in HHS, US federal law enforcement, educational grants, etc...

Posted by: TheJew | Apr 6, 2005 1:31:35 PM

what does "wilt chamberlain example"-type reasons mean?

Posted by: howie | Apr 6, 2005 1:32:08 PM

"If the $200 Billion is going to do damage I would be against it, and I presume Mr. Yglesias would as well."

Ok, lets take a hypothetical country. We'll call it 'Colombia'. Lets pump hundreds of billions of dollars into it without worrying about where the money goes. Common people much better off?

Posted by: Sebastian Holsclaw | Apr 6, 2005 1:43:31 PM

"what does "wilt chamberlain example"-type reasons mean?"

If today you equalized everyone's assets, worldwide, so long as you subsequently let them spend the money as they saw fit, some people would soon become extremely wealthy, simply because they can do things other people are willing to pay them a lot of money to do. Like Wilt Chamberlain playing basketball. The only way to achieve and maintain equality of income and assets is to continuously redistribute so as to neutralize people's voluntary exchanges.

Posted by: Brett Bellmore | Apr 6, 2005 1:46:48 PM

"what does "wilt chamberlain example"-type reasons mean?"

Wilt Chamberlain claimed to have screwed 10000 different women. Superior innate talents will somewhat determine outcomes.

Posted by: bob mcmanus | Apr 6, 2005 1:46:53 PM

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