“We who live in, and lead, the world’s poorest nations are convinced that the leaders of the rich world and multilateral institutions have a heart for the poor. But they also need to have a mind for the poor.”
The heart for the poor is easy to stimulate. When high profile disasters strike, we respond. Pictures bring the suffering, especially of children, into our homes, and we give. It may be a pittance but we give, and at very little cost we satisfy our hearts. Put together, those pittances accumulate into vast sums of money. That knowledge also satisfies the heart.
But the mind for the poor faces a bigger challenge. It is not as easily placated by pictures of smiling children, aid concerts, and the promise of solutions. It asks, are we really helping?
Rwandan president Kagame argues that without a mind for the poor, the trap of poverty only deepens and that aid given without a mind for the poor “has left recipient populations unstable, distracted, and more dependent.” In other words, the heart without the mind actually makes matters worse.
Mental exertion
Developing a mind for the poor will require some mental exertion and a good place to begin is Milton Friedman’s Capitalism and Freedom. Behind the provocative title is an articulate application of the laws of supply and demand* and the market economy they produce.
Explaining this was Milton Friedman’s lifelong mission. Since 1962, Capitalism and Freedom has sold half a million copies and is likely the most famous book on economics in the 20th century. Not bad for an essay in the “dismal science.”
And what does understanding the laws of supply and demand have to do with helping the poor? The market economy they produce is where we live, from which we buy what we need and want, and into which we sell our goods and services. The poor are its casualties. If we want to help the poor, we must understand the forces that define their status.
When MEDA explains the need for microloans they invoke Friedman: “The poor stay poor not because they are lazy but because they have no access to capital.” According to MEDA, the solution to poverty is not charity; it is giving the productive access to capital. Committing ourselves to help the poor is a decision of the heart; rewarding productivity is a task for the mind. Productivity is the key to the market economy.
Competitive advantage
When President Kagame devises a strategy for Rwanda (one of the poorest nations on earth with problems at every turn), he says that although Rwanda is “a land-locked nation emerging from conflict, with few natural resources, little specialized infrastructure and low historical investment in education…we have reasons to be optimistic: we have a clear strategy to export based on sustainable competitive advantages.” Competitive advantage is the producer of wealth. Understanding his nation’s competitive advantage gives Kagame hope.
Friedman’s explanation of the market economy in Capitalism and Freedom is dense and detailed. Some of his conclusions are provocative and some of his subjects are beyond the layperson. But as an explanation of the laws of supply and demand, this little book has stood the test of time.
Understanding the laws of the marketplace will prevent simplistic answers to the problem of poverty. The managers of MEDA’s microloan program and Kagame know this very well. It will open our eyes to the complex challenges of aid – challenges such as why imported food aid can destroy the local farm economy and why sending teams to build houses in Mexico can cause the family of a local tradesperson to go hungry.
The laws of supply and demand are like gravity: observable and measurable. Those who ignore gravity risk calamity. So do those who remain ignorant of the laws of the marketplace. Those who want to have a mind for the poor need to know this. (And Capitalism and Freedom is easier reading than Isaac Newton’s explanation of gravity!)
To have a heart for the poor is Jesus’ command to us; to have a mind for the poor is also not
an option.
*Laws of supply and demand: when the price goes up, supply increases but demand goes down. This makes for a nice graph with intersecting lines. The intersection point is the market price.
