Thursday, November 30, 2006

A Problem Of Production, Not Distribution

Robert T. Miller takes Pope Benedict XVI to task (gently of course) for economic ignorance in a post at FIRST THINGS:

Speaking about the many people in the world who go hungry, Pope Benedict XVI says that we need "to eliminate the structural causes linked to the system of government of the world economy, which allocates the greater part of the planet's resources to a minority of the population."

In focusing on the allocation of goods, however, Benedict misdiagnoses the problem, which really concerns economic growth. Like most non-economists, he speaks as if the world's stock of goods and services were fixed, the only issue being how properly to distribute them. In fact, the total amount of goods and services in the world has been increasing very rapidly for a long time.

Miller goes on to provide a stark comparison:

But economic growth is very uneven, with the economic output of some countries increasing much faster than that of others. If you want to know why some countries have become wealthy and others have stayed poor, therefore, you need only compare the growth of their respective GDPs per capita. Consider South Korea and Zimbabwe. In 1970, their respective GDPs per capita were virtually identical: $290 for Zimbabwe and $291 for South Korea. By 2004, Zimbabwe's GDP per capita had hardly budged, having increased to just $351, meaning that the average Zimbabwean was only marginally better off in 2004 than 1970. In South Korea, however, GDP per capita increased to $14,266, an astonishing forty-nine-fold increase. (In fact, matters are even worse than these numbers imply, for Zimbabwe's GDP per capita had been as high as $867 in 1982, and from 1997 to 2004 it declined every year, from $735 to $351.) Comparisons for similar pairs of nations--e.g., Singapore and Zambia--yield similar results.

It is thus true, as Benedict says, that the greater part of the planet's resources is enjoyed by a minority of the population, but this is because the greater part of those resources is produced by that same minority of the population. The world economy is not rigged in favor of the rich nations. South Korea did not get rich, and Zimbabwe did not stay poor, because the captains of industry and the Wall Street bankers met in a smoke-filled room and decided that they loved South Korea but hated Zimbabwe. The South Koreans got rich because they earned their riches and continue to do so, year in and year out. Zimbabweans are poor because they produce little--and less now than twenty years ago. People who produce wealth naturally think they are entitled to keep most of it for themselves and their children. I don't dispute that such people ought to give away more of what they have, but we should be clear that they have this wealth in the first place because they are producing it themselves, not wrongfully taking it away from others.

UPDATE: King weighs in.

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