Liberalism is the best Cure for Poverty - Dirk

Verhofstadt

In his book World Poverty and Human Rights, philosopher Thomas Pogge
states that Despite a high and growing global average income, billions of
human beings are still condemned to lifelong severe poverty, with all its
attendant evils of low life expectancy, social exclusion, illiteracy and
effective enslavement. This growing gap is a danger. In his book Jihad
versus McWorld Benjamin Barber explains this danger very sharp. If
justice cannot be shared equally, injustice will be imposed equally. How
can we reduce poverty and create welfare in poor countries? This is the
central question of this Conference.

Today I want to make clear that liberalism can bring solutions to todays
economic and social problems. It is my firm conviction we need more
liberalism to counter poverty. Stating we need more liberalism may sound
astonishing. One may think that todays globalization can be seen as
liberal evolution. A lot of people believe that problems like poverty,
inequality of income, unemployment, pollution and the disappearance of
cultural diversity are the result of liberalism and free market economy.
That is not correct. My statement is that today there is no liberal political
awareness, that today there is no free trade, and that this is the reason
why we are confronted with all those problems.

First of all I want to make clear what liberalism means. The term
liberalism is often abused. Politicians like Ronald Reagan and Margareth
Thatcher appealed to ideas from classical liberal thinkers but their political
acts were everything but liberal. It is even the case today. Vladimir
Zjirinofsky is the president of the Liberal Party in Russia but in fact he is
an extreme nationalist. Jorg Hader is the leader from the Freedomsparty,
but in fact he is a racist. Slavoj Zizek was presidential candidate for the
Liberal Party in Slovenia but in fact he is a Marxist. These are only a few
examples of people who act in the name of liberalism but they have
nothing to do with it. At most they use or abuse certain elements of
liberalism to give their own conservatism, nationalism, racism or
egocentrism a smell of dignity and cultivation. But this is for me no
reason not to use the term liberalism anymore. I want to keep liberalism -
with al its outstanding social and human values - out of the hands of
those who misuse it. For the same reason I resist to adjectives or
additions as there are leftist liberalism, neo liberalism, libertarianism and
so on.

Liberalism is based on individualism, another concept that often is

misused. Some people say that individualism is the same as egoism but I
couldnt disagree more. In fact, individualism is a special positive power
allowing people to determine their destiny themselves. Individualism
leads to self-development and emancipation. It is correct that
individualism goes hand in hand with self-interest, but there is nothing
wrong with that. Self-interest is the source of prosperity and
development. However individualism is more than self-interest. It is a
never-ending process towards liberty and self-fulfillment. For the citizen it
is also a process of adaptation to social behaviour. Individualism is not an
obstacle, but a condition for true solidarity. In his book On Liberty John
Stuart Mill wrote: Over himself, over his own body and mind, the
individual is sovereign. Starting from this definition, individualism may
not be tempered, but on the contrary, must be encouraged, especially in
those communities where people are suppressed due to religious, social
or cultural traditions.

Here we come to the most important distinction between liberalism and

the other ideologies. Only liberalism beliefs in individualism, in freedom
and the autonomy of the individual. Therefore it stands against each form
of collectivism, nationalism or traditionalism in which men are inferior to
the community, the collective morality or the nation. It is clear that
liberalism has nothing to do with socialism, conservatism or nationalism.
Liberalism and individualism are without any doubt the most successful
thoughts in history. They are the driving forces of anti dogmatic thinking.
Liberal thinkers such as John Locke, Adam Smith and John Stuart Mill
elaborated the importance of the individual and his freedom. But it was
Immanuel Kant the father of Enlightenment who acknowledged very
clearly the interest of individualism and liberal thinking. His central idea
was Sapere Aude, Dare to use your own sense. He made clear that every
human being is not a tool, but a goal. He defended the categorical
imperative Act only according to that maxim by which you can at the
same time will that it would become a universal law. In other words, each
human being has the duty to care for his fellow humans.

During history, liberalism and individualism increased with lots of ups and
downs. Think about the twentieth century. Think about nationalism and
the First World War making humans suborbinate to the national
community. Think about communism threating man as an object, a tool
that could be switch on or off, used or throwed away. In order to achieve
the ideal equalized society, communist leaders such as Stalin, Mao and
Pol Pot drove millions of people into death. Think about Fascism making
humans suborbinate to the will of the Fhrer. People who would not fit into
the system were destroyed as happened with dissidents, phisical and
mental handicapped persons, gypsies and jews. Think about fanatic
religious communities in which people were submitted to holy texts. Even
today millions of people, mostly women, are suppressed in the name of
God or Allah.

