by Walter Williams
We could make that same observation and
pose that same question about Nigerians, Cambodians, Jamaicans and others of
the underdeveloped world who migrate to the U.S. Until recently, we could make
the same observation about Indians in India, and the Chinese citizens of the
People's Republic of China, but not Chinese citizens of Hong Kong and Taiwan.
Let's look at Egypt. According to various
reports, about 40 percent of Egypt's 80 million people live on or below the $2
per-day poverty line set by the World Bank. Unemployment is estimated to be
twice the official rate pegged at 10 percent.
Much of Egypt's economic problems are
directly related to government interference and control that have resulted in
weak institutions vital to prosperity. Hernando De Soto, president of Peru's
Institute for Liberty and Democracy (www.ild.org.pe), laid out much of Egypt's
problem in his Wall Street Journal article (Feb. 3, 2011), "Egypt's
Economic Apartheid." More than 90 percent of Egyptians hold their property
without legal title.
De Soto says,
"Without clear legal title to their assets and real estate, in short, these entrepreneurs own what I have called ‘dead capital’ -- property that cannot be leveraged as collateral for loans, to obtain investment capital, or as security for long-term contractual deals. And so the majority of these Egyptian enterprises remain small and relatively poor."
Egypt's legal private sector employs 6.8 million people and the public sector 5.9 million. More than 9 million people work in the extralegal sector, making Egypt's underground economy the nation's biggest employer.
Why are so many Egyptians in the
underground economy? De Soto, who's done extensive study of hampered
entrepreneurship, gives a typical example:
"To open a small bakery, our investigators found, would take more than 500 days. To get legal title to a vacant piece of land would take more than 10 years of dealing with red tape. To do business in Egypt, an aspiring poor entrepreneur would have to deal with 56 government agencies and repetitive government inspections."
Poverty in Egypt, or anywhere else, is not
very difficult to explain. There are three basic causes: People are poor
because they cannot produce anything highly valued by others. They can produce
things highly valued by others but are hampered or prevented from doing so. Or,
they volunteer to be poor.
Some people use the excuse of colonialism
to explain Third World poverty, but that's nonsense. Some the world's richest
countries are former colonies: United States, Canada, Australia, New Zealand
and Hong Kong. Some of the world's poorest countries were never colonies, at
least for not long, such as Ethiopia, Liberia, Tibet and Nepal. Pointing to the
U.S., some say that it's bountiful natural resources that explain wealth. Again
nonsense. The two natural resources richest continents, Africa and South
America, are home to the world's most miserably poor. Hong Kong, Great Britain
and Japan, poor in natural resources, are among the world's richest nations.
We do not fully know what makes some
societies more affluent than others; however, we can make some guesses based on correlations.
Rank countries according to their economic systems. Conceptually, we could
arrange them from those more capitalistic (having a large market sector and
private property rights) to the more socialistic (with extensive state
intervention, planning and weak private property rights). Then consult Amnesty
International’s ranking of countries according to human rights abuses going
from those with the greatest human rights protections to those with the least.
Then get World Bank income statistics and rank countries from highest to lowest
per capita income.
Having compiled those three lists, one
would observe a very strong, though imperfect correlation: Those countries with
greater economic liberty and private property rights tend also to have stronger
protections of human rights. And as an important side benefit of that greater
economic liberty and human rights protections, their people are wealthier. We
need to persuade our fellow man around the globe that liberty is a necessary
ingredient for prosperity.
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