ALOD Policy

Stop Conflating Inequality With Poverty

By  Bryan Cheang

The problem of inequality has often been considered to be one of the biggest social problems of our generation.

Widespread concern about the great disparities of income and wealth have fueled anti-globalization sentiments all around the world, and threaten to undermine the advances in trade, investment, and immigration we have seen.

One key problem is that contemporary discussions of inequality have often conflated it with poverty. Not only are inequality and poverty conceptually distinct, a failure to distinguish between them can lead to problematic policy conclusions. Additionally, when market advocates criticize redistributive policies and government welfare programs, they are seen as anti-poor. Thus, separating these two concepts can help market advocates regain the moral high ground in this debate.

Conflating Inequality and Poverty

It is generally assumed that inequality implies poverty, i.e. the rich people are prospering, so poor people must be suffering. This conflation is very subtle and is best seen through the presentation of inequality in the widely-used high school economics textbook Economics (7th ed) by John Sloman (2009). According to Sloman (2009, p. 276):

Inequality is one of the most contentious issues in the world of economics and politics. Some people have incomes far in excess of what they need to enjoy a luxurious lifestyle, while others struggle to purchase even the basic necessities. The need for redistribution from rich to poor is broadly accepted across the political spectrum. Thus the government taxes the rich more than the poor and then transfers some of the proceeds to the poor, either as cash benefits or in kind.”

The chapter seeks to explain the phenomenon of inequality but, almost imperceptibly within this opening paragraph, implicitly suggests that under such unequal situations, there are poor people who “struggle to purchase even the basic necessities.” In fact, this is not necessarily the case.

Inequality in relation to income simply means the existence of a gap between those who earn the most and those who earn the least. The mere existence of an income gap, even if it’s widening, says nothing about the actual income levels of those who do earn the least. In other words, an income gap does not necessarily mean that those at the lowest income brackets are poor. Just because Bill Gates is loaded with greenbacks and is many times richer than I am does not, by itself, suggest that I am “poor” in an absolute sense.

It is clear that a society with a very uneven distribution of income can still be one with high levels of absolute prosperity, in such a way that even those who earn the least (relatively) have enough to survive – comfortably.

Implications of the Conflation

Not only is it possible that the least well-off in unequal societies have enough to survive, it is actually likely for them to be much better off in unequal societies than in more equal ones.

Assuming the absence of crony capitalism, income inequality is a corollary of a free, dynamic, and growing economy that increases prosperity for all.

Attempts to close inequality through standard welfare-state policies such as redistributive taxes, subsidies, minimum wage laws, price controls, and the public provision of “free social goods” like health care can, and often have, slowed down economic growth. Thus impacting the generation of wealth that the least-well-off depend on.

If poor people were truly at the centre of our attention, we should endorse inequality.

Put another way, policy attempts to fight inequality retard economic growth, slow down poverty reduction at best, and exacerbate poverty at worst.

Aside from the economic costs of state-centric welfare programs, there are less quantifiable human costs as well. Generous welfare programs often trap individuals in a state of dependency on the government, which not only disincentivizes them from working but robs them of the dignity and sense of achievement that comes from earning their own income and being independent and self-sufficient.

Consequently, if poor people were truly at the center of our attention, we should endorse inequality, or at least the market system it is based on. When people are left free to trade, invest and innovate in the market, inequality is inevitable simply because people are different, and some may be more adept at spotting profit opportunities. Yet, if this system is left largely unhampered, it generates vast amounts of wealth that benefits everyone, including the least well off.

This is precisely why poverty rates have fallen dramatically in the recent age of globalisation, and, to that extent, so has global inequality.

The above does not mean that there is no role for government in social policymaking. Yet there is a need to ensure that implemented policies facilitate wealth-creation for all rather than redraw the relative shares of the economic pie. The social policies implemented in the country of Singapore provide useful lessons on how best to help the least well off in any society.

Social Policies that Reward Working

Singapore’s main “welfare” scheme is titled “Workfare”.

Singapore’s social-welfare system is based on the fundamental principle of meritocracy,considered a cardinal principle in the Singaporean psyche. It has been said that one of the shared values in Singapore is “work for reward, reward for work.” Even where government assistance is provided to the least-well-off, such schemes are carefully designed to promote and encourage work and thus to promote self-reliance. The belief is that Singaporeans should work and take care of themselves, rather than solely depend on the government.

These principles are reflected in several key initiatives. A testament to its pro-work orientation, Singapore’s main “welfare” scheme is titled “Workfare”. One of its components is the Workfare Income Supplement, which provides a cash payment to low-income individuals who are working. It is not a “free handout” but essentially an incentive to encourage work.

A further illustration of Singapore’s pro-work orientation is the other component of this policy: a training support scheme, which incentivizes workers to upgrade their skills in order to increase their productivity and thus their earning potential.

Singapore has also deliberately rejected a national minimum wage law. In its place, it has instead introduced a targeted “Progressive Wage Model” in several low-wage sectors such as cleaning, security, and landscaping. Employers in these sectors are expected to pay their workers a minimum but are also incentivized to send them for retraining in order to increase their productivity. Where typical minimum wage legislation simply expects employers to pay the mandated wage, Singapore’s take on it goes further in its encouragement of productivity improvements.

Singapore’s leaders have opted to pursue growth-oriented policies.

Subsidies are also provided but only in a limited and targeted fashion. In the healthcare sector, for example, individuals are expected to make co-payments for their medical expenses and cannot rely on government subsidies to simply cover 100% of their bill. More aid is in fact given to the neediest individuals who cannot afford even basic essentials, but the principle of self-responsibility looms heavy in the Singapore system. Not surprisingly, health outcomes in Singapore far exceed those of the United States, even though it spends only a fraction of its GDP on health care in comparison to the USA.

Growth-Oriented Policy

These Singaporean social policies might remain anathema to purist libertarians, who prefer to eliminate all social assistance entirely, but if we must have social welfare policies in the world of here and now, there is a lot to admire in this system.Particularly when observing its targeted, limited nature and its pro-work, pro-responsibility orientation.

