im on holiday and cbf responding but
basically you are wrong
I wrote this earlier in the year for a tute presentation I had to do in development economics
There is a strong false accusation that traditional capitalism fails to help the poor. It is certaintly true that firms have much more incentive to meet the needs of the rich people with money than to meet the needs of the poor without money. However, as firms expand their production to meet more of the rich people’s needs, they hire more unskilled labour to do so – driving up the incomes of poor people. As firms invest in machines to increase production for the rich market, they drive up the productive powers of workers, further increasing the wages of the poor. And as firms have an incentive to continually search for new technologies that make both machines and workers more productive, you guessed it, drives up the wages of the poor. These forces largely explain why the global poverty rate (measured at a fixed poverty line in real terms) has fallen by half over the last 3 decades.
Unfortunately, my experience so far with corporate social responsibility (CSR) is that they are too often filled with wooly-headed people hired specifically for CSR – and not anyone with entrepreneurial experience from the corporation itself. CSR departments are essentially PR departments.
If the goal is to eradicate poverty, you must raise wages, you must make workers more productive. Of course, productive workers need good health and good education. They may or may not be possible outside the usual market mechanisms. These are empirical question. But the bottom line regarding poverty eradication is this: Capitalism is indispensable; health and education measures are a potential help.
Corporate managers have a fiduciary duty to maximise profits. This duty does not exclude the possibility philanthropy. Corporations have long made charitable donations, quite properly from a profit-maximising standpoint, in order to curry favour with politicians and interest groups, advertise the corporations to potential consumers, create diffuse goodwill, disguise greed, and ward off criticisms. I call this public relations charity.
Others argue that a redistribution of income through different indexed marginal tax rates can grant governments sufficient funds to serve the poor. I disagree. In the 80s, Ragan lowered marginal tax rates which in turn provided a boost in economically growth which therefore indirectly increased government revenue as output increased at a multiplied rate. Even if the wealth are to be taxed more; is there really a pareto optimal way to serve the poor? Giving extra capital to the poor is a short term ill thought out waste of money. It does not the solution, in fact, it exacerbates the problem. Money is rarely spent on prosperous things; such as education or health cover, and more likely to be spent on cheap consumable goods – namely alcohol and drugs. Others say food vouchers may help serve the poor. But then you go against individual liberty and freedom, you do not give the individual the choice on how they wish to be served. You also aren’t solving the problem of why they are poor. To rid poverty you need a nation wide real (above inflation) increase in wages. To increase wages nation wide, you need prolonged economic growth and efficiency. Something governments in nature stand in the way of.
