Home
/
RELIGION & LIBERTY ONLINE
/
Poverty, Capital and Economic Freedom
Poverty, Capital and Economic Freedom
May 2, 2025 12:05 PM

This mentary is from Victor V. Claar, an economist at Henderson State University and the author of a new Acton Institute monograph, Fair Trade? Its Prospects as a Poverty Solution. Follow his economics blog here.

+++++++++

Poverty, Capital and Economic Freedom

By Victor V. Claar

When poor countries grow rich, it rarely has anything at all to do with how many mouths they have to feed or the abundance of natural resources. Instead, across the globe, poor countries of all sizes, climates, and endowments begin to grow rich as two key factors increase.

First, countries grow rich as their human capital improves. Human capital is the term economists use to describe the value that a country’s people possess through their accumulated experience and education. For example, there is little doubt that India’s recent growth explosion is due in large part to the education—including the knowledge of the English language—of its people.

Second, countries grow rich as they invest in and accumulate physical capital: the machines, tools, infrastructure, and other equipment that make the product of each hour of physical labor more valuable. That which both human capital and physical capital share is that they both transform the result of an hour of a person’s hard work into something of even greater value. As the value of an hour of labor rises, employers gladly pay higher hourly rates, knowing that their bottom lines will be the better for it.

If we want to be effective agents in aiding the poor, we should focus our efforts in directions leading to the enhanced value of an hour of labor. That is, we should help poor countries wisely grow their stocks of human and physical capital, all the while bearing in mind that markets and their prices send the best available signals regarding where our efforts can have the greatest impact. The newfound success of innovative micro lending efforts such as Kiva can help show us ways to effectively invest in the accumulation of physical capital by the global poor. Compassion International is a marvelous organization that works to further the education—the human capital—of poor children worldwide, with a financial accountability record above reproach.

Further, markets work best when economic systems maintain the dignity of human beings. First, human beings grow and flourish—and accumulate human and physical capital—in systems that afford them considerable economic freedom. Economic freedom means that people are able to make personal choices, that their property is protected, and that they may voluntarily buy and sell in markets. Yet, economic freedom requires the protection of private property. When property rights are clearly defined and protected, people will work harder to create and to save. When they are confident that the fruits of their labors cannot be taken away arbitrarily or by force, people everywhere have greater assurance that their labors will lead to better lives for themselves and their families. Today’s rich collection of NGOs that work toward basic human rights play a critical role in this regard.

Finally, we should be outraged at the protectionist agricultural policies of already-rich nations such as the United States. When we allow the agricultural lobby to garner sweetheart deals from the U.S. House and Senate, the poor in other nations simply pete with American growers of many crops because the trade rules are so utterly slanted against those in other nations.

For example, it is illegal for sugar buyers in the United States to purchase their sugar from sources outside the United States, even though the world price of sugar lies below the federally mandated price of sugar in the United States. This is wonderful, though, for U.S. sugar beet growers in the United States; it means they have a captive supply of buyers at a price that is being kept artificially high by federal decree. If the United States were to abandon such self-centered policies, sugar growers everywhere would have access to our markets, and the price of sugar would fall for all of us.

Moreover, confectioners and soft-drink makers in the United States would be able to produce their goods at lower costs, thereby adding to their job security. In one well publicized case in 2002, the Life-Savers candy factory in Holland, Michigan, was relocated to Canada, though the Michigan factory had been in operation for over thirty-five years and employed six hundred or so American workers. By moving to the northern side of the U.S.-Canada border, Life Savers slashed its input costs dramatically because, in Canada, Life-Savers was free to buy cane sugar at the world price: sugar grown by those who need the e most.

Sugar is not the only market we currently protect to keep out modities in an effort to help poor farmers in the United States. We have erected similar barriers that turn a blind eye to the plight of the global poor in markets for cotton, peanuts, and several other products that we can grow at home. In fact, by now you can probably see another reason why coffee prices are low. Because coffee cannot be grown in Ohio, or in France, rich northerners have not erected protectionist barriers to keep out the coffee that foreigners make.

If we really care about the global poor, we should work to make trade freer for everyone in our munity: a level playing field for all. That means tearing down all of the barriers we use to keep the global poor from working in the very jobs in which they are perfectly positioned to make the greatest lasting gains.

