Liberalism is the best Cure for Poverty - Dirk Verhofstadt
In his book World Poverty and Human Rights, philosopher Thomas Pogge states that ‘Despite a high and growing global average income, billions of human beings are still condemned to lifelong severe poverty, with all its attendant evils of low life expectancy, social exclusion, illiteracy and effective enslavement.’ This growing gap is a danger. In his book Jihad versus McWorld Benjamin Barber explains this danger very sharp. “If justice cannot be shared equally, injustice will be imposed equally.” How can we reduce poverty and create welfare in poor countries? This is the central question of this Conference.
Today I want to make clear that liberalism can bring solutions to today’s economic and social problems. It is my firm conviction we need more liberalism to counter poverty. Stating we need more liberalism may sound astonishing. One may think that today’s globalization can be seen as liberal evolution. A lot of people believe that problems like poverty, inequality of income, unemployment, pollution and the disappearance of cultural diversity are the result of liberalism and free market economy. That is not correct. My statement is that today there is no liberal political awareness, that today there is no free trade, and that this is the reason why we are confronted with all those problems.
First of all I want to make clear what liberalism means. The term liberalism is often abused. Politicians like Ronald Reagan and Margareth Thatcher appealed to ideas from classical liberal thinkers but their political acts were everything but liberal. It is even the case today. Vladimir Zjirinofsky is the president of the Liberal Party in Russia but in fact he is an extreme nationalist. Jorg Haïder is the leader from the Freedomsparty, but in fact he is a racist. Slavoj Zizek was presidential candidate for the Liberal Party in Slovenia but in fact he is a Marxist. These are only a few examples of people who act in the name of liberalism but they have nothing to do with it. At most they use or abuse certain elements of liberalism to give their own conservatism, nationalism, racism or egocentrism a smell of dignity and cultivation. But this is for me no reason not to use the term liberalism anymore. I want to keep liberalism - with al its outstanding social and human values - out of the hands of those who misuse it. For the same reason I resist to adjectives or additions as there are leftist liberalism, neo liberalism, libertarianism and so on.
Liberalism is based on individualism, another concept that often is misused. Some people say that individualism is the same as egoism but I could’nt disagree more. In fact, individualism is a special positive power allowing people to determine their destiny themselves. Individualism leads to self-development and emancipation. It is correct that individualism goes hand in hand with self-interest, but there is nothing wrong with that. Self-interest is the source of prosperity and development. However individualism is more than self-interest. It is a never-ending process towards liberty and self-fulfillment. For the citizen it is also a process of adaptation to social behaviour. Individualism is not an obstacle, but a condition for true solidarity. In his book On Liberty John Stuart Mill wrote: “Over himself, over his own body and mind, the individual is sovereign”. Starting from this definition, individualism may not be tempered, but on the contrary, must be encouraged, especially in those communities where people are suppressed due to religious, social or cultural traditions.
Here we come to the most important distinction between liberalism and the other ideologies. Only liberalism beliefs in individualism, in freedom and the autonomy of the individual. Therefore it stands against each form of collectivism, nationalism or traditionalism in which men are inferior to the community, the collective morality or the nation. It is clear that liberalism has nothing to do with socialism, conservatism or nationalism. Liberalism and individualism are without any doubt the most successful thoughts in history. They are the driving forces of anti dogmatic thinking. Liberal thinkers such as John Locke, Adam Smith and John Stuart Mill elaborated the importance of the individual and his freedom. But it was Immanuel Kant – the father of Enlightenment – who acknowledged very clearly the interest of individualism and liberal thinking. His central idea was ‘Sapere Aude’, ‘Dare to use your own sense’. He made clear that every human being is not a tool, but a goal. He defended the categorical imperative ‘Act only according to that maxim by which you can at the same time will that it would become a universal law’. In other words, each human being has the duty to care for his fellow humans.
During history, liberalism and individualism increased with lots of ups and downs. Think about the twentieth century. Think about nationalism and the First World War making humans suborbinate to the national community. Think about communism threating man as an object, a tool that could be switch on or off, used or throwed away. In order to achieve the ideal equalized society, communist leaders such as Stalin, Mao and Pol Pot drove millions of people into death. Think about Fascism making humans suborbinate to the will of the Führer. People who would not fit into the system were destroyed as happened with dissidents, phisical and mental handicapped persons, gypsies and jews. Think about fanatic religious communities in which people were submitted to holy texts. Even today millions of people, mostly women, are suppressed in the name of God or Allah.