Only liberalism fights this. The fight against nationalism, communism,

fascism and religious fanatism. And the fight is successfull. With the
impuls of the liberal aspiration for freedom and justice, universal human
rights were accepted, abuses condemned, dictatorships eliminated. The
idea that we are not born Belgian, German or American, but as citizen of
the world with a number of untouchable rights and liberties. Since the
sixties in the Western hemisphere, liberalism provided more freedom,
allowing us to have our own lives more under our own control. 1968 was
a crucial year. Some intellectuals consider May 68 as a failure, as an
upsurge of leftist and rebellious youngsters who sympathized with
collectivist ideas. Those who examinated this period carefull see that it
meant the final breakthrough of individualism and liberal values
throughout all strata of society. Look at the civil rights movement, the
feminist movement and later on the gay rights movement. So many
taboos disappeared during those years. Here lies the basis of
secularization, the fall of the sociopolitical blocks, tolerance, rights of
men, the equality of the sexes, antiracism and above all individual
freedom.

During the past decades liberalism was also succesfull on the economic
field. Until the eighties socialist parties and politicians supported
collectivism, nationalizations and a greater impact of the state on the
economy. That Keneysian thinking led to a fat state, an ineffective
bureaucracy, a lack of creativity, high unemployment and huge depts.
Such depts that in the next twenty years we and even our children will
have to pay them off. Today most socialist parties transformed
themselves into social-democratic parties and accept free trade as the
best system to create welfare. Under impulse of liberalism Western
governments stopped subsidizing loss-making branches of the industry
like coal and textile. They slimmed down their bureaucraties. They
abolished unnecessary rules. They privatized branches like telecom and
aviation. They all became more orthodox on the budget. I realise that
some of these transformations are to slow, that there are still to many
bureaucratic rules and that we need more adaptations to keep our
economies competitive. Social-democrats and conservatives are still in
the grip of unions and other pressuregroups. They refuse or postpone
necessary measures and forget that the best way to protect our social
system is a good working economy. So we have to go on and convince
others of the necessity of further liberal reforms in order to make the
state more efficint.

Some even prefer to go much further. They not only want to remove the
fat from state, but they also wish to dismantle the state, even in its most
essential tasks. They call themselves neoliberals or libertarians. This leads
to marketfundamentalism. In contrast to Karl Poppers warning that we
may not accept dogmas, they have a blind believe in absolute freedom,
absolute property rights and in the absolute free market. Since the fall of
the Berlin Wall and the thesis of the The end of history of Francis
Fukuyama, neoliberals and libertarians consider free market as a sort of
scientific certainty. Liberals never followed this dogmatic concept because
they understand that besides freedom also justice is necessary for a
better society. Liberals never adored the absolute freedom because they
know that absolute freedom frequently causes negative effects for fellow
humans and the whole society. Liberals refuse to submit themselves to
blind capitalism because extreme selfishness can hurt society and hamper
opportunities for fellow humans.

Neoliberals and libertarians see the state as an ennemy. They reject the
ideas of actual liberal thinkers as there are Amartya Sen, Fernando
Savater, Hernando de Soto and Martha Nussbaum who prooved, each in
their way, that a good organised state, with reliable education, an efficint
social security and an effective legal system are necessary to give people
the opportunity to live a fulfilling live. The notion absolute freedom is
false. Its like putting someone in the middle of the desert and saying you
are free. There you are, without any protection, without drinking water,
without compass. Ill, older and handicapped people need tools to practice
their freedom. Children need reliable education to receive the knowledge
and capacities to make their own descisions in their later life. People
needs an effective legal system, not only for the protection of their
property and personal rights, but also to protect their human dignity. As
Martha Nussbaum says, an efficint state is necessary for people without
fundamental capabilities to maximize their right on self-determination.

In fact there is a deep gap between liberalism and libertarianism.

Libertarians narrow the liberal notion of justice to lawfullness. They hold a
plea for a minimal state, only taking care of protection of propertyrights
and acts against violence. Some of them even plea for no state at all.
They want the privatization of everything, even jurisdiction. In any case
they reject redistribution by the state. Redistribution is a form of theft,
said Robert Nozick. The hungry, homeless and diprived people can not
make an appeal to the government. Possibly fellow citizens can give
something to the poor, but this is not an obligation and neither is it a task
for the state. This leads to egoism, paternalism and the exploitation of
fellow humans and nature. The libertarian ideas would lead to the
dismantling of public services, such as education, social security and
infrastructure. This is at right angles to the social and human values of
liberalism.