Singapore’s leaders have managed to identify the difference between inequality and poverty, and have opted to pursue growth-oriented policies, sometimes even at the expense of the income gap. The Prime Minister Lee Hsien Loong said in 2013:

If I can get another ten billionaires to move to Singapore, my Gini coefficient will get worse, but I think Singaporeans will be better off because they will bring in business, bring in opportunities, open new doors, and create new jobs.”

In conclusion, there is cause for concern about most societies’ obsessive focus on inequality at the expense of the very poor. Conflating inequality and poverty can ironically lead to misguided policies that ultimately hurt the poor.

The next time you’re asked about whether you care about the “problem of inequality”, respond in the negative and that you care too much for poor people instead. Market advocates should always frame markets as a powerful, poverty-killing device, and regain the moral high ground in this most essential debate.

References:

Sloman, John, & Wride, Alison (2009). Economics (7th ed.). Edinburgh Gate: Pearson Education.

Republished from FEE.org

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The Core of Liberty Is Economic Liberty

By Deirdre McCloskey

Since the rise during the late 1800s of socialism, New Liberalism, and Progressivism it has been conventional to scorn economic liberty as vulgar and optional—something only fat cats care about. But the original liberalism during the 1700s of Voltaire, Adam Smith, Tom Paine, and Mary Wollstonecraft recommended an economic liberty for rich and poor understood as not messing with other peoples’ stuff.

Indeed, economic liberty is the liberty about which most ordinary people care. 

Adam Smith spoke of “the liberal plan of [social] equality, [economic] liberty, and [legal] justice.” It was a good idea, new in 1776. And in the next two centuries, the liberal idea proved to be astonishingly productive of good and rich people, formerly desperate and poor. Let’s not lose it.Well into the 1800s most thinking people, such as Henry David Thoreau, were economic liberals. Thoreau around 1840 invented procedures for his father’s little factory making pencils, which elevated Thoreau and Son for a decade or so to the leading maker of pencils in America. He was a businessman as much as an environmentalist and civil disobeyer. When imports of high-quality pencils finally overtook the head start, Thoreau and Son graciously gave way, turning instead to making graphite for the printing of engravings.

That’s the economic liberal deal. You get to offer in the first act a betterment to customers, but you don’t get to arrange for protection later from competitors. After making your bundle in the first act, you suffer from competition in the second. Too bad.

In On Liberty (1859) the economist and philosopher John Stuart Mill declared that “society admits no right, either legal or moral, in the disappointed competitors to immunity from this kind of suffering; and feels called on to interfere only when means of success have been employed which it is contrary to the general interest to permit—namely, fraud or treachery, and force.” No protectionism. No economic nationalism. The customers, prominent among them the poor, are enabled in the first through third acts to buy better and cheaper pencils.

Economic liberty, that is, is part of liberty. Of course.

Mussolini and Hitler won elections and were popular, while vigorously abridging liberties.

Indeed, economic liberty is the liberty about which most ordinary people care. True, liberty of speech, the press, assembly, petitioning the government, and voting for a new government are in the long run essential protections for all liberty, including the economic right to buy and sell. But the lofty liberties are cherished mainly by an educated minority. Most people—in the long run foolishly, true—don’t give a fig about liberty of speech, so long as they can open a shop when they want and drive to a job paying decent wages. A majority of Turks voted in favor of the rapid slide of Turkey after 2013 into neo-fascism under Erdoğan. Mussolini and Hitler won elections and were popular, while vigorously abridging liberties. Even a few communist governments have been elected—witness Venezuela under Chavez.The protagonist of Forever Flowing by Vasily Grossman (1905–1964), the only example of a successful Stalinist writer who converted wholly to anti-communism, declares that “I used to think liberty was liberty of speech, liberty of the press, liberty of conscience. Here is what it amounts to: you have to have the right to sow what you wish to, to make shoes or coats, to bake into bread the flour ground from the grain you have sown, and to sell it or not sell it as you wish; . . . to work as you wish and not as they order you.”

The blessed Adam Smith was outraged by interferences in 1700s Britain in the right of workingmen to move freely to find profitable work. “The property which every man has in his own labor, as it is the original foundation of all other property, so it is the most sacred and inviolable. To hinder him from employing this . . . in what manner he thinks proper without injury to his neighbor, is a plain violation of this most sacred property.” Not as they order you.

And economic liberty, surprisingly, has massively enriched the world in goods and services. How much? In 1800 the income per person of a country like Sweden or Japan, expressed in 2018 prices, was about $3 a day. Now it is over $100 day, a 3,200 percent increase. Not one hundred percent or even two hundred percent, but thirty-two hundred percent. The enrichment was not a factor of two, as had been routine from time to time in earlier spurts, such as the glory of Greece or the prosperity of Song China, to fall back to $3 a day. It was a factor of thirty-three. No starvation. Taller people. Doubled life expectancy. Bigger houses. Faster transport. Higher education. If you doubt it, see the late Hans Rosling’s startling videos at Gapminder.

We became rich by giving ordinary people their economic liberty.

The usual explanations of the Great Enrichment from economists and historians don’t compute. Accumulation of capital or the extractions of empire were not the causes. Ingenuity was, and the ingenuity was caused in turn by a new liberty after 1800. The liberal plan of equality, liberty, and justice made masses of people bold–first the free and wealthy men, then poor men, then former slaves, then women, then gays, then handicapped, then, then, then. Make everyone free, it turned out (the experiment had never been tried before on such a scale), and you get masses and masses of people inspired and enabled to have a go. “I contain multitudes,” sang the poet of the new liberty. And he did. He and his friends had a go at steam engines and research universities and railways and public schools and electric lights and corporations and open source engineering and containerization and the internet. We became rich by giving ordinary people their economic liberty.And now the “we” has extended far beyond its heartland in northwestern Europe. China after 1978 and India after 1991 began to abandon the illiberal European theory of socialism, devised in the middle of the 1800s and exported by the 1970s to a third of the globe. The result of turning towards economic liberalism was that the annual growth of goods and services per person available to the poorest in China and India rose from its socialist level of 1 percent a year, and sometimes negative, to 7 to 12 percent per year. At such rates, it will take only two or three generations for both countries to have European standards of living. Such a prospect for this four in ten of humans is no pipe dream. Similar enrichments were achieved over a similar span in Hong Kong, South Korea, Singapore, and Taiwan, with other startling success stories for new liberalism and a reasonably honest government in Ireland and Botswana.

