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Posts Tagged ‘poverty’

I like a great deal of Bryan Caplan’s work, and what I like I like a great deal, but it seems to me he makes a significant inferential error in this recent EconLog post. Caplan notes that “71% of poor families with children are headed by single parents. About 80% of all long-term poverty occurs in single-parent homes. Married high school dropouts have lower poverty rates than single parents with one or two years of college.” He infers from these statistics that there are very few “deserving poor”:

If you combine Rector’s evidence with common-sense moral beliefs about the deserving poor, it’s hard to avoid the conclusion that few “poor” Americans qualify. The moral admonition to “help the deserving poor” asks us come to the aid of people who are (a) genuinely destitute, even though (b) they took reasonable measures to avoid destitution. Rector shows that few Americans qualify on either count.

How many of those poor, single-parent families are so because the marriage broke up? How many of those families are so because the father was incarcerated? Fewer than half of children currently in single-parent households were born outside wedlock. You can blame mothers in many of these cases for a poor choice of partner, but living in poverty with your children is a hell of a sentence for that kind of mistake. Some of these households could well be considered “deserving poor.” And yes, their material circumstances are usually not dire, but dignity has to do with a lot more than material circumstances. If you have a refrigerator and a TV but can’t afford to go back to school and get an education to improve your lot in life, are you really well off?

Fatherlessness is important for explaining poverty, but that doesn’t mean fatherless families don’t deserve help.

[Note: "1%" corrected to "71%" above. Copy and paste error - apologies!]

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Conservatives and taxpayer groups are ready to fight the $1 trillion farm bill when it comes up for a vote in the new Congress. Agricultural subsidies, price supports, and tariffs in developed countries (the U.S., Japan, and the European Union especially) not only harm consumers at home by hitting them with higher prices, but cause severe poverty abroad by shutting exports from less developed countries (LDCs) out of developed-country markets and by dumping developed-country surpluses on LDC markets at prices below marginal cost. Since the poorest people in the world are farmers in poor countries, and over 15 million people die from hunger and disease each year due to severe poverty, rich-country agricultural subsidies are literally killing poor people on a massive scale.

Here’s just one anecdote from the IFPRI report of how this works:

Harrison Amukoyi’s farm is perched on a hillside in western Kenya. On less than two acres of land, he raises several crops and a dairy cow. To sell milk, Harrison and his neighbors must compete with industrialized countries that dump their subsidized milk on local markets, depressing prices for Kenyan farmers. This unfair contest appears in countless guises throughout the developing world, intensifying conditions of poverty.

And here are some figures from the NCPA analysis on how poor farmers would benefit if cotton subsidies alone were eliminated:

The International Cotton Advisory Committee (ICAC) estimates that ending U.S. cotton subsidies would raise world prices by 26 percent, or 11 cents per pound. The results for African countries dependent on cotton exports would be substantial:

  • Burkina Faso would gain $28 million in export revenues
  • Benin would gain $33 million in export revenues
  • Mali would gain $43 million in export revenues.

We have seen reductions in severe poverty recently. The world’s biggest reduction in severe poverty has come in China over the last three decades. It’s clear that economic reform is the critical, long-term driver of poverty reductions. But where did China’s poverty reductions start? With growing agricultural productivity. The poorest countries of the world can’t just move straight into manufacturing. They need first to generate some agricultural surplus. Making it possible for poor farmers to sell to rich consumers, or even to their own people, is necessary to making that happen.

Removing rich-country agricultural subsidies could also have political-economy benefits. Many LDCs repress their agricultural markets in favor of the urban sector. Thus, their own governments deserve some share of the blame. The typical tool for this repression is a “marketing board” monopsony. The marketing board buys produce at coercively depressed prices and then tries to export it for a profit, plowing the proceeds back into urban subsidies. Rising world prices for farm goods would increase the profits of these marketing boards, potentially allowing them to raise the prices they pay farmers at home. While some nasty governments might find the new revenue reinforces their power, the new revenues would surely build useful state capacity in just as many places. Furthermore, rising farm incomes should increase the political power of the farm bloc in LDCs, which increases the probability of domestic liberalization.

Ending the rich world’s harmful policies would not eliminate global poverty. However, it would make a significant dent and could set in motion economic and political processes that would have far-reaching effects indeed.

Still, agricultural subsidies and trade barriers survive, amounting to well over $300 billion per year in the rich countries of the OECD, dwarfing the aid sent from rich to poor countries. They survive because of the collective-action problem: poor people have no voice at all in the political systems of the rich world, and rich-world consumers barely have one. Producers organize effectively because of the clear benefits they receive from subsidies, and even ideological opposition from both the left and the right cannot effectively fight them.

The only effective way to counter the greed of the few is with the white-hot moral passion of the many. (more…)

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