Fight Against World Poverty
Fight Against World Poverty:
How Markets and Governments Can Deal with Poverty
(Author deleted)
December 20, 2010
Introduction This paper presents the current thoughts on the fight against poverty, specifically the views of different economists on the role of markets and government on this issue. The discussion begins with Hazlitt’s ideas, based on the U.S. experience. It is then followed by the works of other key economists focusing mainly on the underdeveloped world. Lastly, some concluding opinions are offered.
Reducing Poverty in the Developed World Hazlitt (1973), in his book The Conquest of Poverty makes the case for free enterprise system (Capitalism) as the solution to poverty.[1] Through a thorough analysis, Hazlitt outlines various remedies that have already been tried and those that have been suggested for the future poverty relief in the United States. All these fixes translate into government interventions. The most common interventions discussed by the author are establishing minimum wage rates, creating labor unions, developing welfare programs and job programs, and redistributing income. In the book, and as discussed below, the author analyzes why each of these actions not only fails to reduce poverty, but actually worsen it. ← Minimum Wage Minimum wage actually increases unemployment, and specially the unemployment of those that need the most, the unskilled workers. Why is that? Simply because by forcing the employer to pay a worker more than he/she is worth, it makes it unprofitable for employers to hire those workers, and therefore forces them into unemployment. ← Labor Union The minimum wage logic also applies to labor unions. Labor unions, without realizing it, are an anti-labor force. Wages, like any other price, are determined in the free market by supply and demand, and the demand for labor is determined by the labor productivity. Thus, if union wages exceed what employers
How Markets and Governments Can Deal with Poverty
(Author deleted)
December 20, 2010
Introduction This paper presents the current thoughts on the fight against poverty, specifically the views of different economists on the role of markets and government on this issue. The discussion begins with Hazlitt’s ideas, based on the U.S. experience. It is then followed by the works of other key economists focusing mainly on the underdeveloped world. Lastly, some concluding opinions are offered.
Reducing Poverty in the Developed World Hazlitt (1973), in his book The Conquest of Poverty makes the case for free enterprise system (Capitalism) as the solution to poverty.[1] Through a thorough analysis, Hazlitt outlines various remedies that have already been tried and those that have been suggested for the future poverty relief in the United States. All these fixes translate into government interventions. The most common interventions discussed by the author are establishing minimum wage rates, creating labor unions, developing welfare programs and job programs, and redistributing income. In the book, and as discussed below, the author analyzes why each of these actions not only fails to reduce poverty, but actually worsen it. ← Minimum Wage Minimum wage actually increases unemployment, and specially the unemployment of those that need the most, the unskilled workers. Why is that? Simply because by forcing the employer to pay a worker more than he/she is worth, it makes it unprofitable for employers to hire those workers, and therefore forces them into unemployment. ← Labor Union The minimum wage logic also applies to labor unions. Labor unions, without realizing it, are an anti-labor force. Wages, like any other price, are determined in the free market by supply and demand, and the demand for labor is determined by the labor productivity. Thus, if union wages exceed what employers
References: Chang, Ho-Joon (2008). Bad Samaritans. Bloomsbury Press, New York. De Soto, H (no date). Commanding Heights, PBS interview. Retrieved Oct 10, 2010 from http://www.pbs.org/wgbh/commandingheights/shared/pdf/int_hernandodesoto.pdf Easterly, W. (2008). Hayek vs. The Development Experts. Manhattan Institute for Policy Research. Retrieved Oct 10, 2010 from http://www.manhattan-institute.org/html/hayek2008.htm Hazlitt, Henry (1973) O’Rourke, P.J. (1998). Eat the Rich, Atlantic Monthly Press, N.Y. Ravier, Adrian (2009). Globalization and Peace: A Hayekian Perspective. Libertarian Papers, Vol. 1, Art. No. 10. Reinert, E. (2007). How Rich Countries Got Rich and Why Poor Countries Stay Poor. Constable, UK. Whyman, P. (2010). Third Way Economics. Palgrave McMillan. Retrieved October 10, 2010 from http://www.palgrave.com/pdfs/1403920656.pdf -----------------------