hjmann.com Blog

As you may know I am a contributor to SeekingAlpha.com. I also belong to their contributor forum on LinkedIn.com. On the forum members pose questions and have discussions on a myriad of topics. Recently the following question was posed: What are we running out of?

There were two comments. The first was by McDowell centered on the necessity of transferring wealth from the rich to the poor and the necessity of this to keeping the global economy at large robust. The second by Bloor simply stated that there is a lack of basic services such as water. My reply below:

Dirk– Bloor is correct. In the developed world, the constraints are more practical, such as basic services lagging population or consumption spikes. As an example, I live in Dallas, and when I first moved here in 2000, 8 of the top 50 fastest growing American cities were in the suburbs of Dallas. It was slow getting everything from telephone service to finding a doctor who was taking new patients (I ended up commuting two towns over for a doctor). With the DFW area adding 150000 new residents in 2008 and an even greater number expected for 2009, this trend will continue. And I predict that within 15 years the two biggest problems facing North Texas will be gridlock and lack of drinking water– all this population being added and we have not added any new sources of water– and it takes about 25 years to build a lake for such a purpose.

In the developing world, the constraints are similar, but more basic, such as no access to clean water. But there, the constraints are truly manifest because there is no genuine infrastructure at all. No infrastructure will come to these places until there is rule of law–  basic guarantees against the violation of property rights without due process. And who will invest in these places until such certainty exists?

I could not disagree more with Mr. McDowell’s assertion that simply giving money is the answer. I have my own theories about the failures of Socialism that I will save for another time, and simply counter that hundreds of billions if not trillions of dollars has been handed off to the undeveloped world in the last 60 years, and these places are as bad or even worse off than when we started handing them money. It has been a huge waste of time and resources. 

Want a novel approach? Consider that it would have been less expensive and far more effective to take that 50 years worth of money and buy a million acres of land with access to natural resources, clean water such as a river, and a warm water port.  On this land we establish a government, a constitution, and basic enforcement controls and services. We allow corporations to come in and set up shop, and literally invite people to become citizens. Over time we allow this new country to become self-governing. This would have done more to help those people and would have established a model to be replicated–flaws and all. Instead, we handed off money to corrupt thugs in exchange for tacit stability. And though I agree with McDowell that giving money to these governments does not get the money to the alleged intended recipient (I say ‘alleged’ because I believe the primary purpose of most aid money is to prop up the government of the receiving country, not to help the masses– though tacit, a little stability is viewed as better than none at all), helicoptering in the money directly to the masses would only provide temporary relief and let’s face it, is not a real solution.

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