The other day the New York Times posted an article “Growth Has Been Good for Decades. So Why Hasnâ€™t Poverty Declined?” that began
The surest way to fight poverty is to achieve stronger economic growth. That, anyway, is a view embedded in the thinking of a lot of politicians and economists.
â€œThe federal government,â€ Paul Ryan, the House Budget Committee chairman, wrote in The Wall Street Journal, â€œneeds to remember that the best anti-poverty program is economic growth,â€ which is not so different from the argument put forth by John F. Kennedy (in a somewhat different context) that â€œa rising tide lifts all boats.â€
Longtime blog readers will identify “a rising tide lifts all boats” as a mental model that people apply to the economy. I advocate using models, which we can’t help using anyway, but not blindly. I recommend choosing them based on their results. Applying the boat-tide model to the economy doesn’t improve people’s lives or understanding of how growth, say in the GDP, relates to poverty.
Growth describes the size of the economy. Poverty describes distribution. While size and distribution may correlate long enough that people start to believe they causally relate, they don’t have to.
“A rising tide lifts all boats” is a nice belief and correct for many boats and tides, but there’s no reason to believe that what holds for boats holds for economies, any more than the behavior of dominoes held for Southeast Asian countries, to choose another nice belief many disastrously applied to insufficient criticism.
For that matter, it doesn’t hold for all boats. A big enough tide could completely submerge a boat firmly enough anchored to the sea floor, for example. At the risk of lending any legitimacy to the idea of continuing to apply the tide-boat model to the economy, it fails on so many levels I feel it should embarrass anyone who accepted it without debate. The following points about tides undermine the idea that economic growth should correlate with lowering poverty. You can decide for yourself what these points imply about economies.
- Tides rise and fall globally, but they differ widely in size in different places. Some places see huge tides, some see almost none. A little web research just showed me that tides have tidal nodes, points with zero amplitude that occur because of the Coriolis effect and interference within oceanic basins, seas and bays. So boats at some points don’t rise with the tide.
- Tides don’t rise forever. They fall too.
- Some tides rise so fast they could damage an unprotected boat near a dock or shore.
- You could engineer dams, levees, etc to funnel the water of a tide to lift some boats while not allowing it to lift others.
Do you think it’s possible that we’ve created ways for a rising GDP to help some people while not helping others, or even at the expense of others?
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