Joseph E . Keckeissen The Calases off Third World Poverty INTRODUCTION It is very important for the leaders of our Third World countries to understand the root causes of our poverty , if we are ever to be able to rise to the status of prosperous peoples . This article attempts to summarize the reasons for our backwardness . There are various aspects from which to study the causes of poverty , some of which pertain to the field of moráis ( like the d^eneration of the family or the addiction to drugs ); others to the required preconditions of legal maturity and domestic tranquillity , which are the realm of politics ; and still others which are the domain of economics . In this essay we limit ourselves to the economic causes , retaining a sympathetic ear to the moralists , sociologists , and political scientists , who deal with other vital aspects of the problem of poverty . Joseph E . Keckeissen , graduado de Columbia University ( MBA ) y de New York University ( Ph . D ., 1976 ), fue durante muchos años catedrático de economía en la Universidad Francisco Marroquín , y actualmente enseña en la UFM — Extensión Quetzaltenango . But evaí in the economic field there circuíate both " false " causes , which are those generally heralded in the press and the political dialogue , and " real " causes , which are most often discounted . Let us begin enumerating some of the false FALSE CAUSES OF POVERTY Poverty is not caused by insuffident natural resources or limited national territory , or by high levéis of illiteracy or lack of technical preparation . Ñor is the cause the presence of multi -national companies that sdl powdered milk , cola formulas , or gasoline to worldwide markets . It is not the fact that some folks ( or companies ) are rich that accounts for the misery of the poor , or that the gap between them might be widoiing . It is not greed or speculation that is the culprit . It is not because govemments ( either local or remote ) are insensitive to the realities of poverty and have not done the " required macroeconomic planning " or initiated sufficient development projects or funded huge sums of money . Laissez - Paire 33

It is not because of the very unequal distribution of resources , that permits a small handful of the world population to absorb the lion's share of its wealth , income , production , or whatever . It is not because advanced countries consume too much and distribute too httle . It is not because of the heavy burden of debt , foreign and domestic , that saddles many a struggling nation , or the déficit in its balance of payments . Ñor is it because the national curroicy is weakened or " attacked " or devalued . It is not because a govemment is insolvoit , ñor is it due to inefficiency , thievery , or whatever reason . It is not even true that rich countries get high prices for their elabórate products and that poor countries have to be satisfied with low prices for their unelaborated " rawmaterials ". Ñor could it be true that capitalism is the villain , especially in those áreas in vÁúch premodem or socialist systems prevail . The causes of poverty lie elsewhere . There are two , progress-impeding economic structures and povertyperpetuating attitudes . If we don't identify and then corred these , little will be accomplished to créate prosperity , no matter how much time , resources , money , preoccupation , hand-wringing , or preaching we dedicate to the solution of the poverty problem . PROGRESS-IMPEDING ECONOMIC STRUCTURES Poverty is the resultant of a defective economic structure . The different growth-refraining structures can be listed as pre-modemist , mercantilist , interventionist , and domestic-oriented . We exelude the socialist and communist models from this discussion , although the interventionist model usually contains many of their retardatory features . It is to be noted al so that all modem structures contain mixtures of the various types ; no single model is exclusive in any country . Improving some of the above factors might make things a little better but , in some cases , might even worsen them . The truth is that the practical solution to poverty does not rest with patemalistic employers , victorious unions , govemment fimding , land redistribution , supertechnology , universal education , UN . supervised democratic elections , populist politicians , debt forgiveness , Worid Bank grants , or intemational summits . It has nothing to do with sensitivity or largesse . Ñor with the people's struggle for anything . It does not result from bearing grave fínancial sacrifíces . Ñor does it depend upon just plain good luck . Pre-modernist Structure The pre-modemist or semi-feudalist structure hearkens back to the Middle Ages , wh « i Ufe was considered a continuously repetitive struggle , and there was little or no notion of progress . It is characteristic of labor-intensive agricultural production that has little división of labor . It can consist either of small pareéis , where individual families produce traditional crops for self- consumption and for local markets , without modem technology and equipment , and often with the obligation of paying some form of tithe to fíef or landlord . Or it can consist , as in Laissez - Faire 34

