End Poverty: Export Capitalism

Jonah Goldberg
Wednesday, August 04, 2010

A recent episode of NPR's "This American Life" (quite possibly the best reportorial journalistic enterprise going today -- an admission that might cost me my right-wing decoder ring) focused on the plight of Haiti. The island nation was a basket case long before last January's horrific earthquake. Indeed, despite the fact that the country hosts some 10,000 aid groups and non-governmental organizations (NGOs), it has gotten worse over the past half-century. Haitians on average make half as much as they did 50 years ago. Despite the best of intentions, aid agencies simply haven't made the country better.

Why?

The usual answer from the left is a long indictment of America and the West's legacy of racism, imperialism and slavery. But even if you concede all of that, it won't get you very far in explaining why Haiti has only gotten worse as that legacy has faded further into the past and the West has grown in generosity. (Roughly half of all American households donated to earthquake relief.)

"This American Life," hardly a capitalist hotbed, has a more constructive answer: Haiti's problems in large part boil down to a culture of poverty. Haitians do not lack the desire to make their lives better, nor do they reject hard work. But what they sorely lack is a legal, social and intellectual culture that favors economic growth and entrepreneurialism.

In one NPR vignette, a mango farmer needs a small canal from a river abutting her property if she wants to expand her crop beyond two meager trees. Technology "Sumerians probably took for granted 5,000 years ago" could transform this single mother and her kids from "some of the poorest people on earth to much better off," according to reporter Adam Davidson. But despite a surplus of both cheap ditch-digging labor and aid agencies, she can't get a loan to build it.

"This is what kept striking us in Haiti, just a little upfront investment and people could be living so much better," added fellow correspondent Chana Joffe-Walt.

Instead, Haitians themselves explain, most aid agencies spend much of their energies trying to justify their own existence rather than helping Haitians help themselves. There are important lessons here for U.S. policymakers, not just in regard to Haiti (hardly a national security priority) but also for such places as Afghanistan and Iraq, particularly now that President Obama has announced the combat phase of the Iraq project is coming to an end.

The "root causes" crowd always had a point about the effects of poverty on political stability. Where their case truly fell apart is in the remedy: economic planning from above. For decades, the "international community" bet on big-ticket state-run make-work jobs and white elephants. The West, including America, is expert at pouring aid into poor countries; it's less adept at teaching poor countries how to stop being poor.

Carl Schramm, the president of the entrepreneurism-boosting Ewing Marion Kauffman Foundation, wants to change that. In a recent article for Foreign Affairs, he laid out the case for "expeditionary economics," whereby the U.S. wouldn't export merely democracy but also the economic policies necessary to sustain it.

Economic growth is indispensable to counterinsurgency theory for obvious reasons. Delivering not just better material conditions, but also the sense that better days are ahead, is at the core of any American sales pitch for democracy. Only a thriving entrepreneurial class can create a healthy middle class, which research shows is essential to democratic stability. The Taliban would still be able to recruit fanatics if Afghanistan had a surging job market, but it would be much harder to win the support of the general population.

Recently, there has been a bipartisan boom in support for microfinancing. But it remains the case that for economic planners, putting your faith in the chaos of the market is akin to letting go of the wheel on the highway.

Which is why Schramm argues that the U.S. military should take the lead in bringing "messy capitalism" to places such as Afghanistan. Entrepreneurialism is surely a mind-set, but it is also a skill. And the United States, of all countries, should teach it -- even if it seems that the Democrats would rather un-learn these lessons here at home.

There's a rich body of research suggesting such an effort would pay off.

According to Hernando de Soto, a Peruvian economist, the Third World brims with entrepreneurs, but they must work in the black market because the legal economy bars them. In the early 1970s, when de Soto started his work, it took a Peruvian 200 days of full-time work, and staggeringly expensive fees and bribes, just to start a business legally. De Soto estimates that if the world's poor could just be given clear title to their land, they'd gain access to $9.3 trillion in capital, to borrow against or sell.

Even if that's too rosy a prediction, one thing is clear: The way we've been doing things abroad in places such as Haiti hasn't worked very well, while entrepreneurialism at home has fueled staggering economic growth.

And heck, maybe if we turned Afghanistan and Haiti around, we might return to the same policies here as well.