To End Poverty: Fix Governments

What Makes a Nation Rich? By Daron Acemoglu

The average citizen of the United States is ten times as prosperous as the average Guatemalan, more than twenty times as prosperous as the average North Korean, and more than forty times as prosperous as those living in Mali, Ethiopia, Congo, or Sierra Leone. The question social scientists have unsuccessfully wrestled with for centuries is, Why? But the question they should have been asking is, How? Because inequality is not predetermined. Nations are not like children — they are not born rich or poor. Their governments make them that way...

People need incentives to invest and prosper; they need to know that if they work hard, they can make money and actually keep that money. And the key to ensuring those incentives is sound institutions — the rule of law and security and a governing system that offers opportunities to achieve and innovate. That's what determines the haves from the have-nots — not geography or weather or technology or disease or ethnicity.

Put simply: Fix incentives and you will fix poverty. And if you wish to fix institutions, you have to fix governments. (Emphasis added)

Opportunities to achieve and innovate are meaningless without the security to keep the fruits of your labor. The root cause of wealth is the protection of individual rights, including property rights. The root cause of poverty is the violation of these rights, not just by criminals, but most importantly by governments.

Acemoglu's article compares the richest to the poorest. Another article compares gradations of wealth within the developed countries. If each U.S. state is treated as a country, and then is ranked with countries in Europe in terms of GDP per capita, with the exception of Luxembourg (#2), the first 20 twenty "countries" are states within the U.S.:

2006 GDP-PPP Rankings of EU Nations vs Individual US States

US State or EU Nation	2007 GDP-PPP [billions USD]	2007 Population	2007 GDP-PPP per Capita [USD] ▴
US - District of Columbia	93.82	588,282	159,479.64
EU - Luxembourg	38.14	480,222	79,421.60
US - Delaware	60.12	864,764	69,519.55
US - Alaska	44.52	683,478	65,133.04
US - Connecticut	216.27	3,502,309	61,749.55
US - Wyoming	31.51	522,830	60,275.81
US - New York	1,103.02	19,297,729	57,158.23
US - Massachusetts	351.51	6,449,755	54,500.36
US - New Jersey	465.48	8,685,920	53,590.64
US - Louisiana	216.15	4,293,204	50,346.08
US - Virginia	382.96	7,712,091	49,657.61
US - California	1,812.97	36,553,215	49,598.04
US - Nevada	127.21	2,565,382	49,588.33
US - Minnesota	254.97	5,197,621	49,055.14
US - Colorado	236.32	4,861,515	48,611.18
US - Washington	311.27	6,468,424	48,121.46
US - Hawaii	61.53	1,283,388	47,944.97
US - Maryland	268.69	5,618,344	47,822.81
US - Texas	1,141.97	23,904,380	47,772.21
US - Illinois	609.57	12,852,548	47,427.95
EU - Ireland	191.60	4,109,086	46,628.37
United States - All	13,743.02	301,621,157	45,563.85

In fact, the U.S. states holds 37 out of the top 40 slots.

Economic Freedom of the World provides a great map illustrating the correlation between wealth and economic freedom.



And what is economic freedom? James Gwartney and Robert Lawson define it thus:

Individuals have economic freedom when property they acquire without the use of force, fraud, or theft is protected from physical invasions by others and they are free to use, exchange, or give their property as long as their actions do not violate the identical rights of others. An index of economic freedom should measure the extent to which rightly acquired property is protected and individuals are engaged in voluntary transactions.

Economic Freedom of the World: 1996 Annual Report

But more simply, it is individual rights applied to the realm of trade.

And what institution is designed with the purpose of protecting individual rights?

[T]o secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed.--Declaration of Independence

It is through securing rights that governments provide security.
With security, of life, liberty and property, both the means and the incentives for wealth production exist.

Property rights, not redistribution, are the foundation of good will, compassion, generosity, equity, and justice.

To end poverty, promote freedom.


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