The Politics of Poverty

In a study released in Financial Times in late 2006, it was revealed that the richest 2% of adults in the world own more than 50% of the total assets, while the poorest half of the population hold a mere 1%. [1] Statistics like this were highly prevalent during the Obama presidential campaigns, and they are get repeated in pop culture through propaganda such as Michael Moore’s “documentary” Capitalism: A Love Story. Although these statistics may help to foster greed and envy among the poor of the world, they really only confirm the “Golden Rule” of politics—i.e. he who has the gold makes the rule—a point that is well-made by Hernando de Soto in his book The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else.

Not to be confused with the 16th century Spanish explorer by the same name, de Soto is an economist by trade. His main focus is what we might refer to as the “shadow economy”—one that operates directly alongside the “legal” economy, but without the paper trail. “In his native Peru, de Soto found that the rural and urban real estate held outside the legal system was five times the total valuation of the Lima Stock Exchange and fourteen times the value of all foreign direct investment in the country through its documented history. Nor is Peru unique in this respect. Much the same story could be told of the Philippines, Egypt and other Third World countries.” [2] De Soto’s research helps to put the seemingly lopsided statistics from the Financial Times into a different perspective.

While the Bible declares that “the earth is the Lord’s and all it contains, the world and those who dwell in it” (Psalm 24:1), the balance sheets of the top 2% tell a different story. De Soto shows that the lion’s share of the world’s wealth never ends up being accounted for or even reported. If the thinly distributed wealth of the bottom half of the economic food chain cannot be shown to be an asset or a liability to the upper half, it will be virtually ignored. As far as government bookkeepers are concerned, it doesn’t exist if it can’t be taxed. But it also can’t be counted toward that country’s GNP. The economic elites of that country (or at least the ones with a paper trail) take their investment capital to stronger foreign economies, which causes their own country’s governmental economy to get that much weaker. It becomes an economic “survival of the fittest” where the fittest get to define the terms.

The same philosophical assumptions that drove the worldview of Marx and Hegel are being used today to deny a huge segment of the population any stake in the wealth of the world. “In the hands of the communists and other revolutionary reformers, the Darwinian emphasis on the survival of the fittest was used to justify their revolutionary activities and their efforts to destroy the traditional theistic political and economic philosophies and institutions which stood in their way in their struggles to remake the political and social life of both Europe and America.” [3] The Lord may own the cattle on a thousand hills (Psalm 50:10), but the social Darwinists at the pinnacle of the “legal” economy are redefining wealth to be strictly monetary in nature. Real estate, livestock, land, resources, etc. don’t get counted toward the legal system if they don’t show up on paper. The miles of bureaucratic red tape involved with the legal system make this next to impossible.

De Soto and his team of researchers have examined the processes in a number of Third World countries. In Peru, the process to get a legal title to your home consists of 5 stages and the first stage alone involves 207 steps. In Egypt, anyone who wants to acquire and legally register a lot on state-owned desert land must wend his way through at least 77 bureaucratic procedures at thirty-one public and private agencies. These procedures can take anywhere from five to fourteen years. In Haiti, it is 19 years. Against this background, it is hardly surprising that most economic activities in most Third World and former Communist countries take place illegally, in the underground economy. Less than half the people employed in Venezuela work in legal enterprises. [4]

Armed with this understanding, we can say this about the statistic that the wealthiest 2% own 50% of the world’s assets: “So what?” The statistic itself is as meaningless as Darwin’s phrase “the survival of the fittest.” Statements like this are self-authenticating (they are what is known in logic as a tautology). In other words, the wealthiest 2% in the world—on paper—own more than 50% of the stuff—on paper. That is, the wealthiest people in the world own most of the stuff. Duh, we don’t need economists to tell us this. Similarly, when Darwin gave “survival of the fittest” to the world, he merely taught us that the fittest ones are the ones that survive. That is, he made the scientific observation that the strong will dominate the weak…thanks Charles, for clearing that up. The top 2% may own half of the reported monetary assets of the world, but this only begs the question: What is wealth? If we allow wealth to be defined by loudmouths like Michael Moore and those in the top 2%—i.e. if we allow the Golden Rule to be applied—they do indeed own 50% of the world’s “wealth.” But if we broaden the definition to include more than money, as de Soto has, the picture looks much different.


[1]  Chris Giles, “Richest 2% hold half the world’s assets,” Financial Times (Dec. 5, 2006). Online here.
[2]  Thomas Sowell, “A gem of a book,” JewishWorldReview.com. Online here.
[3]  C. Gregg Singer, From Rationalism to Irrationality (Phillipsburg, NJ: Presbyterian & Reformed, 1979), 130.
[4]  Sowell, “A gem of a book.”


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