From 1997: Financial Times Article on Free Market Creating Global Poverty

This is another piece I found combing through my scrapbooks. It’s by the Financial Times’ columnist, Joe Rogaly. Titled ‘Market Victims Who Are Free to Be Poor’, and with the subtitle ‘One set of figures shows the capitalist road leading to paradise; a better set shows it leading to misery for many’ it compares and contrasts two reports on global poverty, one by the UN and another by a group of free market think tanks led by the Fraser Institute. And Rogaly comes down firmly on the side of the UN. The article, published in the Weekend edition for 14/15 June 1997, runs

When pictures of skeletal children or abandoned babies appear on the TV news do you (a) lean forward to catch the commentary (b) change channels (c) switch off and head for the kitchen? Some of us have seen about as many images of third-world distress as we can bear. Our assumption is that we know the cure for deprivation: unshackle the free market and the globalised capitalist wealth-producing machine will do the rest.

No it won’t. The 1997 Human Development report, published this week by Oxford University Press for the United Nations, demolishes the idea that the bounty created by the genius of market economics will trickle down. You have to spend tax -payers’ money to help the worst-off, or they will be dead before they are rescued.

Not everyone accepts this. It is contrary to the spirit of the 1997 Economic Freedom of the World report. Right-thinking and therefore expressive of familiar sentiments, it was published last month by the Fraser Institute, Vancouver, in association with 46 other pro-market think-tanks dotted around the planet.

This clutch of capitalist theologians, which includes London’s Institute of Economic Affairs, has invented an index of economic freedom. Its 17 components include growth and inflation rates, government spending, top marginal tax rates, restraints on trade, and so on. These are expressed in hard numbers and therefore “objective”. Hong Kong tops a list of 115 countries thus appraised. The US comes 4th, Britain 7th and France 36th.

You can guess what follows. A few clicks on the mouse-button tell you that between 1985 and 1996 the economies near the top of the economic freedom index grew fastes, while those at the bottom – the “least free” fifth – got poorer. That unhappy quintile includes Russia, Ukraine, and the well-known African disaster areas. The lesson is obvious. Impede the market, and you pay, perhaps with your life. The unobstructed capitalist road is the highway to  paradise.

Wrong again. The UN’s Human Development Index is closer to the truth. it does not measure progress by the rules of conventional economics alone. To be sure, it factors in real gross domestic product per head, as do the freedom-theorists. But GDP is only one of three ingredients. The other two are life expectancy and educational attainment. The resulting list puts countries in a different order from the free marketeers’ league table.

On the latter, remember, Hong Kong comes first. On the development index it falls to 22nd. France, which believes in government expenditure, moves up from 36th on the economic freedom ladder to second place on human development. The United Kingdom falls from 7th to 15th. It’s not just the wealth you generate. It’s how you spend it.

The Human Development report introduces another index this year – for “human poverty”. It counts the people who are expected to die before turning 40, the number of illiterates, those without health services and clean water, and underweight toddlers. Once again you get changes in the rank order, particularly among developing countries.

Cuba, China, Kenya and Peru have all done relatively well at alleviating human poverty. Egypt, Guatemala and Pakistan score less on poverty relief than on human development. It is not only how you spend it, but who you spend it on.

The obvious message is aspirational. If the rich countries would put their hands in their pockets, poverty could be eliminated. We know this will not happen, in spite of the determination to give a lead expressed by Britain’s new Labour administration. Government to government aid is no longer fashionable. The money does not always reach its destination, as the worst case story, that of Zaire, teaches us. The US poured in the dollars, and they went straight into former president Mobutu’s Swiss bank accounts.

Tied assistance is better. Big donors usually demand that markets by set free. This is not quite enough to meet the needs of Human Development or the alleviation of poverty. Happily, contracts tying aid to certain actions are getting more sophisticated – although so are the means by which recipients contravene them. Anyhow, aid is but a part of what is needed.

The true value of the Human Development report lies in its implicit challenge to narrow-focused concentration on the market mechanism. Compiled by a team of economists and others directed by Richard Joly, it has evolved within the broad discipline of economics. It would be better still if someone could come up with an acceptable index of political freedom, to measure both economic and human development and democratic practices. That would require judgments that could not be quantified. How would you have treated 99 per cent votes in communist countries?

The outlook is not all so dolorous. Poverty is declining overall, largely thanks to the improvement in China, which has moved up the economic freedom tables and reduced destitution. Not many countries can make that boast. There are still 800m people who do not have enough to eat. We have some clever indices, but so far no great help to the misery on our TV screens. Only a change in the way we think can achieve that.

That was published nearly a quarter of a century ago. I don’t doubt that with time and the progress of neoliberalist, free market economics, things have become much, much worse. The book Falling off the Edge, which I’ve reviewed on this blog, is a full-scale attack on such globalisation, showing how it not only has created worse poverty and exploitation, but has also led to political instability and global terrorism. And as more British children go hungry, as more people fall into poverty due to the Tories’ privatisations and destruction of the welfare state, I wonder how long it will be before conditions very like those of the Developing World appear here.

This was published when the Financial Times’ weekend edition was still worth reading. It had good reviews and insightful columnists. It declined in quality around the turn of the millennium when it became much more lightweight. It has also switched its political allegiance from liberal to Conservative in an unsuccessful attempt to gain readers.

This article shows that neoliberal free market economics, of the type pushed by the Adam Smith Institute and the Institute for Economic Affairs, has always been a fraud, and known to be a fraud.

But our mendacious, vicious press and political establishment are still pushing it, at a massive cost in human lives and wellbeing. Even in Britain.

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4 Responses to “From 1997: Financial Times Article on Free Market Creating Global Poverty”

  1. trev Says:

    And hence we have the situation whereby at least a million or more people are relying on foodbanks in 21st Century Britain, yet at the same time there are more Millionaires and Billionaires than there ever have been.

  2. con Says:

    But it is what elites in all places and at all times have always done – created mechanisms to channel wealth into their own pockets.
    Third world development has many and huge problems, and a major obstacle is corruption. You might find Sarah Chayes “Thieves of State: Why corruption threatens global security” of interest.

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