An economically illiberal government can, of course, borrow from countries honoring liberty. The USSR did from 1917–1989, for example, and for a long time even many economists in the West believed its fairy tale that Central Planning Worked. When communism fell in 1989 we discovered decisively that planning did not work, not for the economy or the environment or for other liberties. Singapore is sometimes cited as an example of intelligent tyranny. And so is China, dominated still by an elite of communist party members. Both, however, practice substantial economic liberty, despite their lamentable practice of jailing political opponents.

And enrichment, in the end, leads to demands for all liberties, political as much as the economic liberties, as it did in Taiwan and South Korea. Enriched people will not long put up with serfdom. And anyway the average record of tyrannies is economically disastrous, such as in Zimbabwe, next door to prosperous Botswana, or for that matter in the long and dismal history of illiberalism worldwide from the invention of agriculture down to 1800.

The ethical habits of commerce are expressed daily in the way an American shopkeeper greets his customer: “How can I help you?”

The Christian gospel says properly, “For what shall it profit a man, if he shall gain the whole world, and lose his own soul?” The claim against economic liberty has always been that even if we gain the world in goods, we lose our souls. We are told from the radical left that free exchange is intrinsically evil. Any extension will merely extend the evil. From the radical right, we are told that free exchange is ignoble compared with the glories of rank and war. But the radical left and right, and also the middle complaining about “consumerism,” are mistaken. The evidence is that economic liberty does not corrupt us, but rather makes us rather virtuous as well as very rich. It enriches in both senses, material and spiritual.For one thing, mutually advantageous exchange is not the worst ethical school. It is better than the violent pride of aristocrats or the violent insolence of bureaucrats. And in economic liberalism, the human desire to excel is provided millions of honorable paths, from model railway building to show business, as against in illiberal societies the narrow path to eminence at the court or politburo or army. We do not lose our souls in commerce, but cultivate them. The military, admired nowadays even in liberal societies, is commended daily for its “service.” But every economic act among consenting adults is service. The ethical habits of commerce are expressed daily in the way an American shopkeeper greets his customer: “How can I help you?”

The upshot? The concert halls and museums of well-to-do countries are full, the universities are flourishing, and the seeking of the transcendent, if not in the established churches, is expanding. One cannot attend much to the transcendent of art or science or baseball or family or God when bent over in a paddy field from dawn to dusk.

Protection of existing jobs has created worldwide a massive and politically explosive unemployment of youths.

The best way to make people bad and poor is the illiberality of communism and fascism, and even the slow if sweet socialism of over-regulation. Women among the theocratic despots of Saudi Arabia are quartered at home, unable to flourish so much as driving an automobile. The economic nationalism of the new Alt-Right is impoverishing, and anyway closes us to ideas from the wide world. If betterment is slowing in the United States—a widely held if doubtful claim—we need the betterment coming from newly enriching countries such as China or India, not cutting ourselves off to “protect jobs” at home. Protectionist logic would have us make everything in Illinois or Chicago or our local street. Breakfast cereal. Accordions. Computers. It is childishly silly as economics, though stirring as nationalism.At the heart of communism and fascism, and the regulating impulse from the middle of the spectrum of governmental compulsion, is massively messing with other people’s stuff. In the United States, over one thousand occupations require licenses from the government. Opening a new hospital requires the existing hospitals to grant a certificate of need. In Tennessee, if you wish to open a new furniture moving company—two men and a truck—you are required by law to ask permission of the existing moving companies. Protection of existing jobs has created worldwide a massive and politically explosive unemployment of youths. One-quarter of French people under 25 and out of schooling are unemployed. It’s worse in South Africa.

Yet true and humane liberals are not anarchists (Greek an-archos, no ruler). One can admit that it can be good to abridge economic liberty a little to the extent of taxing the well-to-do to give a hand up to the poor, such as publicly financed education. No serious argument there—Smith and Mill and even Thoreau agreed. (True, big government routinely gives also a hand up to the rich and powerful, such as protections for farmers in the U.S. and the Common Market. Big governments follow the nasty version of the Golden Rule, namely, those who have the gold, rule.) And one can admit that if the Canadians invade the United States, economic liberty might usefully be abridged for the duration, if prudent for defense. No argument there, either. (Yet big governments routinely break the peace for glorious conquests. Fear those Canadians.)

Better keep the government leashed.

The solution, liberals believe, is to restrict the power of government, even when the government is popular. Fascism often and communism sometimes, unhappily, are popular. Moderate versions of both, in nationalism and socialism, are very popular, until they go wrong. People favor for the nonce the alleged glory of governmental aggressions against foreigners (see Europe in August 1914) and the alleged free lunches of governmental control of the economy (see Venezuela in August 2017).Better keep the government leashed. Of the 190 or so governments in the world ranked in honesty from New Zealand at the top to North Korea at the bottom one might generously take the top 30 as adequately honest for the task. Spain is the marginal case. Britain and the United States qualify. Italy, ranked 75th, just above Vietnam, does not. But the top 30 moderately honest governments serve merely 13 percent of the world’s population. That is to say, 87 percent of the world is governed corruptly and incompetently, by a relaxed standard of goodness. The calculation shows why the optimism among amiable people on the left and among not so amiable people on the right about extending the illiberal powers of government is naïve. Thoreau wrote, in true liberal style, “I heartily accept the motto,—‘That government is best which governs least,’ and I should like to see it acted up to more rapidly and systematically.”

Yes, with a few modest exceptions.

This essay will appear in a volume for the Renew Democracy Initiative. 

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Poverty Breeds Nigeria’s Next ‘Boko Haram Mother

By Mercy Abang

“Over 134 suicide bombings have occurred since 2009 when Boko Haram unleashed a campaign of terror on Nigeria’s northeast region. According to research by Combating Terrorism Center at West Point and Yale University, at least 244 of the 338 attacks since 2011 where gender is identifiable, have been young girls under the age of 7 – 13.