Liberals dont agree. For an open society, a week state can be as

dangereous as an authoritarian state. Justice cannot be reduced to
individual freedom and property. Every person has a duty towards his
fellow humans. The sick, the elder and the handicapped may not be
handed over to the goodwill of others. They must be helped by a system
of redistribution. Its the only way for all people to determine their own
destiny. According to Kant the concept of freedom is hiding a duty: Du
Kannst, denn Du Sollst. In contrast with libertarians, liberals realize that
we have to support and help fellow humans, even if they do not belong to
our society. Not alone out of charity but also structural. Trough an
efficient state.

All of this seems theoretical, but hurricane Katrina made it real and so
much clear. America knew long in advance about the impact of the
disastre. On August 25 four days before the disastre the authorities
were informed by scientists about the probable consequences of the
hurricane. Nobody reacted. The federal government relied on the own
capacity of citizens to face a hurricane. According to them it was not
necessary to send extra doctors, nurses, policemen, firemen or bus
drivers. When Katrina hit New Orleans on August 28, nobody was
prepared. Presdent Bush stayed a few more days on holiday. Only five
days later, on September 2, he visited the disaster area. Meanwhile
thousands of victims were crying for help. What we saw on television was
a powerless state leaving their citizens in the cold. Disastrous pictures
which diserve only one classification: inhuman!

Katrina proved in one deafening bang the lack of state in the United
States. Soldiers were not available because most of them were fighting in
Irak. The budget to reinforce the dykes and the banks was cut back.
Hospitals did not have the disposals for the necessary medication. Some
tens of thousands refugees, including mothers with babies, children,
senior citizens and sick people waited several days in the open air to
rescue them from this nightmare. The lack of state was visible by the
total anarchy in the abandonned city where looting became normal. The
poor from New Orleans felt abandonned. I admit that the Bush
administration does not follow the libertarian minimal or no-state ideas.
Bush follows a neo conservative policy in ethical issues and a neoliberal
policy in economic issues. Bush spend a lot of money for the war in Irak
and the fight against terror, but he cut in public services like education,
social security and infrastructure. By doing this he acted as an enemy of
the state.

For liberals the state is not the enemy. They dont want a fat state but an
efficient state as a vital instrument to provide freedom, justice and
protection. Liberals follow The Theory of Justice from the American
philosopher John Rawls. He demonstrated that people are able to combine
freedom and justice in a rational way. In order to come to an effective
social justice Rawls uses a thought experiment. He starts from an initial
position whereby people find themselves hidden under a veil of ignorance.
He asks everyone to try and imagine how he would see social cooperation
and distribution of means if he were to find himself in an original position
not knowing whether he is rich or poor, black or white, man or woman,
healthy or ailing, etc. Following this train of thought man will always take
into account the potential situation in which he will necessarily have to
appeal to the support of others. Freedom and justice are the keywords in
liberal thinking. In his book The Law of Peoples John Rawls extends the
idea of a social contract to the Society of Peoples and lays out the general
principles that can and should be accepted by societies as the standard
for regulating their behavior toward one another. So we come to
liberalism as the best Cure fot Poverty.

Experts from IMF and the WTO who follow the so-called Washington
consensus tell us that globalization will automatically lead to more
prosperity in all countries opening their borders for unconditional free
trade development. Anti-globalist movements pretend that globalization,
as we know it today, will increase the existing problems in the lesser rich
countries. Anti-globalists position themselves against a free market and in
favor of a stronger grip on the national and international economies by
governments. My perception is that both are wrong. Neither neo-marxist
anti-globalists, nor neo-liberal market fundamentalists offer satisfactory
solutions for less developed countries. Anti-globalists ask for new forms of
nationalization, for subsidies and price controls. They claim to be the
protectors of the poor while most of them protect particular interests.
Most unions claim for more rules on multinationals. But by imposing high
labor and environmental standards they extinguish the competitive
advantages of small countri es. On the other hand, market
fundamentalists expect immediate and positive results from privatization
and deregulation. They seem to forget that a free and liberal world means
more than just economic freedom. Let me quote the Peruvian writer Mario
Vargas Llosa: development, the progress of civilization must be
simultaneously economic, political, cultural, and even ethical.

