The Best Ways to Fight Extreme Poverty (free trade is one of them)

By Bjørn Lomborg.

"each dollar spent ending extreme poverty with cash transfers would achieve about $5 worth of social value. That is not a bad return at all, but there are many better ways to help.

One possibility is to triple mobile broadband penetration in developing countries. This would provide small-scale businesspeople such as farmers and fishermen with market information, enabling them to sell their goods at the highest price – and to boost productivity, increase efficiency, and generate more jobs. Our research shows that the benefits, added up, would be worth $17 for every dollar spent – making it a very good development target. 

An even better intervention addresses migration. More than 200 million people today work outside their home countries. As rich countries age, they need more workers. At the same time, people from developing countries are more productive in a developed country. Easing restrictions on migration would allow young people from developing countries to expand industrialized economies’ diminishing workforces – and generate the taxes needed to pay for care for the elderly. 

Such migration would also be good for the developing countries, because migrant workers send home remittances. In total, every dollar spent on increased migration would produce more than $45 of social good – possibly more than $300. While in today’s political climate, increasing migration might be difficult to achieve, it is worth pointing out how effectively it could help the world’s poorest. 

The single development target that would have the biggest impact on global prosperity would be the completion of the Doha trade round. Lowering trade barriers would mean that all countries could focus on doing what they do best, making everyone better off. Moreover, freer trade would accelerate economic growth, owing to increased innovation and knowledge exchange. Heavy reliance on trading in a global market was one of the main reasons that South Korea has developed so rapidly and essentially eradicated its poverty in the last 65 years. 

Economic models indicate that a successful Doha round would make the global economy $11 trillion richer each year by 2030, with most of the benefits going to developing countries. Each person in the developing world would earn $1,000 more per year, on average. The number of people living in extreme poverty would fall by 160 million. For every dollar spent, mostly to pay off Western farmers blocking the current negotiations, the world would achieve more than $2,000 of benefits, making free trade a phenomenal investment."