And the trend does not seem to be ending soon.  On August 6th, 2017, the Nigerian Army issued a statement appealing to religious and traditional leaders in communities within the region to help dissuade people from donating their daughters or female wards, to the terrorists for indoctrination and suicide bombing missions.

It came off as one of the many announcements made to the media that the public has become numb to over time because of the series of unabated killings by Boko Haram.

Beyond the surface however, it reflected the disturbing state of situation in Northern Nigeria and Nigerians moved on like everyday tales in recent years since the beginning of insurgency. “The statement became expedient in view of recent revelations by some intercepted female suicide bombers during interrogations”, the military wrote.

37-year old Hadiza is a mother to three girls and a missing boy; she loves her children but is willing to offer her teenage daughter to the insurgents for the monetary benefit.

“I can’t say NO to the insurgents, can you?” she asks, speaking in Hausa with the help of a local interpreter who doubled as a fixer. “What has government done for us since we’ve been displaced?”

Hadiza is a nervous wreck, uncoordinated for most of the interview.  Hadiza and her husband were displaced after the deadly attacks on Biu in July 2015 that left 78 persons killed including the insurgents.

Hadiza’s home was raided along with other residents but they hid themselves in the bush as the terrorists looted and torched houses, carting away food produce. That attack forced them out of their home and they walked kilometres from home and slept in the bush for more than six nights to avoid being killed – that journey led them to finally move and settle in Maiduguri.

Boko Haram has killed more than 20,000 people and forced some 2.7 million others including her family to flee their homes since 2009.

Like every other woman in the neighbourhood, she has been through trauma and is a victim of the crisis that has forced her out of her home.   She lights a smoke while seated in the wooden chair shaking her legs constantly and can easily be mistaken for a crackhead.

“I have lost everything, I can’t feed these kids – we hear accounts of stolen foods and items sent to those of us suffering but who are those taking it back? The wealthy”.  Aisha sobs.

“And you think Boko Haram will come here (pointing to the other lady by her side) and any one of us will say NO”?

As disturbing as her accounts may sound, the remarks by Aisha are not so much in contrast to the statement issued by Brigadier General, Sani Kukasheka Usman- Director Army Public Relations.

The military described the motive for some parents donating children to Boko Haram as barbaric and unacceptable, but not for Hadiza. Cases abound like hers, where the insurgents paid off the parents in exchange for their daughters and in less diplomatic situations, threatened with death. At every point of questioning Hadiza, she kept asking who is protecting them from the insurgents?

“It was discovered that most of these hapless minors were “donated” to the terrorists sect by their heartless and misguided parents and guardians, as part of their contribution to the perpetuation of the Boko Haram terrorists’ dastardly acts against the Nigerian society and humanity” – The army statement read.

It appealed to Nigerians to have a responsibility and obligation to “collectively mold our children and wards and define a better future for them rather than condemning them to death by the criminal Boko Haram terrorists and their sympathizers through suicide bombings”.

For Hadiza , the conversation isn’t much about a home, care, or future, it is about the perils of living in the present “It is a war zone here, you survive”, she tears up.

The story of Hadiza can be likened to most of the families in the community, with no breadwinner; she begs to survive along with her kids and refused to move to the IDP camp miles away. She says “staying out here means I can eat whenever I want to but in there you eat once in a day and you’re not sure when the food will be served”

“The place is chaotic” she added.

According to her, she was a one time Biu resident before moving to Maiduguri. Hadiza said her family narrowly escaped the night the insurgents raided their community sometime in 2015 –“they burnt all the houses and left with our farm produce”.  Speaking through an interpreter, Hadiza recounts, as she shrugs, in attempts to put up resistance ignoring the stare from her husband who looks on from the window of the crudely built shack where they reside.

Hadiza’s husband didn’t want her to grant this interview for fear of getting killed in the process, but she insisted.

Hadiza  and her husband were farmers back in Biu – the farm provided not only subsistence but also a little cash crop – now too scared to continue. She said the idea to begin a small farm to survive has again been suspended as a result of the resurgence of terrorist’s activities.

Poverty and Inequality have been blamed for most of the Boko Haram crisis in the Northeast and Hadiza, also a victim of the insurgency suffers same fate of poverty – willing to trade her child for same reasons.

Earlier in the year, the Borno State government warned of the massive baby boom factory in Gwande area of the state – women selling babies for money to survive.

Oxfam, in its 2017 latest report entitled, “Inequality in Nigeria, Exploring the Drivers,” presented an alarming picture of the Nigerian economic situation, stating that 112 million Nigerians are living in abject poverty.

Presenting a picture of extreme inequality in Nigeria, Oxfam argued that the combined wealth of the five richest Nigerians, put at about $29.9 billion, could end extreme poverty in the country. According to the report, economic inequality was a key factor behind the conflict that had led to the severe food crisis in Nigeria’s North East states, especially as the UN estimates that about five million people in North East Nigeria will suffer from severe food shortages this year.

Analysts have suggested varied reasons for the Boko Haram crisis but poverty and inequality remain the prevalent factor. In Northern Nigeria for instance, unemployment and underemployment is still at the highest levels as compared to Southern Nigeria. According to UNICEF report released in year 2015, Nigeria accounts for 10.5 million out of school children, of which the North alone is responsible for 8 million of that number.  For instance, the former Central Bank of Nigeria Governor, Sanusi Lamido Sanusi, blamed the rise of Boko Haram partly on the way revenues from the nation’s Federation account are shared. Sanusi, now an Emir in Kano, argued that the sharing is done in such a manner that disadvantaged the North.

He maintained “there is clearly a direct link between the very uneven nature of distribution of resources and the rising level of violence”.

On 2nd August 2016 there was a crack in Boko Haram that led to two factions between Abubakar Shekau and Abu Musab al-Barnawi.

