.
.
.
.
.
Unions   
Freedom   
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Search

Contact:
Foundation for Economic Growth,
P.O. Box 10-282,
Wellington, N.Z.
Email

Growth is Good for the Poor
By Phil Scott
May 8, 2004, 13:54

Email this article
 Printer friendly page

One of the problems we have in determining policies to help all our citizens is that we have been indoctrinated or perhaps just misinformed to believe many things which are not true when examined in the light of all the evidence.

When it comes to helping the poor in our society we are awash with misinformation. So to help you form a view that is based on evidence subjected to scientific scrutiny rather than what is current thinking (whether it is politically correct or not) we have provided you with a link to some of the latest evidence on what economic policies help the poor (the bottom 20%) in society.

This study has produced some interesting findings:

"Reducing government consumption and stabilizing inflation are examples of policies that are "super-pro-poor". Not only do both of these raise overall incomes, but they appear to have an additional positive effect on the distribution of income, further increasing incomes of the poor."

"From this we conclude that the basic policy package of private property rights, fiscal discipline, macro stability, and openness to trade increases the income of the poor to the same extent that it increases the income of the other households in society."

"This is not some process of "trickle-down," which suggests a sequencing in which the rich get richer first and eventually benefits trickle down to the poor. The evidence, to the contrary, is that private property rights, stability, and openness directly create a good environment for poor households to increase their production and income."

"To summarize, we find that contrary to popular myths, standard pro-growth macroeconomic policies are good for the poor as they raise mean incomes with no significant adverse effect on the distribution of income."

"In fact, macro stability, proxied by stabilization from high inflation, increases income of the poor more than mean income as it tends to improve income distribution. Other policies such as good rule of
law and openness to trade benefit the poor and the rest of the economy equally."

"On the other hand, we find no evidence that formal democratic institutions or a large degree of government spending on social services have any effect on income of the poor."

"Finally, the growth-poverty relationship has not changed over time, does not vary during crises, and is generally the same in rich countries and poor ones."

"We do not want to be misinterpreted as arguing that growth is all that is needed to improve the lives of the poor. But we do want to get the message out that growth generally does benefit the poor and that anyone who cares about the poor should favor the growth-enhancing policies of good rule of law, fiscal discipline, and openness to international trade."

This is some of the summary of findings and spells out very clearly that if we can establish growth policies in government then we will have done a great deal to help the poor become wealthier.

The full text can be found on

http://siteresources.worldbank.org/INTRES/Resources/469232-1107449512766/Growth_is_Good_for_Poor_Journal_Article.pdf


© Copyright; Foundation for Economic Growth and various authors. Individual authors retain their own copyright.

Top of Page

Creating Wealth and Keeping it

The New book by Phil Scott, President of the Foundation for Economic Growth.

"This book is good, damn good and no statistics!" Lindsay Gordon, MA, MSC, PHD.

Every serious economics student should have a copy and read this ground-breaking foundation of clear economic thinking. Real Economics explains how human actions shape our world and why so much seems to be going wrong for Western economies. This book will bring enlightenment for the general reader who will see why a few very wealthy are becoming exceedingly rich and the middle classes are on the road to serfdom.

See more: www.realeconomics.co.nz