Free trade improves lives, not climate summits

Richard Tren & Jasson Urbach | 29 Jun 2012
Business Day (South Africa) Delegates to the United Nations (UN ) summit on environmental sustainability in Rio de Janeiro have gone home, many of them depressed at not having achieved more. The ideal outcome for most environmentalists would have seen far greater governmental and UN control over the world's economies and everyone's lives. This idea was largely rejected. Being saddled with jaw-dropping levels of debt restricts what rich countries can do. And developing countries seem to understand that a necessary prerequisite to development is greater individual liberty and economic freedom.

It has been 20 years since the first Rio Earth Summit and 10 years since the jamboree befell Johannesburg. Since then, life for most human beings has become, on average, far better. We live longer and healthier lives than at any time in history. We also have greater access to food and can now produce more of it on fewer hectares than ever before. In Africa, child mortality has fallen dramatically.
Some of these improvements are due to improved access to healthcare in poor countries paid for by wealthy donor countries. HIV/AIDS and malaria treatment and prevention programmes are paying dividends. But we should be cautious in attributing all these gains in human wellbeing to the UN or donor agencies.

Take, for instance, the Millennium Villages Project, conceived by Jeffrey Sachs of Columbia University. This project, over several years, provided intensive aid, such as mosquito bed-nets and agricultural assistance, to selected villages in nine African countries. The results show that, by some indicators, such as under-five mortality, life has improved. However, as World Bank economist Gabriel Demombynes has pointed out, the average decline countrywide in under-five mortality has been the same as, if not higher than, in the villages inundated with aid. And this project was not cheap. Michael Clemens of the Centre for Global Development calculates that it cost $12000 a household. At that price, it would be unthinkable to scale the model up.

While targeted, measured donor aid for diseases has produced some important results, something else has been going on in Africa. Over the past decade, many African economies have grown dramatically. This growth has its roots in the steadily improving economic freedom in most African countries. African entrepreneurs, farmers and traders are better able to open businesses and trade across borders than ever before. These ordinary Africans are creating the wealth that can pay for clean water, more food and medicines. Soon, African children won't be seen as desperate recipients of medicines and vaccines but as a target market for iPads and Xbox 360s.

The empirical evidence is clear: as countries open their borders and increase their levels of economic freedom, their citizens become healthier and wealthier. According to the Fraser Institute's Economic Freedom of the World Index, not only is economic growth higher in freer, more open economies, but so is life expectancy. In freer countries, life expectancy at birth is more than 79 years; whereas in countries that have the least amount of economic freedom, it is about 60 years. And in wealthier countries the environment is cleaner too.

We must ignore the self-serving UN development plans because history has shown that the power of the free market to lift people out of poverty and improve the environment dwarfs any effort the UN or donor agencies have ever or could ever muster. If sustainability is your concern, free markets and free trade will keep people out of poverty far better and for longer than capricious donor agencies.

Indeed, as economic freedom increases, the rate of extreme poverty, defined as an income of $1,25 a day, decreases. In countries with the least amount of economic freedom, about 41% of the population lives on less than $1,25 a day, whereas in countries with the highest levels of economic freedom, only 2,7% of the population lives on less than $1,25 a day.

Hopefully, now that they have returned from Rio, Africa's delegates will continue to free economies and cut the red tape that restricts every businessman, street trader, entrepreneur and schoolchild. Perhaps UN officials and environmental statists are sincere in wanting to better the world, but following their plans for greater government control of our economies will only sustain poverty.

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