Rock star activist and philanthropist Bono is saying that capitalism is a better long-term strategy for helping third-world countries than aid payments.
“Aid is just a stop-gap,” he said during a speech to Georgetown University last month. “Commerce [and] entrepreneurial capitalism takes more people out of poverty than aid.”
There is an assumption that the problem with third world countries is that they’ve been exploited by external forces. The real problem, though, is that they’ve been exploited by internal forces. Most of these places are ruled by corrupt governments which don’t protect property rights or individual rights and which allow rampant fraud and crime to be perpetrated by their cronies.
If these places were governed by those who protected individual and property rights, who allowed commerce to take place while acting to stop fraud and enforce contracts, the people set free to pursue their own self-interest in a free market would quickly lift themselves out of poverty.
As Milt Friedman said, “There has never in history been a system more effective for lifting people out of poverty than the free enterprise system.”