In his book In Defence of Global Capitalism the Swedish author Johan

Norberg proved that countries implementing a free market develop more
prosperity than countries protecting their markets, that economic freedom
extends average life expectancy, that economic freedom fights corruption,
that economic growth decreases poverty, that also poor people get a
benefit out of growth and that progress is good for the environment.
These are no fake allegations but reality. Countries opening up their
borders to free trade are growing faster than those protecting their
economy. Around 1820 poverty was spread fairly evenly throughout most
countries. Then the industrial revolution took root, first in Great-Britain,
later in Germany, and the other Western countries. It didnt take long
before these countries started to prosper. In the second half of the 20th
century countries such as Japan, Taiwan, Singapore, Hong Kong, Malaysia
and South-Korea joined the worldeconomy and reached a high level of
welfare in a short period. Today China, Vietnam, India and Chile are
catching up very fast. Only countries steering a protectionist course are
lagging behind and are still experiencing widespread poverty. All these
examples go against the predictions of antiglobalist theories. Norbergs
analyses not only unmasks the myth. It shows the potential for free trade
to be a solution to many difficult problems in extremely poor countries. To
make it clear: problems, correctly considered as important by
antiglobalist movements can be fought by the system they refuse the
most: a free market economy and a liberal democracy.

Liberalism does not mean that government should disappear for

privatization. The efficiency of government is absolutely necessary for the
creation of conditions and guidelines for fair competition between people
and countries. Governments have tasks and responsibilities which cannot
be taken over by private companies or organizations. If the goal is a free
and fair society, politicians should pay attention to this and to five key
elements: democracy, education, a real free market, right of ownership
and international cooperation.

Democracy is essential for the freedom and development of mankind. A

democratic legal order is the best system to maintain as much individual
freedom as possible allowing access to prosperity for as many people as
possible. The past has proven that the political systems supported today
by most leftist antiglobalists are not efficient. One only has to remember
the social, economical and ecological damages brought to ex-communist
countries and to socialistic peoples republics. Democracy is the only
system whereby rulers have to report to the representatives of the
people. Their political continuity depends on the result of elections. In his
book Development as Freedom the Indian Nobel Prize winner Amartya
Sen found out that there is no famine in democratic countries. The most
terrible famine-stricken period out of our contemporary history happened
in China between 1958 and 1961. The result of the ruling planned
economy implemented by the communist central government. 30 million
Chinese died. From the beginning Mao refused to acknowledge this
catastrophe, and continued to believe in his dogmatic rule. There was no
democratic opposition, no freedom of press. The government was being
mislead by the propaganda of local party officials who tried to save their
job and disguised what was really happening. The essence of democracy
is the presence of counterforce obliging political leaders to take up
responsibility.

A second element is making education available to everybody. In my

opinion, this is essential for further development of poor countries.
Education, research and development are the real gates to the future.
Developing countries need a labour force able to compete in the global
economy in skills and therefore in productivity. Better educated labour
forces will encourage multinationals to invest more in poor countries.
Personally I belief it is the governments task to make sure that education
reaches also the poor. Therefore I support public programs as Bolsa-
Escola, a scholarship program for the poorest families. It allows their
children to replace the hardness of working by the hope of learning in
school. 20 million children benefited from Bolsa-Escola programs in Latin
America in last years.
A third essential element is to impose a real free market. Liberals support
privatization. But they do not accept that public monopolies are turned
into private monopolies in order to enrich a particular industry, company
or person. Liberals support deregulation. But they do not accept the law
of the jungle, the exploitation of people or the dismantlement of a basic
social protective system. Liberals support a smaller state, but dont want
the government to withdraw from all fields of public life. An efficient state
is necessary to strengthen its legal system in order to protect property
rights and contracts, to provide security and freedom, to fight
monopolies, trusts, cartels and corruption. Most of the time liberalism
never delivered prosperity, simply because in most countries liberalism
never existed. The problems in the world are not due to too much
liberalism, but to a lack of liberalism. The lack of opportunities for people
in poor countries is, for the major part, due to protectionism in rich
countries. Unions, employers organizations, agricultural confederations
and their political friends consider their own interests more important
than the public interest. Different from pressure groups - which in Europe
are mostly linked to socialist or conservative political parties - liberals
reject each form of protectionism.

The most important protectionists are the United States, the European
Union and Japan. Every year they subsidize their economies with billion of
dollars, euros and yens. They protect their own companies, they close
their markets for import from poor countries and above all they allocate
export subsidies to dump their over-production on to the world market.
This policy of the rich countries is not liberal but protectionist. They do
not implement a free market policy, they obstruct it. They apply import
taxes on food, textile and steel, damaging other countries. Protectionism
disrupts local markets in poor countries and keep local workers in
poverty. Antiglobalists are wrong. Actually liberal free trade does not
exist, only market disturbing protectionism. Protectionism is a continuing
tragedy, causing unnecessary hunger and disease. According to Johan
Norberg protectionism may lead to even bigger problems in the future. He
says: We in the West used to tell the developing countries about the
benefits of the free market. And we promised wealth and progress would
certainly come if they changed and adopted our ways. Many did, only to
find that our markets are closed to them.

