In a New York Times letter-to-the-editor entitled Trading Away Poverty, Ignacio Sosa writes that free markets and trade can do more to fight poverty than donations to large organizations such as the World Bank.
I agree completely. Of course, we can both trade with and donate to poor communities. The two methods do not exclude each other.
Nonetheless, large donations do not usually help people or communities become self-sufficient. Donations often only provide temporary relief to the symptoms of poverty, and they can undermine local markets and increase dependency. To permanently escape poverty, poor people and poor communities need to develop economically so that they can become self-sufficient.
For example, the United States could do more to relieve Mexican poverty by reducing border restrictions. This would allow workers from the labor-intensive country of Mexico to immigrate to the United States, and investors from the capital-intensive country of the United States to invest in Mexico’s labor-intensive economy. This would create a win-win situation for both countries, in that each economy would get what it demands by voluntarily trading away what it has in excess.
Truly free markets allow for mutually beneficial agreements and trades, which leads to economic development and reductions in poverty.