Security analysts believe that al-Barnawi is the son of Boko Haram’s original founder, Mohammed Yusuf, and was previously the spokesman of Boko Haram under Shekau. He is said to have been responsible for most of the deadly attacks currently being carried out by the sect and the abduction and killings of oil workers and some lecturers from the University of Maiduguri.

“Al-Barnawi has the capacity to carry out attacks on a larger scale” according to an Abuja based security expert who doesn’t want his name mentioned in this report.

The resurgence of the terrorist activities forced 70 lecturers teaching at the University of Maiduguri to resign and also forced then Acting-President Yemi Osinbajo, to order military chiefs to move to Borno, in a bid to “scale up their efforts”.

Though the Nigerian Army is offering a reward of the sum of Five Hundred Thousand Naira  (N500,000.00) to anybody who provides information about suicide bombers. Young girls are allegedly still being used in carrying out deadly attacks in the troubled Northeast region.

This article was written as part of the 2017 BudgIT Media Fellowship.

 

Mercy Abang is a Freelance Journalist, focusing on development Journalism – She doubles as a media fixer with Sunday Times of London, BBC, Aljazeera and a former Stringer with the Associated Press – She tweets at @abangmercy.. She is the 2017 United Nations Journalism Fellow and budgIT Media fellow for 2017  

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No thanks to Ghana, Ivory Coast is at risk of losing fifth of next coca harvest to smuggling

Ivory Coast’s cocoa regulator forecast the nation may lose a fifth of its cocoa crop to smuggling during the next harvest if neighboring Ghana refuses to cut payments to farmers after international prices fell, according to a person familiar with the matter. 

The prediction by Le Conseil du Cafe-Cacao comes after the world’s biggest cocoa producer cut farmers’ pay by 36 percent to the equivalent of about 700,000 CFA francs ($1,251) per metric ton in April to cope with global prices that dropped more than a third in a year on expectations of oversupply. Ghana, the second-biggest grower, has kept farmer payments at the equivalent of 7,600 cedis ($1,708) per ton since October and has ruled out any cuts for the main harvest that starts next month. Cocoa is harvested twice a year in West Africa.

The Ivorian regulator expects losses of as much as 400,000 tons of cocoa next season, said the person, who asked not to be identified because he’s not authorized to speak publicly about the matter. One of the nation’s biggest exporters has a similar forecast, according to a separate person familiar with the matter.

Ivory Coast President Alassane Ouattara conveyed his concern about the pay discrepancy to his Ghanaian counterpart, Nana Akufo-Addo, according to two other people familiar with the matter. The two countries agreed in May to cooperate on plans to counter volatile prices and officials of their regulators were locked in talks about the partnership at a meeting on Wednesday and Thursday in Ghana’s capital, Accra. Read the full story here.

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The Power of Making Friends with Ideological Enemies

“How can people hate me, when they don’t even know me?”

This is the question that drives the subject of a fantastic new documentary on Netflix called “Accidental Courtesy: Daryl Davis, Race, and America,” directed by Matt Ornstein.

For the past 30 years, soul musician Daryl Davis has been traveling the country in search of an answer in the most dangerous way possible for a black man in America: by directly engaging with members the Ku Klux Klan.

He’s invited KKK members into his home, he’s had countless conversations, and as unlikely as it seems, now considers a number of them to be his friends.

Daryl might say that he’s not really even doing anything special besides treating his enemies with respect and kindness in the hopes of actually dissuading them from their hateful views.

Some people now take this approach for even trivial and academic disagreements.

Yet, that’s something almost no one else has the courage to do, even when the risks are considerably lower.

Disagreements are stressful and difficult, and the more horrifying someone else’s viewpoint is, the easier it is to dismiss the people who hold those beliefs as inhuman garbage who simply can’t be reasoned with. Social media has also made dehumanizing people considerably easier, as we all get to interact with people from around the world without ever seeing their faces or considering their feelings.

As a result, we live in an increasingly polarized time when a lot of people are saying that the only answer to hate and awful ideas is to meet them with even more hate, more anger, outrage, and even violence.

And it’s not just a problem when dealing with the worst ideas in human history like racial supremacy and fascism. Some people now take this approach for even trivial and academic disagreements.

Don’t like a speaker coming to campus? Silence them and prevent them from getting into the auditorium.

Don’t like what a Facebook friend has to say? Block them.

And of course, if you think someone you meet is a white supremacist or a neo-Nazi, the only thing left to do is punch them in the face.  

Punching Doesn’t Work

But consider that most of human history is filled with people allowing their disagreements to turn into bloody, horrific warfare; it’s only our commitment to dealing with our adversaries peacefully through speech and conversation that has allowed us to become more civilized. So escalating conflicts into violence should be seen as the worst kind of social failure.  

And besides, punching people who disagree with you doesn’t actually change their minds or anyone else’s, so we’re still left with the same deceptively difficult question before and after:

When people believe in wrongheaded or terrible things, how do we actually persuade them to stop believing the bad ideas, and get them to start believing in good ones instead?

Judging by social media, most people seem to believe that it’s possible to yell at people or insult and ridicule them until they change their minds. Unfortunately, as cathartic as it feels to let out your anger against awful people, this just isn’t an effective strategy to reduce the amount of people who hold awful ideas.

People’s amygdalas can actually bypass their rational minds and create a fight-or-flight response when they feel attacked.

In fact, if you do this, your opponents (and even more people who are somewhat sympathetic to their views, or just see themselves as part of the same social group) might actually walk away even more strongly committed to their bad ideas than they were before.

The evidence from psychology is pretty clear on this.

We know from studies conducted by neuroscientists like Joseph LeDoux that people’s amygdalas — the part of the brain that processes raw emotions — can actually bypass their rational minds and create a fight-or-flight response when they feel threatened or attacked. Psychologist Daniel Goleman called this an “Amygdala Hijack,” and it doesn’t just apply to physical threats.

The existing research strongly supports Daryl Davis’ approach.

People’s entire personal identity is often wrapped up in their political or philosophical beliefs, and a strong verbal attack against those beliefs actually creates a response in the brain of the target similar to a menacing lunge.

