Saturday, June 21, 2014

Increasing the Earning Power of Workers in Developing Countries

Henry Hazlitt wrote "Why some people are poorer" on January 1972 at The Freeman, and it was republished at last Decemeber 2009. After providing a brief historical overview of the economic condition of the world from poverty to prosperity, Hazlitt then shared some quantitative studies about causes of poverty. He considered these studies nonsense and misleading for the causes are too numerous and too diverse to classify. In concluding the article, Hazlitt stated:

"The real problem of poverty is not a problem of 'distribution' but of production. The poor are poor not because something is being withheld from them, but because, for whatever reason, they are not producing enough. The only permanent way to cure their poverty is to increase their earning power."

Reading the last statement, a question comes to my mind: How can you increase the earning power of people in developing countries if the investment capital per head is very small due to low foreign investment and stagnation of domestic capital caused by government interventionist policies?

I answered my own question: The economic policies must change in order for foreign investment to freely enter the country and for domestic capital to grow. Only then can the investment capital per head will increase and the salary of laborers in developing country will also increase. 

But the problem is statist ideas are so pervasive in our society. Socialist and neo-Marxist ideas have captured our educational institution and the media. These ideas dictate the policies that politicians and bureaucrats make. Everybody think they help the poor. Due to ignorance to sound economic principles, our leaders are clueless that they are actually reducing the economic pie, and making the poor even poorer. 

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