Only liberalism fights this. The fight against nationalism, communism, fascism and religious fanatism. And the fight is successfull. With the impuls of the liberal aspiration for freedom and justice, universal human rights were accepted, abuses condemned, dictatorships eliminated. The idea that we are not born Belgian, German or American, but as citizen of the world with a number of untouchable rights and liberties. Since the sixties in the Western hemisphere, liberalism provided more freedom, allowing us to have our own lives more under our own control. 1968 was a crucial year. Some intellectuals consider May ’68 as a failure, as an upsurge of leftist and rebellious youngsters who sympathized with collectivist ideas. Those who examinated this period carefull see that it meant the final breakthrough of individualism and liberal values throughout all strata of society. Look at the civil rights movement, the feminist movement and later on the gay rights movement. So many taboos disappeared during those years. Here lies the basis of secularization, the fall of the sociopolitical blocks, tolerance, rights of men, the equality of the sexes, antiracism and above all individual freedom.
During the past decades liberalism was also succesfull on the economic field. Until the eighties socialist parties and politicians supported collectivism, nationalizations and a greater impact of the state on the economy. That Keneysian thinking led to a fat state, an ineffective bureaucracy, a lack of creativity, high unemployment and huge depts. Such depts that in the next twenty years we and even our children will have to pay them off. Today most socialist parties transformed themselves into social-democratic parties and accept free trade as the best system to create welfare. Under impulse of liberalism Western governments stopped subsidizing loss-making branches of the industry like coal and textile. They slimmed down their bureaucraties. They abolished unnecessary rules. They privatized branches like telecom and aviation. They all became more orthodox on the budget. I realise that some of these transformations are to slow, that there are still to many bureaucratic rules and that we need more adaptations to keep our economies competitive. Social-democrats and conservatives are still in the grip of unions and other pressuregroups. They refuse or postpone necessary measures and forget that the best way to protect our social system is a good working economy. So we have to go on and convince others of the necessity of further liberal reforms in order to make the state more efficiënt.
Some even prefer to go much further. They not only want to remove the fat from state, but they also wish to dismantle the state, even in its most essential tasks. They call themselves neoliberals or libertarians. This leads to marketfundamentalism. In contrast to Karl Poppers warning that we may not accept dogma’s, they have a blind believe in absolute freedom, absolute property rights and in the absolute free market. Since the fall of the Berlin Wall and the thesis of the The end of history of Francis Fukuyama, neoliberals and libertarians consider free market as a sort of scientific certainty. Liberals never followed this dogmatic concept because they understand that besides freedom also justice is necessary for a better society. Liberals never adored the absolute freedom because they know that absolute freedom frequently causes negative effects for fellow humans and the whole society. Liberals refuse to submit themselves to blind capitalism because extreme selfishness can hurt society and hamper opportunities for fellow humans.
Neoliberals and libertarians see the state as an ennemy. They reject the ideas of actual liberal thinkers as there are Amartya Sen, Fernando Savater, Hernando de Soto and Martha Nussbaum who prooved, each in their way, that a good organised state, with reliable education, an efficiënt social security and an effective legal system are necessary to give people the opportunity to live a fulfilling live. The notion ‘absolute freedom’ is false. It’s like putting someone in the middle of the desert and saying ‘you are free’. There you are, without any protection, without drinking water, without compass. Ill, older and handicapped people need tools to practice their freedom. Children need reliable education to receive the knowledge and capacities to make their own descisions in their later life. People needs an effective legal system, not only for the protection of their property and personal rights, but also to protect their human dignity. As Martha Nussbaum says, an efficiënt state is necessary for people without ‘fundamental capabilities’ to maximize their right on self-determination.
In fact there is a deep gap between liberalism and libertarianism. Libertarians narrow the liberal notion of justice to lawfullness. They hold a plea for a minimal state, only taking care of protection of propertyrights and acts against violence. Some of them even plea for no state at all. They want the privatization of everything, even jurisdiction. In any case they reject redistribution by the state. ‘Redistribution is a form of theft’, said Robert Nozick. The hungry, homeless and diprived people can not make an appeal to the government. Possibly fellow citizens can give something to the poor, but this is not an obligation and neither is it a task for the state. This leads to egoism, paternalism and the exploitation of fellow humans and nature. The libertarian ideas would lead to the dismantling of public services, such as education, social security and infrastructure. This is at right angles to the social and human values of liberalism.