Even presenting facts or arguments that directly conflict with people’s core beliefs or identities can actually cause people to cling to those beliefs more tightly after they’ve been presented with contrary evidence. Political scientists like Brendan Nyhan and Jason Reifler have been studying this phenomenon for over 10 years and call it the “Backfire Effect“.

And when the people whose minds we desperately need to change are racists and fascists (or socialists and communists, for that matter), a strategy that actually backfiresand pushes more people towards those beliefs is the last thing we need.

Principles of Persuasion

The good news is that in addition to knowing what doesn’t work, we also know a lot about how to talk to people in ways that are actually persuasive — and the existing research strongly supports Daryl Davis’ approach.

In the psychologist Robert Cialdini’s book, Influence, he describes what he calls the “Principles of Persuasion.”

One of these principles is called “reciprocity”, and it’s based on the idea that people feel obliged to treat you the way you treat them. So, if you treat them with kindness and humility, most people will offer you the same courtesy. On the other hand, if you treat them with contempt, well…..

Another principle Cialdini describes is the idea of “liking”.

It’s almost too obvious, but it turns out that if someone likes you personally and believes that you like them, it’s easier to convince them that your way of thinking is worth considering.  One easy step towards being liked is to listen to others and find common ground through shared interests. This can be a bridge — or a shortcut — to getting other people to see you as a friend or part of their tribe.

Many of those robes now hang in Daryl’s closet.

You might think somebody like Daryl Davis would have nothing in common with a KKK member, but according to Daryl, if you “spend 5 minutes talking to someone and you’ll find something in common,” and if you “spend 10 minutes, and you’ll find something else in common.”

In the film, he connects with several people about music, and you can see these connections paying off — breaking down barriers and providing many Klan members with a rare (and in some cases only) opportunity to interact with a black man as a human being worth respecting instead of an enemy.

Even better, over time, forming these relationships has had an interesting side-effect.

In the last couple decades alone, over 200 of America’s most ardent white supremacists have left the Ku Klux Klan and hung up their robes and hoods for good.

Many of those robes now hang in Daryl’s closet.

And in a lot of cases, these individual conversions have much bigger consequences and end multi-generational cycles of bigotry. When a mother or a father leaves the darkness of the Klan, they’re also bringing their kids into the light with them. A few of these cases are profiled in “Accidental Courtesy”, and they’re indescribably moving.

Daryl Davis can be a model for how to change people’s minds and with everything that’s going on in the world today, we need successful models now more than ever.

Making Friends From Enemies

There’s another point to all of this that I think often goes unsaid.

The way to deal with wrong or evil ideas isn’t shouting them down or starting a fight.

Unlike Daryl, most of us aren’t actually interacting with KKK members or trying to change people’s minds away from truly evil ideologies, and yet we all fall to the temptation of yelling and name-calling, and using all those techniques of influence that have the opposite of our intended or desired effect.

It’s easy to allow outrage and emotion carry us off into treating other people as inhuman enemies to be crushed rather than human beings to be persuaded.

But if Daryl’s techniques can work to convince die-hard white supremacists that a black man — and perhaps eventually all black people — are worthy of respect, imagine how effective they can be when disagreements crop up with your friends, neighbors, and co-workers who don’t actually hate you or the things you stand for.

Who knows, if you have more genuine conversations with people outside your bubble, you might even find yourself changing a little bit for the better as well.

“Accidental Courtesy” teaches us that the way to deal with wrong or evil ideas isn’t shouting them down or starting a fight; it’s having the courage to do what Daryl did and making a friend out of an enemy.

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How Prices Promote Peace

By Matthew McCaffrey

Donald Trump’s plan to escalate the war in Afghanistan makes it necessary to once again stress the value of peace and the importance of rejecting US militarism and imperialism. Yet it also provides an opportunity to think about the foundations of a truly peaceful society, and to reaffirm a basic social truth: no institutions more effectively promote peace than the institutions of the market economy.

Cooperating not Expropriating

Peace begins at home, or rather, it begins wherever you and I decide it does: at any time and place we realize that the best way to improve our lives is to cooperate rather than to brutalize each other.

Trade allows us to benefit from our different values, while hurting no one.

As economists like Ludwig von Mises point out, this realization is actually the foundation of human social relations. It also explains why we establish social bonds through trade: we recognize, first, that we each possess resources and skills that are less valuable to us than others that we hope to acquire, and second, that other people value things in just the opposite way. Trade then allows us to benefit from our different values, while hurting no one. It is an act of peace, one reason why it’s no surprise that Mises refers to the moment after exchange as a “state of rest” – including an absence of conflict.

Voluntary exchange is thus a rebuke to violence and war-making: it reveals to each of us, in a personal way, that increasing our own welfare means cooperating, not expropriating.

Prices are a social recognition of this deeper fact. They tacitly acknowledge that many individuals have foregone violence and realized the benefits of cooperation and trade, so much so that they can establish between them an objective estimate of the social worth of the things we hold dear: a price.

Eventually, a vast network of individual exchanges creates the price system, a gigantic engine for improving the welfare of all members of society. This engine works 24 hours a day to overcome the greatest cause of conflict among human beings: scarcity.

The Struggle over Scarce Resources

Property, exchange, and the price system enable us to put aside our conflicts.

Scarcity presents seemingly intractable problems: how can we thrive in a world where human wants outstrip the resources available to satisfy them? How can we ensure that the goods and services we produce will get to the people who need them most?

Prices are the answer, and the price system works from moment to moment to appraise and allocate countless scarce resources over which we no longer have to fight.

Property, exchange, and the price system enable us to put aside our conflicts. In fact, when prices can’t be established because property rights are unclear – as in the tragedy of the commons – the result is a desperate conflict over scarce resources as each person tries to exploit a “free” good.

Similarly, price controls prohibit buyers and sellers from agreeing on a way to mutually benefit. Inevitably, someone leaves the market unsatisfied. In fact, price floors and ceilings cause conflict by eliminating exchange and replacing it with rationing. Without prices, producers and consumers arbitrarily discriminate, thereby creating special privileges for certain individuals and groups.

