Just get out of the way: how India's government can reduce poverty

In Robert Anderson's new book, "Just Get Out of the Way: How Government Can Help Business in Poor Countries," he examines the role of governments in improving the economies in the developing world.

Many governments, often under the influence of Western advisers, end up intervening in their economies and end up doing far more harm than good. This frequently manifests itself in wealth redistribution schemes to help those in poverty. For instance, consider India:

  • Roughly 80 percent of India's population lives on less than two dollars per day; about 35 percent live on less than one dollar a day.
  • Conversely, the richest 10 percent of the population consume an average of $6,213 in goods every year.

    While attempting to help the poor is well-intentioned, Anderson doubts that government has the capacity to do so competently or efficiently:
  • To raise all Indian citizens' income up to two dollars a day would require raising taxes by 50 percent, crippling the nation's economy.
  • In developing countries rampant corruption tends to eviscerate benefits intended to help the poor, with the funds instead going to government bureaucrats.
  • Redistributed funds are often diverted to the middle- and upper-classes, groups that are better educated, live in major cities and more engaged in politics.

    According to Anderson, India's solutions to reducing poverty have had little or no positive impact. Instead, raising its standard of living would be better achieved through promoting economic growth by lowering taxes and drastically reducing government regulation.

    Source: Robert E. Anderson, Just Get Out of the Way: How Government Can Help Business in Poor Countries, Cato Institute, 2004.

    For more information about the Cato Institute see: http://www.cato.org

    For more on International Taxes and Growthhttp://www.ncpa.org/iss/int/

    FMF Policy Bulletin 21 September 2004

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