How to Cure Poverty

May 29, 1961

The “real issue” in the Western Hemisphere, according to Secretary of State Dean Rusk, is the battle against poverty. Foreign aid, he keeps repeating, must be concerned with “social” as well as “economic” objectives; it must not perpetuate the gap between the rich and the poor.

Is the battle against poverty the “real” issue? Is it the problem with which Americans think their Secretary of State should be primarily charged? Or isn’t that problem really the battle against Communist subversion and aggression?

The problem of poverty has existed from time immemorial. It is as old as man. Since the birth of capitalism—the Industrial Revolution—tremendous strides have been made toward its solution. But the problem of Communist subversion and aggression is peculiarly the problem of our time, our decade, of 1961. It is this that Americans are worried about. They are a generous people and would like to see other people better off. They have in fact done more in this direction than any other people in history. But the poverty in India, or the gap between the rich and the poor in Brazil, is not what keeps them awake nights.

Secretary Rusk seems to think that poverty is the primary cause of Communism, and that an increase in incomes would be the primary cure. Experience and statistics do not bear him out. In Italy and in a score of other countries, Communism is nearly always found to be higher in the richer industrial districts than in the poorer agricultural sections. Communism has been growing while world income has been growing. The Broadway and Hollywood Communists also spoil the Secretary’s thesis.

NOT BY GIVEAWAY

One of the things we have been told for years by the advocates of foreign aid is that the world cannot exist half rich and half poor. It has in fact so existed for centuries. Of course poor nations do not buy much from us nor sell much to us. But neither do they threaten us militarily. It is nations well-off enough to embark on huge armament programs, like Nazi Germany, prewar Japan, and Communist Russia, that can do that. The latter can also subsidize aggression against us in the poorer countries.

Of course it is always desirable to reduce poverty, where and to the extent that we can. But what is the method or system most likely to do that? It is precisely here that Secretary Rusk and the advocates of bigger and longer-term foreign aid are most wrong in their implications. For they assume that the way to cure foreign poverty is by government-to-government giveaway programs, by state projects, state spending, state planning. In a word, by socialism.

BRAZIL AND INDIA

This is made clear not only in their generalities but in their specific programs. A $2 billion “international financial rescue package” is being prepared for Brazil, with smaller packages to bolster the economies of Venezuela and Bolivia. But the difficulties of these countries are of their own making. They are the result of their inflationism, socialism, Brasilias and other grandiose state-planned projects. Now that they have run out of their own money, the U.S. is offering Latin American governments a $600 million “social development fund” for more of the same. Our planners are also planning to lend India $1 billion in the next two years to meet the foreign-exchange requirements of India’s third Five-Year Plan, and to help India build a nuclear power plant and a government steel mill. India having borrowed and spent itself to the brink of bankruptcy, it is considered our duty to forget all about our own balance-of-payments problem and rush to the rescue of Indian socialism.

If the Kennedy Administration is right in thinking that foreign poverty is the “real” problem, it has chosen precisely the wrong way to solve it. The problem of poverty cannot be solved by Communism, socialism, or state planning, but by capitalism—by the system of freedom of private property, private enterprise, and free markets. But few of our officials, despite occasional lip service, seem to have any real faith in the system that has made it possible for us to keep bailing out the socialist failures.