From http://www.firstthings.com
November 29, 2006
Speaking about the many people in the world who go hungry, Pope Benedict XVI says that we need “to eliminate the structural causes linked to the system of government of the world economy, which allocates the greater part of the planet’s resources to a minority of the population.” (See the ZENIT Daily Dispatch for November 12, 2006.)
In focusing on the allocation of goods, however, Benedict misdiagnoses the problem, which really concerns economic growth. Like most non-economists, he speaks as if the world’s stock of goods and services were fixed, the only issue being how properly to distribute them. In fact, the total amount of goods and services in the world has been increasing very rapidly for a long time. According to the United Nations Statistics Division (from which all the statistics below are taken), the aggregate gross domestic product of all countries in the world—that is, the total value of all goods and services produced in the world—has increased from about $3.26 trillion in 1970 to about $40 trillion in 2004 (all measured in current U.S. dollars).
In other words, the world nowadays produces twelve times the goods and services it did thirty-five years ago, and, apart from recessions (defined as two or more successive quarters of declining GDP), we will produce even more in the future. This is why we are much better off than we were in the past.
But economic growth is very uneven, with the economic output of some countries increasing much faster than that of others. If you want to know why some countries have become wealthy and others have stayed poor, therefore, you need only compare the growth of their respective GDPs per capita. Consider South Korea and Zimbabwe. In 1970, their respective GDPs per capita were virtually identical: $290 for Zimbabwe and $291 for South Korea. By 2004, Zimbabwe’s GDP per capita had hardly budged, having increased to just $351, meaning that the average Zimbabwean was only marginally better off in 2004 than 1970. In South Korea, however, GDP per capita increased to $14,266, an astonishing forty-nine-fold increase. (In fact, matters are even worse than these numbers imply, for Zimbabwe’s GDP per capita had been as high as $867 in 1982, and from 1997 to 2004 it declined every year, from $735 to $351.) Comparisons for similar pairs of nations—e.g., Singapore and Zambia—yield similar results.
It is thus true, as Benedict says, that the greater part of the planet’s resources is enjoyed by a minority of the population, but this is because the greater part of those resources is produced by that same minority of the population. The world economy is not rigged in favor of the rich nations. South Korea did not get rich, and Zimbabwe did not stay poor, because the captains of industry and the Wall Street bankers met in a smoke-filled room and decided that they loved South Korea but hated Zimbabwe. The South Koreans got rich because they earned their riches and continue to do so, year in and year out. Zimbabweans are poor because they produce little—and less now than twenty years ago. People who produce wealth naturally think they are entitled to keep most of it for themselves and their children. I don’t dispute that such people ought to give away more of what they have, but we should be clear that they have this wealth in the first place because they are producing it themselves, not wrongfully taking it away from others.
When some people are producing a tremendous amount of wealth and others are producing little, it is fine, as a stopgap measure, to tell those producing much that they should share what they produce with those producing little. The immediate needs of the poor must be met. But any permanent solution to the problem requires that those producing little start producing more. The conditions needed to generate sustained economic growth are well known: political stability, transparent and just government, respect for the rule of law, strong property rights, free trade, free flows of capital, disciplined monetary policy, and an educated and hard-working population. Most people in the poor nations are willing to work hard, but the other conditions for economic growth rarely obtain in such nations. This is the fault, primarily, of their leaders—sometimes, it is true, aided and abetted by the governments of developed countries—who have largely prevented the emergence of the other factors needed for sustained growth. The tyranny of Zimbabwe’s Mugabe is a particularly spectacular example, but the conditions for economic growth are fragile, and pathological political, legal and economic regimes nowhere near as bad as his are quite sufficient to stifle economic growth.
In our fallen condition, such problems may be intractable. After all, we have it on good authority that we shall always have the poor with us. Still, we have to try to help when we can, and doing so begins with understanding clearly why the poor nations are poor. The problem is one of production, not distribution. Pretending otherwise only makes the problem harder to solve by obscuring its true nature.
Robert T. Miller is an assistant professor at the Villanova University School of Law.
10:21 AM
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