A fourth liberal tool to reduce worldwide poverty is the attribution and

protection of the right of ownership, especially in poor countries. During
decades socialist thinkers explained and even fooled the poor by stating
that collectivism and nationalizations would solve their problems, but it
always failed. Peruvian researcher Hernando de Soto demonstrated that
just this policy was pernicious for the creation of welfare. Millions of
migrants established themselves in the slums around big cities, in the
favelas, the bidonvilles, the shawnty towns. Automatically they enter a
world without any official legislation. They have their own social rules,
which in no means mean that they are not active. On the contrary.
Nowhere else is there so much activity and entrepreneurship than among
poor people. And poor people do not only work for and amongst poor
people. They also fill gaps in the legal economy. They drive taxis without
licenses, they take on jobs in hotels and restaurants. They do
construction work. They take on jobs in illegal shops. This leads to De
Sotos surprising conclusion that the illegal or unofficial world is the norm.
His conclusion is not only surprising but important: the poor are not the
problem, they are the solution. Give the millions of people who lives in
the slums the opportunity to convert their poor properties into
economically usable assets. Give them the opportunity to start up a
business easily. Simplify the acquisition of properties and estates.
Property means economic potential. Bringing the poor into a legal
environment would lead to an enormous accumulation of welfare. A
multiple of all the development assistance. Does this mean we should
stop development assistance? Not at all. We not only have the duty to
help the poor, the sick and the older in our own societies but also the
weak in the rest of the world. Money must be used more efficiently and
end up with the people and not with corrupt regimes and their leaders.
According to Amartya Sen, development assistance must go to education,
health care and basic infrastructure of the poor state.

Finally we need more democracy in the international organizations. Its

absolutely necessary that the different regions in the world get more
influence in world policy. The composition of the Security Council of the
United Nations is not longer acceptable. As you know the US, Russia,
China, the United Kingdom and France are the permanent members of
this Council. We need a better balance and representation. Why cant we
accept a Council with one representative from North America, Europe,
Africa, Russia, the Arabic world, China, India, South East Asia and Latin
America? Representatives of the different regions in the world should also
be involved in other international organizations such as the World Bank,
IMF and WTO. Today those organizations work to much as an extension of
the economic and financial interests of the United States and Wall Street.

To conclude I would like to give my opinion about a case in which liberals

should take the lead for the benefit of millions of poor and unprotected
people. I am talking about the further enlargement of the European Union
and the candidacy of Turkey. According to my Kantian way of thinking
and my plea for individualism my concern does not go to Turkey as a
country. My concern goes to the individual Turk, to the individual Kurd, to
the individual Armenian, and so on. My concern goes to individuals who
hope for a better future and especially for the final protection of their
rights and freedoms in the European jurisdiction. As Europeans and
citizens of the world we have the duty to give those people a perspective.
The perspective to enter into the great European family in a few years. A
family in which their children will find peace and welfare.

I realize that the European Union needs urgent deepening, a more

transparent and democratic way of acting. But this cannot be an excuse
to draw a final line. The European Union is not based on a common
language, religion or history. It came from the free and resolute will from
people who understood that we could only maintain peace by connecting
our destiny and by sacrificing small pieces of our national sovereignty to a
higher interest. Democracy, human rights and a free market economy are
the common values of it. In this sense Europe is a universal project. Let
me quote Jean Monnet, one of the Founding Fathers of the European
Community: We are not forming coalitions of states, we are uniting men.
The shortage of a clear and common identity is not a lack but on the
contrary an advantage. This is an important difference with European
nationalists and conservatives who wish to keep the historic Avondland.
They frighten people and plea for a return to the classic nation states. The
worst thing we can do with regard to the Turks, but also to the Bulgars,
the Roumanians, the Ukrainians, the White Russians and so on, is
definitely closing the door and blowing up all perspectives. It is my
personal conviction that the absence of perspective is the breeding
ground for fanaticism and terrorism. As long as people have a
perspective, they have hope and turn away from extremists. Take away
any perspective and you give fanatics the possibility to spread their
pernicious ideas.

The title of one of my books is Human Liberalism. It elected immediately

the question if there is something like inhuman liberalism. I dont believe
so. I wanted to make clear that in liberalism the human being stands
central and nothing else. Not profit, not the economy, not the state, not
the nation, not a race. Only the human being and his freedom to make his
own choices. We need more liberalism, more concrete measures leading
to more freedom, more emancipation, more opportunities for the
individual, more welfare for fellow humans here and in the rest of the
world.
Dirk Verhofstadt
Dirk Verhofstadt

Lecture from Dirk Verhofstadt at the Conference on Development in

Brussels, October 17, 2005

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