the colonial epodi , of large plantation-type agriculture , producing crops for intemational markets under conditions reminisc « it of slave labor . In either case , the workers are practically wedded to the local soil , in isolation from modem industry and the amaiities available in world markets . Theirs is a monotonous existence that afFords little incentive for self-betterment and promotes the continuous emigration of illiterate serfs from the rural communities to the capital cities and the outside world . A very high rqjroductive rate usually exacerbates these effects . Puré feudalism does not exist as such and is gradually disappearing . However , its vestiges still remain and serve to in^ede the agricultural prosperty that is so necessary for third-world progress . Some factors causing the feudalist structure to disappear and to converge into modem structures are , briefly : in the case of the small agriculturist , the direct access of cash crops to intemational markets and to capital and technology improvements ( like fertilizers , irrigation , pickup trucks ); in the case of the plantations , modemization results from the creation of processing plants that refine the agricultural produce into forms saleable in world wholesale and consumer markets , the consequent technification and specialization of the workers , and incaitive-creating systems of remuneration , which are directly geared to output production . All of the above signal gradual exodus from poverty status and admittance into a more humane mode of modem existence . Mercantilist Structure The oíd mercantilism ( 1600's to 1700's ) was characterized by the practice of the newly emerging centralized states ( England , Spain , France , Holland ) to control their national industry and commerce . They did this by granting unique privileges to individual companies to produce and distribute specified products . And they attempted to protect these companies by every sort of exclusión , tarifiF , and subsidy . The continuation of many mercantilist practices dominates the industrial and commercial structure of many underdeveloped countries . Exclusivism and privilege limit entrance to many markets , thus preventing the growth of cost-cutting competition . The law shelters these artificial monopolies from intrusión by others . The result is markets serving a limited number of high-priced products to a very reduced diéntele , thus favoring only the already well-to-do sectors and eliminating the masses from participation in the benefits ( quality and price ) of world commerce . In the domestic market the national entrepreneurs can raise the prices of their tariff-protected products , and thus can sell inferior substitute goods at higher than worid cost ; but these same high costs serve to bar them from participating in world commerce . Interventionist Structure The growth of govemment interventionism is one of the great causes of poverty . Interventionism is responsible for the many poverty-creating structures set up within govemment , in the form of múltiple ministries and departments with Laissez - Faire 35

seemingly unlimited agenda . These are directed by well-intended but inefficient bureaucrats , who are responsible for imposing an infinite array of complicated and overlapping programs , regulations , eligibility requirements , prohibitions , reporting rules , accounting burdens , and arbitrary decisions upon the citizairy and upon the productive enterprises of a nation . The administrative cost of this regulative burden cx ) ntributes enormously to the countrys uncontrolled déficit , and results , as often as not , in most dubious benefits to the hamstrung public , that is forced , under pain of fine or imprisonment , either to comply or to make the illegal payofFs that some unscrupulous public servants extort . The underground market , which enjoys no legal sanction or protection , arises because of the inability of most small producers to comply with the multiplicity of arbitrary requirements and payoffs the law imposes upon them . The conviction that govemment should be unlimited in its obligations towards its citizens , and thus directly responsible for their health , education , housing , oíd age , and even recreation , has contributed greatly to this problem of intervaitionism . Very few services escape this direct tutelage . The state bureaucracy has added greatly to the inefficiency and high cost of the most essential services and is responsible for the dq ) lorable unavailability of the latter . The bottom line is that , even after the outlay of huge social expenditures , the population never seems to be able to surmount the poverty of the past and the demoralization the system often creates . The further conviction that govemmait has immediate r^ulatory responsibility over prívate business and banking activity has produced an unsupportable restraint upon the productivity of a nation . The notion that it is the duty of the govemment to intervene for the protection of consumers , workers , and investors , that it must r^ulate in detail pnces , wages , and interest rates , that it must be the first-line policeman of all market activity , has created an overbearing ( and inefFective ) supercontrol that tends to shackle business initiative and efficiaicy , and impede the consequent eamings that foster economic growth . It impoveríshes much more than it protects . It creates insecurity rather than prosperity . It refrains rather than stimulates . In addition , the mercantilist countríes generally intervaie to nationalize the industries most essential for growth , like Communications , aiergy , transportation . Most of them have only one nationalized airline , telqahone company , electric company , among others . The result is even more bureaucratic inefficiency , waste , and enrichment of public servants , with the corresponding déficits and debt . Central America , for example , urgently needs millions of more telephones , which the nationalized companies are incapable of providing and servicing . Another diaracteristic of interventionism lies in the attempt of a nation to control its monetary unit by means of a variety of policies directed by its central bank . The latter is considered the guardián of the currency . But in the ftitile attempt to finance excessive govemmoit expenditures , to amass intemational reserves , to regúlate prices , and to protect the overvalued national currency , the bank destroys the monetary unit , distorts the economy , and incurs sizeable déficits . This is most often due to the lack of a sound monetary discipline and the political tampering with the money creation Laissez - Faire 36