Liberals don’t agree. For an open society, a week state can be as dangereous as an authoritarian state. Justice cannot be reduced to individual freedom and property. Every person has a duty towards his fellow humans. The sick, the elder and the handicapped may not be handed over to the ‘goodwill’ of others. They must be helped by a system of redistribution. It’s the only way for all people to determine their own destiny. According to Kant the concept of freedom is hiding a duty: Du Kannst, denn Du Sollst. In contrast with libertarians, liberals realize that we have to support and help fellow humans, even if they do not belong to our society. Not alone out of charity but also structural. Trough an efficient state.
All of this seems theoretical, but hurricane Katrina made it real and so much clear. America knew long in advance about the impact of the disastre. On August 25 – four days before the disastre – the authorities were informed by scientists about the probable consequences of the hurricane. Nobody reacted. The federal government relied on the own capacity of citizens to face a hurricane. According to them it was not necessary to send extra doctors, nurses, policemen, firemen or bus drivers. When Katrina hit New Orleans on August 28, nobody was prepared. Presdent Bush stayed a few more days on holiday. Only five days later, on September 2, he visited the disaster area. Meanwhile thousands of victims were crying for help. What we saw on television was a powerless state leaving their citizens in the cold. Disastrous pictures which diserve only one classification: inhuman!
Katrina proved in one deafening bang the lack of state in the United States. Soldiers were not available because most of them were fighting in Irak. The budget to reinforce the dykes and the banks was cut back. Hospitals did not have the disposals for the necessary medication. Some tens of thousands refugees, including mothers with babies, children, senior citizens and sick people waited several days in the open air to rescue them from this nightmare. The lack of state was visible by the total anarchy in the abandonned city where looting became normal. The poor from New Orleans felt abandonned. I admit that the Bush administration does not follow the libertarian minimal or no-state ideas. Bush follows a neo conservative policy in ethical issues and a neoliberal policy in economic issues. Bush spend a lot of money for the war in Irak and the fight against terror, but he cut in public services like education, social security and infrastructure. By doing this he acted as an enemy of the state.
For liberals the state is not the enemy. They don’t want a fat state but an efficient state as a vital instrument to provide freedom, justice and protection. Liberals follow The Theory of Justice from the American philosopher John Rawls. He demonstrated that people are able to combine freedom and justice in a rational way. In order to come to an effective social justice Rawls uses a thought experiment. He starts from an initial position whereby people find themselves hidden under a veil of ignorance. He asks everyone to try and imagine how he would see social cooperation and distribution of means if he were to find himself in an original position not knowing whether he is rich or poor, black or white, man or woman, healthy or ailing, etc. Following this train of thought man will always take into account the potential situation in which he will necessarily have to appeal to the support of others. Freedom and justice are the keywords in liberal thinking. In his book The Law of Peoples John Rawls extends the idea of a social contract to the Society of Peoples and lays out the general principles that can and should be accepted by societies as the standard for regulating their behavior toward one another. So we come to liberalism as the best Cure fot Poverty.
Experts from IMF and the WTO – who follow the so-called Washington consensus – tell us that globalization will automatically lead to more prosperity in all countries opening their borders for unconditional free trade development. Anti-globalist movements pretend that globalization, as we know it today, will increase the existing problems in the lesser rich countries. Anti-globalists position themselves against a free market and in favor of a stronger grip on the national and international economies by governments. My perception is that both are wrong. Neither neo-marxist anti-globalists, nor neo-liberal market fundamentalists offer satisfactory solutions for less developed countries. Anti-globalists ask for new forms of nationalization, for subsidies and price controls. They claim to be the protectors of the poor while most of them protect particular interests. Most unions claim for more rules on multinationals. But by imposing high labor and environmental standards they extinguish the competitive advantages of small countries. On the other hand, market fundamentalists expect immediate and positive results from privatization and deregulation. They seem to forget that a free and liberal world means more than just economic freedom. Let me quote the Peruvian writer Mario Vargas Llosa: “development, the progress of civilization must be simultaneously economic, political, cultural, and even ethical”.
