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Poorest need deregulation more than Davos

Those on the left of the political spectrum argue that many of the world’s problems are caused by big business exploiting the poor. Those who support a free economy, meanwhile, lay many of the world’s…

You won’t find the best policy ideas here. Michel Euler/AP

Those on the left of the political spectrum argue that many of the world’s problems are caused by big business exploiting the poor. Those who support a free economy, meanwhile, lay many of the world’s problems at the door of public debt, high taxes or government regulation simply not allowing a thriving entrepreneurial economy.

Both sides of this debate tend to be agreed, however, that little good and much harm comes from a cosy relationship between big business and big government which exploits the people to the benefit of corporate and state interests.

This is a rather inauspicious starting point for considering whether the Davos meeting of the world’s political and business elites will bring about useful change.

In political circles, there is much talk of poverty, inequality and the 1%. But the big news of the last generation is the number of people who have actually been lifted out of grinding poverty as a result of continued globalisation.

Unprecedented improvement

Recent improvements in living standards of the world’s poorest people are unprecedented. Many parts of Asia have grown at extraordinarily rapid rates, and Africa is not only growing more rapidly and more sustainably than at any time in the post-war period, but inequality seems to be falling too.

It is true that much more needs to be done. The right policies, for example, would ensure that India grows as rapidly over the next two decades as China has in the past two. This doesn’t require grand pledges of aid or other action agreed at the Davos talking shop. In India, 40% of food rots before it gets to market because of poor supply chains and petty bureaucracy, a situation that will only end when the economy liberalises. A change in domestic policy is required. The necessary reforms will be homegrown and not determined in European ski resorts.

There are also changes to the world’s trading system that would help poorer countries. Within Africa, there is very little trade between the different nations – intra-African trade represents just 10% of the continent’s total trade, and the bureaucratic obstacles can be formidable.

A recent Brookings Institute Report described one African border crossing where up to 15 different government agencies bogged things down in paperwork and procedures.

The removal of trade barriers – especially in relation to agricultural goods – imposed by rich countries against poor countries would also be of great help. But there are already forums in which these things should be dealt with, including the World Trade Organisation.

Insofar as inequality is a major problem that needs to be addressed, one wonders what a meeting of a group of the world’s most privileged people will achieve.

Enriching us all

To some extent an increase in inequality, especially within a country, is an inevitable result of the process of globalisation that has improved the living standards of so many very poor people. Global entrepreneurs and their brands such as Google and Microsoft enrich us all but they enrich some more than others.

While not wishing to reverse the changes brought about by globalisation, politicians can ask themselves what changes would both move policy in the right direction and help the least-well-off who may, in developed countries, have benefited relatively less from greater freedom to trade.

The answers may vary from country to country, but in the UK they are pretty clear. Here are three policies that would greatly decrease living costs for the poor: a huge liberalisation of planning laws; the abolition of the Common Agricultural Policy and other trade restrictions in the EU; and a reconsideration of green policies that increase energy bills.

But don’t expect these policies to come out of discussions among the international business and political elites in Davos. Helping the worst-off requires solutions, which do not seem to be on the agenda of the global elites.