For example, landlords of rent-controlled apartments might choose tenants based on their racial characteristics rather than those who need housing the most. Similarly, faced with increasing minimum wage rates, fast food restaurants hire college students instead of workers from less wealthy or educated backgrounds who more urgently need a job. Inevitably, the non-privileged groups start to resent the beneficiaries of discrimination, and social conflict is the result.

Non-Market Goods

The lack of prices for such “goods” reveals that they’re nothing of the sort.

Importantly, this effect works across borders as well, as domestic producers and unions reap the benefits of trade barriers and immigration controls at the expense of foreign workers. This kind of exploitation sows the seeds of economic and, eventually, military conflict. Allowing prices to exist for foreign goods and labor is, therefore, a vital step toward achieving global peace.

For that reason, we should also be deeply skeptical about the production of any weapons or military technologies that have no market applications – and no prices – in a free economy. The reason is simple: the lack of prices for such “goods” reveals that they’re nothing of the sort. Their purpose is to destroy life, not improve it.

Seeing prices emerge and change in the marketplace should be a cause for celebration just as much as the sight of a soldier laying down his weapons. Both are victories for humanity, but prices especially reflect a deep commitment on the part of many people to choose cooperation over conflict. In that sense, it’s not much of an exaggeration to declare: Blessed are the price-makers.

Republished from FEE.org

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Nigeria Needs More Entrepreneurship And Government Has A Role

By Gbadegesin Tosin 

Entrepreneurship is an important factor in the development of any nation. Entrepreneurs are responsible for taking calculated risks that open up doors to progressively higher levels of economic growth. If it were not for them, the world would never have known such marvels as the wheel, electricity or the Internet, to name just a few.

Entrepreneurs are the veritable backbone on which the world and modern ideas continue to develop. The magnitude and reach of their contributions, however, extend much beyond the world of business and economy, and to them goes irrefutable credit for the growth and evolution of societies at large. Developed nations across the world owe their current prosperity to the collective effort of intrepid entrepreneurs, on whose innovation also rests the future prosperity of much of the developing world.

The role of government in entrepreneurship development in Nigeria became significant after the Nigeria civil war (1967-70). Since then, there has been increased commitment of government to entrepreneurship development especially after the introduction of the Structural Adjustment (economic) Program (SAP) in 1986 and establishment of agencies such as National Directorate of Employment (NDE), National Open Apprenticeship Scheme (NOAS), Small and Medium Enterprise Development Association of Nigeria (SMEDAN) etc.

In early 2000s, entrepreneurship studies were introduced into the Nigerian educational system, especially at higher institutions as a mandatory course. The Centre for Entrepreneurship Development (CED), which has the objective of teaching and motivating students of higher institutions (especially in science, engineering and technological (SET)) to acquire entrepreneurial, innovative, and management skills, was established. This was done to make Nigerian graduates self-employed, create job opportunities for others and generates wealth in the process.

The scope of financial freedom and flexibility that entrepreneurialism allows is a means to simultaneous individual and national prosperity. If this holds true for economies around the world, it has especially. Traditional Nigerian entrepreneurship began in a climate of economic stagnation and as a purely survivalist endeavor. Dismal human development indices, unemployment and infrastructure deficits resulted in the evolution of a massive informal economy that depended almost exclusively on personal initiative and hazardous risk-taking capacity.

The return of democracy in 1999 ushered in a period of economic reforms and a renewed focus on enterprise development as viable means to sustainable growth. Nigerian leaders initiated a massive program of disinvestment and financial deregulation aimed at boosting business development across the Micro, Small and Medium Enterprise (MSME) space.

One of the principal problems is the fact that Nigeria is not perceived as a promising business destination. The high cost of doing business, corruption and systemic flaws in the country’s economic policies have cumulatively succeeded in keeping off potential investors. Massive infrastructural deficits, particularly with regards to roads and electricity, are further turn-offs. The most significant aspect of the problem, however, is Nigeria’s nascent and shaky polity, constantly under threat from civil intolerance and rising religious extremism.

Social problems, growing out of deplorable human development indicators in the absence of inclusive growth, form the second significant obstacle for Nigeria in utilizing the benefit entrepreneurship brings. The status of women and their traditionally limited involvement in entrepreneurial activities is a significant drawback from the perspective of rapid social and economic growth. The issue is further compounded by a catastrophic divide in the condition of rural and urban populations. People exposed to entrepreneurship frequently express that they have more opportunity to exercise creative freedoms, higher self-esteem, and an overall greater sense of control over their own lives.

Entrepreneurship promotes liberty and increase economic growth by:

  1. Producing and distributing goods and services to satisfy certain public needs. To fulfill this task, businesses developed flexibility and constantly researched on consumer demands.
  2. Creating job opportunities; More than that, most jobs created are productive jobs.
  3. Providing income sources: income that business provides is by no means restricted to the profit its owners get. It pays salaries and wages to its employees, and this way, makes the whole business world go round: they spend the money they earn buying all kinds of goods and favour further development of business ventures.
  4. Contributing to national well-being: by means of taxes businesses pay to government (though, grudgingly as its management is hardly ever justified), it is possible for the government to maintain all kinds of public and social institutions and services;
  5. Helping to enlighten and educate people, thereby encouraging their further personal growth.

Entrepreneurship is the foundation of any developed nation. For Nigeria to reap the full benefits of a dynamic and evolving economy however require the overcoming of entrenched social, financial and political hurdles. The government must increasingly work to improve the ease of doing business by developing and implementing more pro-market policies and making the entire business environment more attractive to investors. Also, improvements and reforms in education and international participation are crucial for Nigeria to shake off its third world heritage and achieve the full breadth of its economic potential.

 

Republished from AfricanLiberty.org

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Twelve Economic Concepts Everyone Should Know

By Richard N. Lorenc


When I tell people that I work at the Foundation for Economic Education, they sometimes ask: “What economic ideas should people understand?”

We at FEE have thought about this quite a lot for our articles, courses, seminars, and videos. We have distilled “economic thinking” into 12 key concepts. The following list has guided us internally for a few years, and I figure it’s now time to share it with the world.

