Economic Nonsense: 22. Only by understanding the causes of poverty can we act to reduce it


This assertion is nonsense because it erroneously supposes that poverty has causes; in fact it is the lack of poverty that has causes. Poverty is, alas, the default condition. It is what happens when you do nothing. Anyone who wants to experience poverty has only to do nothing for a year. If they survive that long, they will be poor, poor because they have not done the things it takes to create wealth. Poverty has unfortunately been the lot of most of humankind for most of its existence. First by hunting and gathering, then by agriculture and animal husbandry, people have lived on the edge of survival, always striving to obtain their food supply. If they had a few bad days at hunting, or a bad harvest at farming, poverty would come, bringing malnutrition and death with it.

At some stage people developed trade, exchanging goods with other, sometimes distant peoples. They learned how to specialize and to generate wealth. With the Industrial Revolution our ability to do this multiplied enormously. Wealth was created on an unprecedented scale, and for most people in the richer countries extreme poverty has become a thing of the past.

Other nations that have followed the same route have achieved similar progress themselves. Only in the past few decades has wealth been multiplied in poorer countries. First Japan became rich, then the 'tiger' economies of South Korea, Singapore, Hong Kong and Taiwan. Following them have been countries such as Malaysia and Thailand, and most dramatically of all, the giants of India and China, lifting over a billion people out of poverty.

To move out of poverty takes trade, specialization, investment and infrastructure. It takes stable property rights, clear titles to land, efficient and honest courts, and governments that are neither predatory nor rapacious. These are the conditions under which people find space to improve their lot and to create wealth. Failure to achieve a reasonable measure of these will keep a country in poverty. Poverty is not caused by things people do, but by things they fail to do.