The poor have never had it so good ... now what?

Written by Gavin Chait

If poverty was purely a lack of cash then we should end it this year.

The World Bank, financier of last resort to bankrupt governments, has a great deal of competition.  The Global Fund has $ 6.8 billion.  The Gates Foundation has $ 31.9 billion.  Google has chipped in with $ 90 million in their foundation.  Even the US government, so much maligned, has tripled their development aid to $ 9 billion.  There are now more than 50 billion-Dollar foundations in the US alone.

Many of these foundations are having trouble giving away the minimum of 5% of their capital that they must to maintain their charitable status.

Yet poverty remains as intractable as ever.  Clearly money isn’t the only problem.

Money is not wealth.  Neither does it have any intrinsic value.  It is simply a physical reflection of the wealth in an economy.  Printing more money doesn’t increase the wealth of an economy – there is still the same amount of physical stuff as before – but it does debase the value of the currency. And capitalism is no different from the internal combustion engine.

An engine works by the same rules under a communist government as it does in a free-market democracy.  It’s just that in a communist economy the government decides what the efficiency of that engine will be and how well it will work.  Then everyone gets the same engine.  If you doubt how bad this can be, just ask some East Germans about the Trabant.

In a free-market economy the vehicle comes in a wide variety of styles.  If you don’t like the car you can complain to the manufacturer and indulge in consumer action.  If you didn’t like the Trabant you had to take issue with a police-run, Soviet-era, state.

Social development has been a lot like a centralised Soviet-run economy.  There is only one choice, and you will take what you’re given.  Soviet states ran very well; if you didn’t mind poverty, shortages, and corruption.

All of these new charitable foundations, started by entrepreneurs, rely on third-party development organisations started by socialists.  They’re speaking different languages.

Development is not as simple as just giving people the things they lack.  Oxfam has, since the early 1980s, assisted subsistence and micro-farmers to grow coffee around the world.  Their success at raising charitable donations for this inspired other organisations to follow suite.  Not surprisingly all this activity resulted in a global coffee slump even as Seattle coffee culture swept the globe. Who does Oxfam blame?  Why Starbucks of course. It seems that consumers don't pay enough for coffee.

Yet farming is not simply about growing the same cash crop year-in-year-out on the assumption that it will always have the same value.  Commercial farmers study global supply trends and decide what crops and how much of it to farm.  As one crop becomes devalued they farm another.  They diversify by raising a number of different crops and livestock.  Development organisations do not teach this finesse.  They expect market conditions to remain identical.  But demanding a stable coffee price despite massive supply is the same as expecting Playstation 1 games to remain at the same price as newly introduced Playstation 3 games. In the real world retailers left with PS1 stock dump it in the bargain bin in the hopes of getting rid of it.

Demanding an esoteric idea of "fairness" requires very real unfairness and has resulted in organisations like Oxfam colluding with corrupt dictatorships (like Ethiopia's).

The future of development relies on teaching the poor the mechanisms of a market economy, not simply the appearance of one.  And this requires that we modernise social development organisations. The problem with this is the same as trying to convert a communist-era economy into a free-market one without turning it into modern Russia; filled with corruption, oligarchs and dramatic differences between rich and poor.  It requires continual scrutiny and feedback.

In this new year of 2007 let us start a conversation about development.  In the same way bloggers hold each other to account (most especially over the recent Acer Ferrari fiasco) let us hold development organisations to account.

If they believe that they are doing a good job, let them explain and prove and win our support.  Let us not allow them to blame others for their own mistakes. So that the poor are not always with us.

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