Is growth good for the poor?

politics : IMF Meeting: Growth is Good for the Poor (editorial)

The subject is a bit out of fashion - the grievance is not. In the midst of great abundance there is great poverty in the world. Of the six billion people on earth, 2.8 billion - almost half - live on less than two dollars a day. According to the World Bank's definition, people are poor when they don't have more than a dollar a day: that's still 1.2 billion people. Almost half of them live in South Asia. Those who are poor often have to work more physically than the rich. He is therefore more susceptible to disease. Those who are sick a lot die earlier.

The agency of the rich is now dealing with the problems of the poor: The annual meeting of the IMF and World Bank, which begins this week in Prague, has set itself the topic of fighting poverty. The World Bank and the Monetary Fund do not just have a topic, they also have a thesis. It is as simple as it is controversial: good for the poor is growth, growth and growth again. Prague will be the place where this growth thesis has to face the opposition of the opponents of globalization. It is to be hoped that the contradiction will be articulated with words and arguments - and not with stones and riots like in Seattle a year ago or in Melbourne a few days ago. Especially since the World Bank is doing exactly what the demonstrators want: It resolves to help.

But if you want to help the poor world, you shouldn't advise the rich world to adopt protectionism: Nothing else is hidden behind the call of many well-meaning people to introduce minimum standards for work and the environment. Those who ban child labor in poor countries are pursuing a good goal. But a general ban on child labor would drive many families that depend on this income into even greater poverty. It would be better to think of ways to give such families low-interest loans so that their children can attend schools and universities. Something like this is hidden behind the catchphrase of "empowerment" (authorization), with which the World Bank is now calling for poverty reduction.

The best prerequisite for growth, however, is a radical opening up of states to foreign direct investment, a dismantling of all customs and trade barriers and extensive liberalization of the domestic markets. That is the opposite of protectionism. A macroeconomically stable policy that prevents inflation and promotes fiscal discipline is of more benefit to the poor than a policy of supposedly state benevolence that generally dampens growth. This therapy works even if all other states do not participate in the liberalization at the same time. The opening of the markets does not depend on multilateral agreements. This requires a stable legal framework that protects property and guarantees freedom of contract. Democracy and independent justice are better for the poor than dictatorship and corruption.

There can be no empirical or historical doubt that growth is good for the poor. Wherever economic policy focuses on growth, this has resulted in an improvement in prosperity for all. This was no different in England in the 19th century than in the Asian tiger states in the 20th century. It applies to Argentina and Chile in Latin America or Estonia and the Czech Republic in Eastern Europe. For those who oppose liberalization, visiting these countries is perhaps more worthwhile than protesting against the IMF and the World Bank.

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