In his book In Defence of Global Capitalism the Swedish author Johan Norberg proved that countries implementing a free market develop more prosperity than countries protecting their markets, that economic freedom extends average life expectancy, that economic freedom fights corruption, that economic growth decreases poverty, that also poor people get a benefit out of growth and that progress is good for the environment. These are no fake allegations but reality. Countries opening up their borders to free trade are growing faster than those protecting their economy. Around 1820 poverty was spread fairly evenly throughout most countries. Then the industrial revolution took root, first in Great-Britain, later in Germany, and the other Western countries. It didn’t take long before these countries started to prosper. In the second half of the 20th century countries such as Japan, Taiwan, Singapore, Hong Kong, Malaysia and South-Korea joined the worldeconomy and reached a high level of welfare in a short period. Today China, Vietnam, India and Chile are catching up very fast. Only countries steering a protectionist course are lagging behind and are still experiencing widespread poverty. All these examples go against the predictions of antiglobalist theories. Norberg’s analyses not only unmasks the myth. It shows the potential for free trade to be a solution to many difficult problems in extremely poor countries. To make it clear: problems, correctly considered as important by antiglobalist movements can be fought by the system they refuse the most: a free market economy and a liberal democracy.
Liberalism does not mean that government should disappear for privatization. The efficiency of government is absolutely necessary for the creation of conditions and guidelines for fair competition between people and countries. Governments have tasks and responsibilities which cannot be taken over by private companies or organizations. If the goal is a free and fair society, politicians should pay attention to this and to five key elements: democracy, education, a real free market, right of ownership and international cooperation.
Democracy is essential for the freedom and development of mankind. A democratic legal order is the best system to maintain as much individual freedom as possible allowing access to prosperity for as many people as possible. The past has proven that the political systems supported today by most leftist antiglobalists are not efficient. One only has to remember the social, economical and ecological damages brought to ex-communist countries and to socialistic peoples republics. Democracy is the only system whereby rulers have to report to the representatives of the people. Their political continuity depends on the result of elections. In his book Development as Freedom the Indian Nobel Prize winner Amartya Sen found out that there is no famine in democratic countries. The most terrible famine-stricken period out of our contemporary history happened in China between 1958 and 1961. The result of the ruling planned economy implemented by the communist central government. 30 million Chinese died. From the beginning Mao refused to acknowledge this catastrophe, and continued to believe in his dogmatic rule. There was no democratic opposition, no freedom of press. The government was being mislead by the propaganda of local party officials who tried to save their job and disguised what was really happening. The essence of democracy is the presence of counterforce obliging political leaders to take up responsibility.
A second element is making education available to everybody. In my opinion, this is essential for further development of poor countries. Education, research and development are the real gates to the future. Developing countries need a labour force able to compete in the global economy – in skills and therefore in productivity. Better educated labour forces will encourage multinationals to invest more in poor countries. Personally I belief it is the government’s task to make sure that education reaches also the poor. Therefore I support public programs as Bolsa-Escola, a scholarship program for the poorest families. It allows their children to replace the hardness of working by the hope of learning in school. 20 million children benefited from Bolsa-Escola programs in Latin America in last years.
A third essential element is to impose a real free market. Liberals support privatization. But they do not accept that public monopolies are turned into private monopolies in order to enrich a particular industry, company or person. Liberals support deregulation. But they do not accept the law of the jungle, the exploitation of people or the dismantlement of a basic social protective system. Liberals support a smaller state, but don’t want the government to withdraw from all fields of public life. An efficient state is necessary to strengthen its legal system in order to protect property rights and contracts, to provide security and freedom, to fight monopolies, trusts, cartels and corruption. Most of the time liberalism never delivered prosperity, simply because in most countries liberalism never existed. The problems in the world are not due to too much liberalism, but to a lack of liberalism. The lack of opportunities for people in poor countries is, for the major part, due to protectionism in rich countries. Unions, employers organizations, agricultural confederations and their political friends consider their own interests more important than the public interest. Different from pressure groups - which in Europe are mostly linked to socialist or conservative political parties - liberals reject each form of protectionism.
The most important protectionists are the United States, the European Union and Japan. Every year they subsidize their economies with billion of dollars, euro’s and yens. They protect their own companies, they close their markets for import from poor countries and above all they allocate export subsidies to dump their over-production on to the world market. This policy of the rich countries is not liberal but protectionist. They do not implement a free market policy, they obstruct it. They apply import taxes on food, textile and steel, damaging other countries. Protectionism disrupts local markets in poor countries and keep local workers in poverty. Antiglobalists are wrong. Actually liberal free trade does not exist, only market disturbing protectionism. Protectionism is a continuing tragedy, causing unnecessary hunger and disease. According to Johan Norberg protectionism may lead to even bigger problems in the future. He says: “We in the West used to tell the developing countries about the benefits of the free market. And we promised wealth and progress would certainly come if they changed and adopted our ways. Many did, only to find that our markets are closed to them.”
