John Minto doesn't like what Mike Moore has to say about property rights. So he writes a column about it in the Herald. And for poor David Farrar Minto's heresy becomes unbearable. So he rushes out a fisking:
John Minto has an opinion piece in the Herald responding to Mike Moore’s piece on alleviating poverty. Minto, of course, disagrees.
The US has the highest levels of poverty in the Western world (more than 30 million) despite one of the highest per capita incomes in the world. Why would this be?
Minto is not talking about absolute poverty here, but relative poverty. The bottom 10% of the US still have an average income massively higher than most in the third world.
In fact, 46% of those “in poverty” in the US, actually own their own home. The “relative poverty” line in the US in 2006 is US$10,488 or around US$30 a day.
The World Bank defines extreme poverty as less than $1 a day and moderate poverty as less than $2 a day.
In East Asia, the proportion living on under $2 a day has fallen from 69% in 1990 to 27% today.
How-ever in Sub-Saharan Africa, those living in extreme poverty, less than $1 a day, has increased from 41% in 1981 to 46% in 2001.
Now this is not to say that that things are perfect in the US - far from it. But the difference between $30 a day and $2 a day is massive. So Minto’s rejection of “property rights” as helping poverty is nonsensical.
Moore has come to the conclusion that it is the absence of enforceable property rights that lies at the heart of poverty. This has done no good for those living in poverty in the US or New Zealand but apparently he believes it will do wonders to drive poverty from developing countries.
The opposite is true. Property rights are there to benefit the wealthy and the middle class. They mean much less, if anything, to people in poverty.
One just has to look at China, and see the massive uplift of people out of poverty, as they have moved from an economy where people have no property rights, to one where they now have a significant rule of law relating to property rights.
There is a reason East Asia has lifted so many people out of poverty in recent decades, while Africa has got worse. It isn’t coincidence.
DPF is, alas, being a little disingenuous here (well I never!). The US is one of the few developed countries to use an absolute rather than a relative poverty line (NZ is another, although ours is not technically a poverty line). Nevertheless, in the funny way these things work (I need to do a proper post on this), the poverty in the US is technically relative poverty [Update: Actually, on reconsideration, I'm not so sure about this - the basket of goods that the US poverty line is based around is itself based on bare necessities for a healthy life in the US - still more than bare necessities in the Philippines but it's quite contestable that this is absolute poverty]. However, this doesn't mean it isn't real deprivation. Mostly not of the severity that can be found in the developing world but real nonetheless. And, anyhow, the comparison Minto is making isn't between the US and India or Sub-Saharan Africa but with the West:
The US has the highest levels of poverty in the Western world (more than 30 million) despite one of the highest per capita incomes in the world.I have to confess I'm not really sure of the overall point of Minto's column (it's not one of his best) but I think the passage above has an important insight. This is, very simply, that property rights, while a necessary condition for capitalist economic development are not a sufficient condition for the elimination of poverty. The recipe for successful poverty elimination is the subject of a blog post of its own (not to mention a lifetime's study) but for the time being I will link to two good counter arguments to the it's all about the property rights folks. The first by Dani Rodrik and the second by John Gravois (a handy antidote to De Sotophillia).
As it happens, Farrar's case study of success - China - is a good example of the complexities of successful development (complexities that defy 'it's all about property rights' or any other simple narrative').
China's economic success is not simply a case of the triumph of property rights. China has only recently - long after growth had taken off - began to formalise property rights. It's true that some form of de facto property rights did exist in China prior to this and that this probably contributed to the country's economic success but China has also benefited from:
- A relatively healthy, well educated population (communism can take credit for this).
- Integration into the global economy on its terms (and using strategic tools like an undervalued currency).
- A currency that has not been a commodity.
- Not having IMF structural adjustment rammed down its throat.
- A remarkable mix of formal and informal institutions that have somehow proven conducive to economic development.