1. Trade, Development & Sustainability
  2. Roadblocks to Development
  3. International Trade and Corporations
  4. The Debt Crisis in Developing Countries
  5. Free Trade and the Environment
  6. Trade and National Boundaries
  7. A Case Study: the Bushmeat Crisis
  8. "Sundown on the Unions"
  9. What's Wrong with Fair Trade?
  10. A Peek at the US Tariff Schedule


Roadblocks to Development*

In many 
Less Developed Countries (LDCs), most of the land is held by a small elite — sometimes only a few families — who are closely connected with the military and the government. Farmers typically rent or own small plots of land, and often must supplement their subsistence crops with income earned in commercial plantations, where coffee, bananas, and other crops are grown for export. Women are usually dominated by men, and are often not allowed to own property. Wars, civil strife and oppression have made sheer survival the main priority of many of the people in these countries, as malfunctioning economies feed political instability, which then inhibits development.

In fact, the governments of most LDCs have placed barriers against investment. High taxes, legal restrictions, complicated permit requirements, and bureaucratic procedures have stifled domestic and foreign enterprise. Often, corrupt government officials require a bribe to obtain a permit. Some governments impose costly and time-consuming visa requirements for foreign visitors, or make travel impossible.

Unemployment in any country, including the LDCs, is caused by such barriers between labor and resources. In many cases, the ruling elites of such countries are uninterested in economic development, because they stand to collect the overwhelming majority of what little wealth is produced. This is one reason why there is so much military investment, and so much repression, in these countries. The ruling elites’ main objective is not to develop their economy but to maintain their privileged status quo. Furthermore, in Eastern Europe and in some LDCs, organized crime plagues enterprise, making businesses pay protection money. The government, including members of the police and border guards, are often allied with the racketeers and share in the loot. A truly free economy cannot be established unless such crime and corruption is rooted out.

The fundamental cause of poverty is low wages at the margin of production — low productivity on the worst land being used. The solution is the "Georgist remedy" — to both increase productivity at this margin and to move the margin toward more productive land. The public collection of land rent will induce the most productive use of land, so that the margin will be at the best available unused land. The removal of taxation on labor and enterprise will then enable workers to keep the full product of their labor and will encourage investment in more productive enterprise. The removal of restrictions will also enable farmers and small business persons to obtain credit and create enterprises.

Those countries which have developed have had relatively free-market oriented policies grounded initially in land reform. Japan in the 19th century and Taiwan after 1950 removed the old aristocracy and turned land over to the farmers, combined with a substantial tax on the land rent. As Fred Harrison states in The Power in the Land (1983, p. 154), "within two decades Japan had completed the transition to modern economic growth and was ready to take on all comers!" Land rent was used to develop infrastructure, which further increased productivity and rent. Funds from agriculture were used to develop export-oriented industry.

The engine of development is the desire of people to improve their lives. Where labor has equal access to natural resources and is able to keep its product, thus having the incentive to invest much of it for future gains, development will happen. With freedom also will come a sea of foreign investment seeking the most productive fields.

And of course, those peoples who do not wish to change their way of life, particularly the primal and tribal peoples in the rain forests and the nomads of the deserts and dwellers of the Arctic — they have the right to continue their cultures unmolested by the onslaught of commercial nature-wrecking development. Human beings did not start out poor, hungry, needing development. Primal man had natural wealth from the bounty of nature. Only after humanity turned to agriculture and conquerors took the land did the brave hunter become a lowly peasant working for a wage pittance from dawn to dusk while the lord dined on wine and game hens under chandeliers. Only after the descent to serfdom does development beckon with the promise of increasing productivity. And then, unless workers are liberated from bureaucracy and taxation, and unless the yields of land are shared by the community, the road of development will be a long, hot, stony journey.


* These sections are adapted from The Science of Economics by Dr. Fred Foldvary.