Don’t believe the government’s poverty campaign

Written by Andrew Henderson

Dateline: Cancun, Mexico

At Nomad Capitalist we focus on strategies for protecting wealth and those who are best equipped to benefit from them. However, as much as we think that corrupt, high tax governments are bad for people who have money, they are just as dangerous for those who don’t.

The World Bank recently reported (with admittedly unreliable numbers) that for the first time in history, less than 10 percent of the world is living in extreme poverty, defined by those earning less than $1.90 a day.  This achievement was the only one of eight UN Millennium Development Goals that were supposed to be met by 2015 that was in fact met, in large part due to East Asia’s emergence.

The ugly cycle of foreign aid

Development experts in government and international organizations like the UN often tout technical solutions like mosquito nets, latrines and other handouts that they can overspend tax payer’s money on as ways to lift the global poor out of poverty.

But what they miss is that these attempts create a cycle of victimization, enrich corrupt dictators and crony capitalists, and most importantly don’t allow the poor to implement sustainable solutions themselves.

A disgusting example of the inefficiencies of foreign aid is the $10 billion that was pledged to Haiti after a tragic earthquake wreaked havoc on the impoverished nation in 2010.

USAID funded firm Chemonics and The Clinton Foundation received a large portion of the aid money for earthquake victims, most of which was ultimately squandered on soccer fields, luxury hotels for aid workers and projects in regions of the country that were unaffected by the earthquake but were strategic for companies friendly to the aid organizations.

Vice Media covered this calamity, which you can watch a preview of below:

Poverty and economic freedom

When poverty does fall, it’s due to increases in economic and personal freedom that allow human ingenuity to be unleashed.

I talk about how I love Hong Kong and Singapore as destinations for business and freedom, but looking at what has become of those countries’ general populations because of their governments’ policies shows how beneficial a freedom-minded government is for all.

From an impoverished backwater in 1965 after achieving independence, Singapore has become one of the wealthiest countries in the world, going from a per capita GDP of around two thousand dollars a year to over thirty-eight thousand in 2014.

Despite its enormous wealth, the country still has a relatively low cost of living and excellent public services including some of the best hospitals in the world. Because of the income opportunity in Singapore, it’s one of the most sought after places for immigrants from the rest of Asia.

The poor are like everyone else, they want to go where they’re treated best. A country with jobs and opportunities is a place anyone will choose over being treated like a victim in a refugee camp.

In countries like Botswana, Rwanda and Georgia, I see new Singapores in the making. Rather than becoming corrupted by Western aid organizations and governments, these countries are finding novel ways to rise above their peers.

While big government proponents will argue that minimum wages, redistribution schemes and other top-down governance are necessary for protecting the rights of the poor, countries like Hong Kong have proven that the free market will sort these things out on its own and over time, a rising tide will lift all boats.

Beyond the presence of more job opportunities, living situations change in wealthier and freer countries. Fertility rates are highest in countries with low economic freedom, but individual poverty falls when women have fewer children. Prosperous societies have longer life expectancies and lower infant mortality rates, further reducing incentives for producing more children.

The real reason poverty has gone down

Rather than a failed UN program raising millions out of poverty, instead it has been the economic liberalization of China that has done so. After more than 70 million people died under Mao Zedong’s “Great Leap Forward” socialist redistribution plans and the country became isolated from the world, China decided to begin reforming their economy in 1978 and grew by 10% every year until 2013.

Not only has this growth lifted hundreds of millions out of poverty in China, it has provided new job opportunities for people from Africa to the Caribbean.

Rather than UN-directed debt relief or other schemes to allay poverty, it has been economic liberalization that has done the lion’s share of this work.

Whatever hinders economic growth also hinders environmental and societal improvement. It is in wealthy, economically free countries that air and water are clean, education is universal, and most of the innovations that positively transform the world originate.

Attacking wealth to fix poverty won’t solve the problem, even though certain increasingly popular politicians claim it will.

Rather than stifling the development of mankind with goals to reduce poverty, we need to allow human ingenuity to prosper in places where it is now being suffocated.

Andrew Henderson
Last updated: Dec 27, 2019 at 5:21PM

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