Let’s take a trip to a parallel universe.
On planet Earth of the parallel universe, two thinkers are born in Denmark and Holland, instead of the highly influential — in our history line — France and Germany. We are talking about Jean-Jacques Rousseau and Karl Marx. Being born in less influential countries, they did not have as big an impact as they did in our world.
What could be the result of that simple change? Quite astounding: nobody would be involuntarily poor. We’d have a world of wealthy countries, where no country would be poor because of state intervention (forcibly making them poor). Is this seemingly fantastic outcome possible at all? We think it is.
Poverty could be eradicated worldwide in less than two generations if the ideas that Rousseau and Marx popularized were defeated and replaced with a proper understanding of means and ends, the creation of wealth, and realizing what exchange is all about.
But there were other, lesser thinkers also. John Maynard Keynes, although of tremendous importance in the West, wouldn’t have been able to hamper the wealth creation process with his ideas if the 400 million people that the anti-life, anti-market, Marxist Soviet Union isolated in our world had never happened. Moreover, we contend that social-democratic regimes such as Nehru’s in India, and all CEPAL-oriented governments in Latin America and other parts of the underdeveloped world, would not have been as devastating had Rousseau and Marx not provided the foundation for “mixed economy” policies that has haunted those countries for a hundred years. “We are socialists,” Hitler once said, and as a socialist he extended his socialism to include state management of body ownership, with catastrophic results.
What about corruption and decay? Sure, the natural tendency of states to grow and cripple economic life would still be present if Adam Smith or even Ludwig von Mises had become the dominant intellectual figures for mankind. But then it could have been possible for people to rally against such things in the same spirit that led the American revolutionaries against state aggression. With the Rousseaunian-Marxist consensus in place in our universe, a big part of our societies is actually working against itself. If what they hope to achieve is prosperity and peace, the means are erroneous and will only bring about poverty and misery.
The state reduces the amount of wealth because it extracts resources from private producers and re-allocates it in manners which are less efficient (or not efficient at all). It is inherently less efficient because these goods and services are not being allocated according to what people want and therefore their needs are not satisfied in the most expedient manner. Had they preferred to spend the money exactly as the state decides, then there would have been no reason at all for the intervention in the market. It is not a coincidence that the greater the state intervention, the worse off that people are.
And finally, let’s not forget that some professions have prospered from the fact that there are poor people in the world. Stiglitz, Chomsky, and a myriad of ThirdWorldists (the intellectual current that sees other’s wealth as the main cause of poverty and not as an opportunity), along with dozens of paternalistic regimes in the world, need poor people or will surely loose their support. Will they ever allow the marvel that capitalism is, to be replicated worldwide?
And so, to the followers of baby Jean-Jacques and baby Karl: grow up!
Juan Fernando Carpio [send him mail] lives in Quito, Ecuador. He is finishing his Master’s Degree in Entrepreneurial Economics from Universidad Francisco Marroquin in Guatemala and is the founder of the Movimiento Libertario del Ecuador, a young libertarian movement in his country. Manuel Lora [send him mail] works at Cornell University as a TV and multimedia producer. Visit his blog.