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The Solution to Poverty

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I have great news for you! According to today’s Washington Post (March 22), world leaders meeting at a U.N. conference in Monterrey, Mexico, have come up with a new plan for ridding the world of poverty. The plan involves the U.S. government’s sending of foreign aid to the governments of Third World countries. Now why didn’t someone think of that before?

Here’s how the plan will work: The American people will continue sending their hard-earned money to the IRS. The U.S. government will then send the money to government officials in poor countries (after deducting operating costs). The foreign officials will ensure that the money reaches the poor. Voila! Poverty ended forever. The other good news is that according to World Bank President James D. Wolfensohn, the money will not be wasted or sent to corrupt government officials, as has happened in the past.

But there is actually one — and only one — solution to poverty: stop governments from waging war on poverty, for it is the governmental wars on poverty that have ensured that people remain mired in poverty throughout history.

The only way to raise standards of living is through the accumulation of private capital, which makes people more productive. And the only way to bring capital into existence is through savings.

For example, farm hands who use a tractor will produce more than those using a hoe. So, if a farm owner saves a portion of his income to buy the tractor, the farm hands become more productive. (If the farm owner has to send the money to the IRS instead, productivity doesn’t rise.) How can we ensure that the farm owner will pay higher wages to his workers after the increased production? Because if he doesn’t, the farm next door (which also is increasing production) will attract his workers by offering them more money. The farm hands can rely on the virtues of competition, not the benevolence of the farm owner, for their increases in pay. (That’s why many businesses pay workers in excess of the legally established minimum wage.)

To rid the world of poverty, then, would entail at a minimum the following steps: the repeal of income taxation (including here in the United States), minimum-wage laws, restrictions of business enterprise (that’s why it’s called “free” enterprise), restrictions that prevent people from entering into mutually beneficial trades with one another, and all government welfare, including for the rich and middle class.

In other words, to solve the problem of poverty, leave people free to accumulate unlimited amounts of wealth, freely engage in any business enterprise, and enter into any peaceful exchange with anyone in the world. The solution to poverty lies not in the failed welfare-state policies of the past but rather in the unhampered market economy.

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    Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.