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Why Blame Third World Poverty on First World Greed? Recently, a friend told me about an exercise his son had participated in at a church youth program. The project was intended to "raise young people's consciousness" about Third World poverty, and to galvanize them into "doing something" about it. The instructor divided the young people into "haves" and "have-nots," drawing straws to determine group membership. Then, the "haves" enjoyed a day of abundant meals and recreation, while the "have-nots" were confined to the basement and given bread and water. Afterwards, they all discussed how unfair this had been, and "the poor" expressed anger at "the rich" for not sharing. The instructor drew parallels with the plight of Third World nations, and the kids closed the day by kicking-off a campaign to raise money to send food to developing countries. Many schools and churches offer some variation on this exercise. Most teach the same lesson: that poor countries' poverty is the result of rich countries' greed. The implication is that the world's wealth is like a pie of fixed size -- when some take too much, others are inevitably left with too little. If we Americans would only eat less, the thinking goes, the world's poor would eat more. But today, evidence abounds that the fundamental cause of Third World poverty is not First World greed. Paradoxically, it is the economic, political and social obstacles that developing nations themselves raise to progress by their aspiring poor. In "The Other Path," Peruvian economist Hernando de Soto has drawn a compelling picture of how oppressive these barriers can be. De Soto's book appeared in 1989, when Peru's Byzantine bureaucracy seemed to be throwing all its energies into preventing the struggling peasants crowding into its cities from getting ahead. For example, de Soto reported that to get a license to sell from a pushcart, a would-be peddler had to spend 43 days shuttling between bureaucrats, and lay out $590 -- 15 times the minimum monthly wage. To register a tiny factory required 289 days and $1,231. Homeless families seeking to build huts on vacant government land had to spend 7 years jumping through bureaucratic hoops, and expend the impossible sum of $2,156 -- 56 times the minimum monthly wage -- per person. Shut out of the legal economy, Lima's enterprising poor created a bustling "black market." As of 1989, they had built 50 percent of the city's housing and 83 percent of its markets, and operated fully 95 percent of its bus and taxi network. Yet because their operations were illegal, their lives remained distressingly insecure. Without access to credit or insurance, they could not expand their businesses or plan for the future, and were constantly vulnerable to prosecution and extortion. A better way Fortunately, since 1989, Peru has moved decisively toward free market policies. Deregulation and privatization have sparked an economic renaissance, and much of the "informal economy" now operates within the law. The poorest of the poor -- perennial outcasts -- are becoming tax-payers, and slowly but surely entering the middle class. Excessive government regulation is a primary culprit in perpetuating poverty across the globe. But in some countries, culture and history also impose burdens. The striking contrast between Barbados and Haiti illustrates this well. Barbados and Haiti are Caribbean nations of similar size and resources, and both are populated by the descendants of former slaves. Barbados is a thriving democracy, with a 99 percent literacy rate and a per capita income of $8,700. But Haiti -- though a major aid recipient -- is the poorest country in the Western Hemisphere, with rampant illiteracy and a per capita income of about $250. The two islands' divergent pasts seem to explain this astonishing gap. Barbados was colonized by the British, who left a heritage of democratic institutions, education and entrepreneurial activity. Haiti, by contrast, was colonized by the French, who quashed the entrepreneurial spirit, and established an oppressive caste system. Moreover, Haiti's people have clung to the voodoo religion, which portrays the universe as capricious, and makes planning ahead seem pointless. Today, both oppressive governments and stifling social systems restrict the creative capacity of many Third World people. Under these circumstances, progress is difficult. For, as aid expert Lawrence Harrison has pointed out, the creative capacity of human beings -- their ability to imagine, invent, theorize, organize and solve problems -- is at the heart of the development process. The world's wealth is not a fixed pie, Harrison observes. On the contrary, productive economic activity creates wealth. In Harrison's view, "The society that is most successful at helping its people -- all its people -- realize their creative potential is the society that will progress the fastest." Handouts don't work Clearly, "wealth transfers" -- giving each family a bag of beans a week -- will do little to help Haiti's poor become self-sufficient. Over the long haul, such transfers may even do harm, by creating a mentality of dependency. The development programs that offer most hope to countries like Haiti are those designed to tap the creative potential of the poor, by helping them build self-sustaining "micro-enterprises." Fortunately, organizations like Enterprise Development International, headquartered in Arlington, Virginia, are doing just that. In Haiti, EDI works with the most neglected elements of the population -- families struggling for survival in remote areas, whose annual income is under $240. EDI operates very differently than major international relief organizations. It makes loans, at market rates, to "solidarity groups" of 10 to 40 families, mostly church members who know each other well. Individual loans average $135, but the entire group is responsible for repayment -- an arrangement which fosters both cooperation and accountability. One loan recipient might buy a sewing machine to make school uniforms, passing on her skills to assistants as demand grows. Another might improve rice yields, or buy tables and chairs to expand seating capacity in a tiny restaurant. All are required to open savings accounts, and take EDI training in small business planning, budgeting, record-keeping, and market analysis. Thus far, EDI has helped 1,260 Haitian families, 7,560 people in all. Loan recipients have increased their income by 20-48 percent, and EDI boasts a remarkable payback record of 99 percent. The political, economic and social roots of Third World poverty are complex, and often beyond our power, as Americans, to change substantially. That is why organizations like EDI offer such hope. They reach out directly to individuals in poor countries, and help them realize their creative potential -- potential that would go to waste without the access to credit, know-how, and "solidarity group" support that EDI provides. What a service we would do our young people -- and the Third World poor -- if we taught, as EDI does, that the best way to help a hungry person is not just to give him a fish, but to teach him how to fish. -- Katherine Kersten is chairman of Center of the American Experiment in Minneapolis and a commentator for National Public Radio's "All Things Considered." |