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The Lighthouse is the weekly email newsletter of the Independent Institute.
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Volume 9, Issue 47: November 19, 2007

  1. New Book Shows How to End Global Poverty
  2. U.S. Role in Bringing Pakistan to the Abyss
  3. French Charity Breaks Laws to Save the Children
  4. Privatizing Dispute Adjudication

1) New Book Shows How to End Global Poverty

How can poor nations become prosperous? For decades, politicians have emphasized protective tariffs, subsidies to industry, and redistributionist programs as the best hope for alleviating the widespread poverty of the developing world. A growing body of empirical research, however, points toward the establishment of economic freedom and the enforcement of property rights as the keys to making impoverished countries significantly wealthier, according to Benjamin Powell, editor of the new book, Making Poor Nations Rich: Entrepreneurship and the Process of Economic Development (Stanford University Press/The Independent Institute).

“Economic freedom and private property rights are essential for promoting the productive entrepreneurship that leads to economic growth,” writes Powell, a research fellow at the Independent Institute, in his introduction to the book. “In countries where this institutional environment is lacking, sustained economic development remains elusive. When countries make pro-market reforms that enhance their institutional environment, growth improves—sometimes dramatically.”

Divided into three sections, and with 14 chapters authored by 16 economists, Making Poor Nations Rich begins by laying out a theoretical framework that illuminates the effects of entrepreneurship, economic freedom, and property-rights enforcement on economic growth. It then examines failures in entrepreneurial development in Africa, Latin America, Romania, and Sweden. Lastly, it discusses successful reforms enacted in China, India, Ireland, New Zealand, and Botswana—a country that has transformed itself, since gaining independence, from one of the world’s poorest countries to an upper-middle-income country.

“For the sake of many millions of people trapped in poverty, I wish politicians of all ideological persuasions would pay careful attention to the arguments expounded by this remarkable book.”
—Ernesto Zedillo, former President of Mexico; Director, Yale Center for the Study of Globalization

Order Making Poor Nations Rich for a Holiday gift!

Highlights and synopsis of Making Poor Nations Rich

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2) U.S. Role in Bringing Pakistan to the Abyss

U.S. support for General Pervez Musharraf can be characterized as a series of missteps and misjudgments that have played an important role in bringing Pakistan to the abyss, according to Independent Institute Senior Fellow Ivan Eland.

For starters, because he needed the support of Islamists in northwest Pakistan—the area where al-Qaeda’s top leaders are believed to be in hiding—Musharraf kept his troops out of that area—while he strengthened his grip on the reins of power. As more U.S. aid flowed to Musharraf—totalling about $10 billion—his critics increasingly claimed that he was in the pocket of the U.S. government. Consequently, Pakistani Islamists have become a force to reckon with.

“In Pakistan, Musharraf is likely to fall, but such a close U.S. hug for him makes it more likely that Islamists could eventually win power,” Eland writes in his latest op-ed. “So the U.S. should use Musharraf’s declaration of marital law as a reason to terminate all aid to his regime. The United States is so unpopular in the region that supporting a government alliance between Musharraf and former Prime Minister Benazir Bhutto would probably delegitimize even the middle ground in Pakistan. For moderate forces to have the best chance in that nuclear-armed nation, the United States, paradoxically, should refrain from supporting them, and stay out of Pakistani politics.”

“U.S. Role in Bringing Pakistan to the Abyss,” by Ivan Eland (11/15/07)

 “In The Empire Has No Clothes, Dr. Eland shows that the concept of empire is wholly contrary to the principles of liberals and conservatives alike and makes a mockery of the Founding Fathers’ vision for a free republic.”
—Ron Paul, U.S. Congressman

Order The Empire’s New Clothes: U.S. Foreign Policy Exposed, by Ivan Eland

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3) French Charity Breaks Laws to Save the Children

Last month, Zoe’s Arc, a French group, tried to airlift 103 children out of eastern Chad, claiming it was a humanitarian mission to deliver orphans from neighboring Darfur to adoptive families in France. Chadian authorities, however, blocked the operation and arrested 17 people working for the charity. In Europe, public opinion has strongly condemned Zoe’s Arc for violating Chad’s laws. Although most of the detainees have been released, the incident has sparked a debate about how charitable organizations should act in other countries, explains Independent Institute Senior Fellow Alvaro Vargas Llosa in his latest column.

“I would suggest that it is immoral to use this case as grounds to disqualify all others when it comes to international humanitarian actions by private parties,” writes Vargas Llosa. “What if, after trying to act legally, Zoe’s Arc had been prevented by Chad’s tyrannical government from taking the children and they had faced imminent danger? Those who maintain that even under such circumstances a European charity would not be right to violate the norms of a different country live in a fantasy world. What they are in effect saying is that the parents should hand the patria potestas (parental custodianship) over to a government even if that decision entails possible slavery or death.”

Although the Geneva Convention of 1951 provides an international legal defense for saving children from mortal danger, the real issue is one of morality, not legality, Vargas Llosa argues. Hence, although they may have violated international law, the Catholic Church’s efforts to help settle about 15,000 Cuban minors in the United States during the Cuban revolution were morally legitimate, as was the heroic effort of Irena Sendler to smuggle Jewish children out of the Warsaw Ghetto in 1942.

“The Humanitarian Dilemma,” by Alvaro Vargas Llosa (11/14/07) Spanish Translation

Liberty for Latin America: How to Undo Five Hundred Years of State Oppression, by Alvaro Vargas Llosa

The Che Guevara Myth and the Future of Liberty, by Alvaro Vargas Llosa

El Independent—the Independent Institute’s Spanish-language website and blog. As of 10/31, it has 5,463 posts and 473,509 visitors!

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4) Privatizing Dispute Adjudication

Must conflicts be settled by the state, or would non-state institutions be up to the task?

In “Privatizing the Adjudication of Disputes” (Independent Institute Working Paper #69), economists Bryan Caplan and Edward P. Stringham (editor of Anarchy and the Law) discuss some of the problems of public judicial systems and some advantages of private dispute resolution. Arbitration, the law merchant, and trade associations, they argue, are often inherently able to outperform government courts, which have a weak customer-service orientation, lack a pricing mechanism, and are overburdened with nuisance suits.

“Private dispute resolution is not flawless, but it works surprisingly well,” write Caplan and Stringham. “Scholars are usually too quick to dismiss private courts on the grounds of market failure, without first considering the magnitude of the market failure, or whether the government could realistically do any better.”

What are the public-policy implications? Government policy should lift obstacles that impede arbitration, Caplan and Stringham continue. “Public courts should, as a matter of policy, respect contracts that specify final and binding arbitration. Legislatures should abolish laws that hamper ostracism, boycott, and other non-violent private enforcement methods. These small changes would make private courts much more attractive than they already are—and go a long way toward putting public courts out of business.”

“Privatizing the Adjudication of Disputes,” by Bryan Caplan and Edward P. Stringham (Independent Institute Working Paper #69)

Anarchy and the Law: The Political Economy of Choice, edited by Edward P. Stringham

“As the marvelous book Anarchy and the Law demonstrates, a rich intellectual tradition on the desirability and workings of private-property, non-state legal systems stretches back to the mid-nineteenth century. Henceforth, ignorance will be no excuse.”
—Robert Higgs, author, Crisis and Leviathan, Against Leviathan and Depression, War and Cold War

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