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Poverty and inequality: A question of justice?

Mar 11th 2004
From The Economist print edition

The toll of global poverty is a scandal. But deploring economic “injustice” is no answer

HUNDREDS of millions of people in the world are forced to endure lives of abject poverty—poverty so acute that those fortunate enough to live in the United States, or Europe or the rich industrialised parts of Asia can scarcely comprehend its meaning. Surely there is no more commanding moral imperative for people in the West than to urge each other, and their governments, to bring relief to the world's poorest. And what a tragedy it is, therefore, that many of the kind souls who respond most eagerly to this imperative bring to the issue an analytical mindset that is almost wholly counterproductive. They are quite right, these champions of the world's poor, that poverty in an age of plenty is shameful and disgusting. But they are quite wrong to suppose, as so many of them do, that the rich enjoy their privileges at the expense of the poor—that poverty, in other words, is inseparable from a system, capitalism, that thrives on injustice. This way of thinking is not just false. It entrenches the very problem it purports to address.

Symptomatic of this mindset is the widespread and debilitating preoccupation with “global inequality”. Whenever the United Nations and its plethora of associated agencies opine about the scandal of world poverty, figures on inequality always pour forth. (Such figures, though, are always higher than the likely reality: see article) It is not bad enough, apparently, that enormous numbers of people have to subsist on less than a dollar a day. The claim that this makes in its own right on the compassion of the West for its fellow men is deemed, apparently, too puny. The real scandal, it seems, is that much of the world is vastly richer than that. The implication, and often enough the explicit claim, is that the one follows from the other: if only we in the West weren't so rich, so greedy for resources, so driven by material ambition—such purblind delinquent capitalists—the problem of global poverty would be half-way to being solved.

Equity at a price

Certain ideas about equality are woven into the fabric of the liberal state, and quite inseparable from it: first and foremost, equality before the law. But equality before the law, and some other kinds of liberal equality, can be universally granted without infringing anybody's rights. Economic equality cannot. A concern to level economic outcomes must express itself as policies that advance one group's interests at the expense of another's. This puts political and ethical limits on how far the drive for economic equality ought to go. (Strictly practical limits, as well, since too noble a determination to take from the rich to give to the poor will end up impoverishing everyone.) It also means that perfect economic equality should never be embraced, even implicitly, as an ideal. Perfect economic equality is a nightmare: nothing short of a totalitarian tyranny could ever hope to achieve it.

The preoccupation bordering on obsession with economic equality that one so often encounters at gatherings of anti-globalists, in the corridors of aid agencies and in socialist redoubts in backward parts of the world reflects a “lump of income” fallacy. This remarkably tenacious misconception is that there is only so much global income to go around. If the United States is consuming $10 trillion worth of goods and services each year, that is $10 trillion worth of goods and services that Africa cannot consume.

But goods and services are not just lying around waiting to be grabbed by the greediest or most muscular countries. Market economics is not a zero-sum game. America consumes $10 trillion worth of goods and services each year because it produces (not counting the current-account deficit of 5% or so of the total) $10 trillion of goods and services each year. Africa could produce and consume a lot more without America producing and consuming one jot less. It so happens that the case for more aid, provided of course that it is well spent, is strong—but the industrialised countries do not need to become any less rich before Africa can become a lot less poor. The wealth of the wealthy is not part of the problem.

To believe otherwise, however, is very much part of the problem. For much of the 20th century the developing countries were held back by an adapted socialist ideology that put global injustice, inequality and victimhood front and centre. Guided by this ideology, governments relied on planning, state monopolies, punitive taxes, grandiose programmes of public spending, and all the other apparatus of applied economic justice. They also repudiated liberal international trade, because the terms of global commerce were deemed exploitative and unfair. Concessions (that is, permission to retain trade barriers) were sought and granted in successive negotiating rounds of the General Agreement on Tariffs and Trade. A kind of equity was thus deemed to have been achieved. The only drawback was that the countries stayed poor.

Towards the end of the century, many developing countries—China and India among them—finally threw off this victim's mantle and began to embrace wicked capitalism, both in the way they organised their domestic economies and in their approach to international trade. All of a sudden, they are a lot less poor, and it hasn't cost the West a cent. In Africa, too, minds are now changing, but far more slowly. Perhaps that has something to do with the chorus that goes up from Africa's supposed friends in the West, telling the region that its plight is all the fault of global inequality, “unfair trade” and an intrinsically unjust market system.

Heed the call

People and their governments in the West should heed the call of compassion, and respond with policies to help the world's poor, and indeed to advance the opportunities of the (much less desperately) poor in their own countries. Expressed that way, the egalitarian impulse is a good thing, worth nurturing. But a compassionate regard for the poor, as any good Marxist will tell you, is a very different thing from a zeal for economic “justice”. That zeal, despite the exemplary fate of the socialist experiment at the end of the 20th century, guides a great deal of thinking still. And it continues to do nothing but harm.