Comments
Welcome to mreligion comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
RELIGION & LIBERTY ONLINE
Samuel Gregg on Germany’s populist surge
Following the election results in Germany this past Sunday, Chancellor Angela Merkel has been re-elected to serve for a fourth term. In his article “Germany Revolts“, Samuel Gregg describes Chancellor Merkel’s party as being “woefully out of touch” with the German people, and as a result many are abandoning the CDU/CSU coalition for the AFD. Perhaps the most important lesson to glean from the election, Gregg says, is that Germany is increasingly reflecting frustrations felt elsewhere in Europe. The European...
Explainer: What you need to know about the 2017 German presidential elections
On Sunday, German voters cast their ballots for members of the national parliament, the Bundestag, and Angela Merkel appears poised to serve a fourth term as chancellor. But with a much-diminished number of supporters, fierce populist opposition, and warring coalition allies, her tenure could prove tenuous. Populism has surged in the nation, carrying into parliament representatives from both the so-called “far-Right” and far-Left. And Merkel faces the prospect of trying to form a new coalition capable of uniting fiscal conservatives...
How should Christians respond to economic disruption?
I graduated from college in 2008 at the height of the Great Recession. It wasn’t the greatest time to be looking for a job, but nevertheless, I somehow managed to get hired at a global FORTUNE pany. I had conquered! I had succeeded! Alas, within a few months, several of my fellow coworkers were let go and their jobs were offshored to the Philippines and Mexico. It was the first in a series of layoffs e, and I soon realized...
Houston’s culture of rugged communitarianism
In the late 1920s, a primary theme of Herbert Hoover’s presidential campaign was the idea of “rugged individualism,” the practice or advocacy of individualism in social and economic relations emphasizing personal liberty and independence, self-reliance, resourcefulness, self-direction of the individual, and petition in enterprise As Hoover said about the era in the U.S. after the Great War, “We were challenged with the choice of the American system ‘rugged individualism’ or the choice of a European system of diametrically opposed doctrines...
Introduction to price discrimination
Note: This is post #50 in a weekly video series on basic microeconomics. Price discrimination mon, says economist Tyler Cowen. Movie theaters charge seniors less money than they charge young adults puter panies sell to businesses and students at different rates, often offering discounts to students. These price differences reflect variations in the elasticity of demand for these different groups. When demand curves are different, it is more profitable to set different prices in different markets (If you find the...
On man vs. robots, don’t trust the economic models
Given the breakneck pace of improvements in automation and artificial intelligence, fears about job loss are taking more space in the cultural imagination.Symbolized by President Obama’s famous laments about ATM machines and the more recent concerns about Amazon’s “job-killing” grocery-store roboclerks, the anxiety is palpable and persistent. Enter the economic planners and doomsayers, using elaborate models and forecasts to affirm such fears, predicting the rise of robot overlords and the demise of human labor. Take the famous 2013 study by...
What you should know about the Graham-Cassidy Obamacare repeal bill
What is Graham-Cassidy? Graham-Cassidy is the shorthand title for a proposal introduced by Senators Lindsey Graham (R-SC) and Bill Cassidy (R-LA) to repeal and replace Obamacare. Does this legislation “repeal and replace” Obamacare? As with the previous three Republican proposals, the answer is yes and no (but overall, not really). No, the Graham-Cassidy does pletely repeal Obamacare in toto and it merely replaces some aspects of the current law. But yes, it does repeal certain aspects of Obamacare and in...
Hurricanes as schools of charity
The only force greater than the destruction wrought by this summer’s hellish hurricanes is the solidarity written indelibly upon the human heart. The acts of charity they galvanize show the power of voluntary efforts springing from voluntarism, virtue, passion. Unfortunately, natural disasters often inspire calls for more government intervention, either to fight climate change or to preserve the temporary sense of national unity they create. But Steve Stapleton writesthat “the default position of a free people in a free society...
If you hate poverty, you should love capitalism
Did you know that since 1970, the percentage of humanity living in extreme poverty has fallen 80 percent? How did that happen? Arthur Brooks, president of the American Enterprise Institute, explains. ...
Millennials, marriage, and the ‘success sequence’
“What if large causes of poverty are not matters of material distribution but are behavioral — bad choices and the cultures that produce them? If so, policymakers must rethink their confidence in social salvation through economic abundance.” –George Will According to a recent report from the U.S. Census Bureau, the values and priorities of young adults are shifting dramatically from those of generations past. As it relates to family in particular, millennials are pursuing a range of nontraditional routes, either...
Related Classification
Copyright 2023-2025 - www.mreligion.com All Rights Reserved