A fourth liberal tool to reduce worldwide poverty is the attribution and protection of the right of ownership, especially in poor countries. During decades socialist thinkers explained and even fooled the poor by stating that collectivism and nationalizations would solve their problems, but it always failed. Peruvian researcher Hernando de Soto demonstrated that just this policy was pernicious for the creation of welfare. Millions of migrants established themselves in the slums around big cities, in the favelas, the bidonvilles, the shawnty towns. Automatically they enter a world without any official legislation. They have their own social rules, which in no means mean that they are not active. On the contrary. Nowhere else is there so much activity and entrepreneurship than among poor people. And poor people do not only work for and amongst poor people. They also fill gaps in the legal economy. They drive taxis without licenses, they take on jobs in hotels and restaurants. They do construction work. They take on jobs in illegal shops. This leads to De Soto’s surprising conclusion that the illegal or unofficial world is the norm. His conclusion is not only surprising but important: the poor are not the problem, they are the solution. Give the millions of people who lives in the slums the opportunity to convert their poor properties into economically usable assets. Give them the opportunity to start up a business easily. Simplify the acquisition of properties and estates. Property means economic potential. Bringing the poor into a legal environment would lead to an enormous accumulation of welfare. A multiple of all the development assistance. Does this mean we should stop development assistance? Not at all. We not only have the duty to help the poor, the sick and the older in our own societies but also the weak in the rest of the world. Money must be used more efficiently and end up with the people and not with corrupt regimes and their leaders. According to Amartya Sen, development assistance must go to education, health care and basic infrastructure of the poor state.
Finally we need more democracy in the international organizations. It’s absolutely necessary that the different regions in the world get more influence in world policy. The composition of the Security Council of the United Nations is not longer acceptable. As you know the US, Russia, China, the United Kingdom and France are the permanent members of this Council. We need a better balance and representation. Why can’t we accept a Council with one representative from North America, Europe, Africa, Russia, the Arabic world, China, India, South East Asia and Latin America? Representatives of the different regions in the world should also be involved in other international organizations such as the World Bank, IMF and WTO. Today those organizations work to much as an extension of the economic and financial interests of the United States and Wall Street.
To conclude I would like to give my opinion about a case in which liberals should take the lead for the benefit of millions of poor and unprotected people. I am talking about the further enlargement of the European Union and the candidacy of Turkey. According to my Kantian way of thinking and my plea for individualism my concern does not go to Turkey as a country. My concern goes to the individual Turk, to the individual Kurd, to the individual Armenian, and so on. My concern goes to individuals who hope for a better future and especially for the final protection of their rights and freedoms in the European jurisdiction. As Europeans and citizens of the world we have the duty to give those people a perspective. The perspective to enter into the great European family in a few years. A family in which their children will find peace and welfare.
I realize that the European Union needs urgent deepening, a more transparent and democratic way of acting. But this cannot be an excuse to draw a final line. The European Union is not based on a common language, religion or history. It came from the free and resolute will from people who understood that we could only maintain peace by connecting our destiny and by sacrificing small pieces of our national sovereignty to a higher interest. Democracy, human rights and a free market economy are the common values of it. In this sense Europe is a universal project. Let me quote Jean Monnet, one of the Founding Fathers of the European Community: “We are not forming coalitions of states, we are uniting men”. The shortage of a clear and common identity is not a lack but on the contrary an advantage. This is an important difference with European nationalists and conservatives who wish to keep the historic ‘Avondland’. They frighten people and plea for a return to the classic nation states. The worst thing we can do with regard to the Turks, but also to the Bulgars, the Roumanians, the Ukrainians, the White Russians and so on, is definitely closing the door and blowing up all perspectives. It is my personal conviction that the absence of perspective is the breeding ground for fanaticism and terrorism. As long as people have a perspective, they have hope and turn away from extremists. Take away any perspective and you give fanatics the possibility to spread their pernicious ideas.
The title of one of my books is Human Liberalism. It elected immediately the question if there is something like ‘inhuman liberalism’. I don’t believe so. I wanted to make clear that in liberalism the human being stands central and nothing else. Not profit, not the economy, not the state, not the nation, not a race. Only the human being and his freedom to make his own choices. We need more liberalism, more concrete measures leading to more freedom, more emancipation, more opportunities for the individual, more welfare for fellow humans here and in the rest of the world.
Lecture from Dirk Verhofstadt at the Conference on Development in Brussels, October 17, 2005