1. Gains from trade: In any economic exchange, freely chosen, both parties benefit–at least in their own minds.

2. Subjective value: The value of any good or service is determined by the individual human mind.

3. Opportunity cost: Nothing is free, and the cost of anything is what you give up to get it.

4. Spontaneous order: Society emerges not from top-down intention or planning but from individuals’ actions that result in unplanned outcomes for the whole.

5. Incentives: Individuals act to maximize their own reward.

6. Comparative advantage: Cooperation between individuals creates value when a seller can produce a given item or service at a lower cost than the buyer would spend to produce it himself.

7. Knowledge problem: No one person or group knows enough to plan (and force) social outcomes, because information necessary for social order is distributed among its members and revealed only in human choice.

8. Seen and Unseen: In addition to the tangible and quantifiable effects, there are quite often invisible costs and unmet opportunities to any action or policy.

9. Rules matter: Institutions influence the decisions individuals make. For example, property rights extend from the reality of scarcity which demands that ownership must be vested in individuals and not a collective.

10. Action is purposeful: Each person makes choices with the intention of improving his or her condition.

11. Civil society: Voluntary association permits people of all backgrounds to interact peaceably, create value, cultivate personal character, and build mutual trust.

12. Entrepreneurship: Acting on an opportunity to gather underused, misused, or undiscovered resources and ideas to create value for others.

You might think about all the ways and places these principles appear–as you shop, socialize, and plan your future. As we like to say, economics is everywhere!

Republished from FEE.org

Richard N. Lorenc

Richard N. Lorenc is the Chief Operating Officer of FEE and serves as managing director of FEE’s Youth Education & Audience Research (“YEAR”) project to develop and promote new content and distribution techniques for free-market ideas.

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2017 ALOD Essay Contest: The Top 20

           

  Position                 Name    School  
1 Ota A. Chinonso      University of Nigeria  
2 Esther O. Tunde   Sa’adatu Rimi College Of Education  
3 Maduka E. Chibuenyim   Federal University of Tech, Minna,  
4 Ijuo I. Odeh   Obafemi Awolowo University  
5 Balogun Ismail   Obafemi Awolowo University  
6 Adeleke A.David   Babcock University  
7 Elom S. Njoku              University Of Nigeria  
8 Bakare A. Gbolahan   University of Lagos  
9 Enwereakuh A. Ugonna   University of Nigeria  
10 Ukeje C. Chukwunenye   Federal University of Tech, Akure  
11 Nwachukwu Deborah   University of Port Harcourt  
12 Orkuma Martha   National Open University  
13 Amede F. Ebuka   Delta State University  
14 Tanguhwara A. Lewis   University of Agriculture, Makurdi  
15 Oyesomi W. Adetope   Ekiti State University  
16 Akinsanya O. Deborah   University of Ibadan  
17 James O. Adakole   University of Nigeria  
18 Omotosho Oluwadamilola   University of Ibadan  
19 Sylver Vitalis    undisclosed   
20 Oluwafemi Boluwatife   University of Ibadan  

 

Top 3 entries would be published on our blog in the coming days.

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New South African Airways bailout package shows government is not committed to transformation

By Martin Van Staden

With low economic growth prospects, ever-increasing unemployment and destitution, government appears to be more concerned with the useless prestige and status that comes with our national airline, than the wellbeing of the South African people.

In mid-July, EWN reported finance minister Malusi Gigaba saying that “too much money has been invested in cash-strapped South African Airways (SAA) in the form of guarantees and bailouts” and that government was going to seriously try to waste no more resources on “inefficient state-owned entities”. In an about-face, Gigaba now says that Treasury is considering a R13 billion bailout for the national carrier.

Proposing such a bailout in the midst of a tax shortfall is evidence of government’s deep-seated contempt for the people of South Africa and a preoccupation with satisfying its short-term and short-sighted ambitions. Its intention to introduce more and more taxes to finance programmes like the National Health Insurance (NHI) is mindboggling, let alone the proposal made earlier this year that, in addition to television licences, it would consider requiring licenses for other devices to boost revenue for the national broadcaster. The Davis Tax Committee too is considering increasing wealth taxes.

These desperate attempts to get its hands on more revenue are unnecessary in the face of the most obvious solution – significant tax transformation – and dangerous, in that it is unlikely that businesses, especially small ones, can survive for much longer in such an environment. Companies like General Motors and AngloAmerican already have either left our shores or are in the process of reducing their investments.

ANC MP Pinky Kekana proposes that, to help our national carrier, government intervene and give to SAA air routes currently operated by other, profitable airlines. For her, this would be radical economic transformation. By what logic could forcing the productive and efficient private sector, which creates unquantifiable wealth for millions of people every minute of every day, to yield to the ineffective and bloated dinosaurs of the public sector radically transform anything? South Africans already find more affordable and higher-quality travelling products with foreign airlines. Even domestically, it is estimated that SAA contributes less than a quarter of commercial air travel.

If government wants more money, it should look to decreasing taxes and repealing regulations across the board to allow significant economic growth to occur. In turn, more South Africans will become taxpayers and contribute to the national purse. But, even if this should happen, the national purse should not be an ATM for state companies that have proven time and time again that they are unable to stand on their own two feet in the market. Both SAA and Eskom have been given repeated opportunities to become profitable, but each ‘second chance’ ends with yet another ‘turnaround’ strategy. These companies are lost causes which South African taxpayers are propping up with no benefit to themselves, and certainly none to the poor.

Radical economic transformation would be to get rid of wealth sucking, economy strangling state-owned enterprises that are firmly rooted in the social engineering logic of the apartheid regime to fulfil, as the first apartheid labour minister Ben Schoeman explained, “State control on a large scale” that replaces personal responsibility with a “system of State responsibility.”

There will be no radical economic transformation while government and state-owned enterprises get first dibs on the hard-earned produce of the people. The people have a natural right to keep what they earn, and government is under an obligation to spend what it takes from the people wisely. What we are seeing now, however, is a commitment by government to itself, and not to the people.

 

Republished from AfricanLiberty.org

Martin van Staden is Legal Researcher at the Free Market Foundation and Academic Programs Director of Students For Liberty in Southern Africa.

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