Dr. U Myint, economic adviser to Burma President U Thein Sein, presented a paper to the “Forum on Poverty” sponsored by the Burmese government in Naypyitaw, on May 20-21, 2011. The paper is entitled “Reducing Poverty in Myanmar: the Way Forward.”
In a recent interview concerning his appointment as Chief of the Economic Advisory Unit, Dr. U Myint said:
“I welcome critics… … In this way, we can get suggestions… … They have the right to say whatever they think will benefit the country. … But they … must also say what we should do, what will be good for the country. … The real situation is understood only after hearing all views.”
In this spirit, we present a view that sharply contrasts with Dr. U Myint’s. We recommend that the country avoid launching programs to address poverty, and instead create the freedom that will bring prosperity.
We hope that the people of Burma, the organizations working for the country’s freedom, and friends of the country may benefit from this perspective.
Background
Burma’s Government
A junta has ruled the country since 1988. The junta rejected the results of an election in 1990 that was overwhelmingly won by the party led by Daw Aung San Suu Kyi. Daw Suu Kyi was awarded the Nobel Peace Prize in 1991 for her nonviolent struggle for democracy and human rights. The junta kept Daw Suu Kyi jailed or under house arrest for fifteen of the twenty-one years between 1989 and 2010.
The junta conducted what is almost universally recognized as a sham election in November 2010. The constitution created by the government reserved a quarter of the parliamentary seats for the military, and the military-supported party won almost eighty percent of the balance. The government released Daw Suu Kyi from house arrest days after the election. In February 2011, the parliament named former general and outgoing prime minister U Thein Sein as president.
Political and Civil Freedom in Burma
Freedom House’s Freedom in the World 2011 ranks Burma as “Not Free.” Freedom House’s report on Burma recounts the sad history of government repression and abuse, including the use of military force against protesters and the imprisonment of political dissidents.
Freedom House’s “Freedom on the Net 2011,” analyzing Internet freedom in thirty-seven countries, ranks Burma as the second worst, behind only Iran. The report observes:
“The government uses a wide range of means to restrict internet freedom, including legal and regulatory barriers, infrastructural and technical constraints, and coercive measures such as intimidation and lengthy prison sentences.”
Economic Freedom in Burma
The Heritage Foundation/Wall Street Journal’s 2011 Index of Economic Freedom ranks Burma as among the least free countries, the 174th freest of the 179 countries studied. The report notes, “Burma is richly endowed with natural resources, but government intervention in the economy has made it one of the world’s poorest countries.”
The Fraser Institute’s Economic Freedom of the World—2010 Annual Report ranks Burma the second worst, at 140 out of 141 countries analyzed, ahead only of Zimbabwe. The institute’s methodology is instructive:
“The index … measures the degree to which the policies and institutions of countries are supportive of economic freedom. The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to compete, and security of privately owned property.”
Dr. U Myint’s Proposal
Dr. U Myint recommends Burma reduce poverty by having the team of economists he leads at the President’s office take four steps: 1) study poverty in the country, 2) create a strategy, 3) develop an action program, and 4) monitor and review implementation of the program. He also recommends establishing a “Myanmar Development Resource Institute” (MDRI) “to spearhead the economic and social reform process…”
While Dr. U Myint acknowledges the importance of the private sector, he overwhelmingly stresses the role of government:
“Government ministries and departments will play the key role in implementing the action programme for poverty alleviation. In addition to giving a brief account of activities in the respective sectors in which they are engaged, the focus should be on what has been done to meet the needs of the poor in their spheres of work, achievements made, problems encountered, and suggestions and plans for the future.”
Dr. U Myint recommends government promoting “human capital development” and creating “social protection” programs, including pensions and unemployment and disability insurance.
He proposes multiple ways the government should intervene in the rice market to meet goals:
“There are two issues concerning the role of rice in poverty alleviation in Myanmar. The first has to do with ensuring food security for the poor by making sure that there is sufficient rice on the local market that can be bought at prices they can afford. The second is to restore Myanmar’s traditional role as a major rice exporter…”
While Dr. U Myint also notes the need for “land reform,” the control of inflation, and reform of trade and other policies, his paper offers few specifics. The greatest detail comes with the proposal for the MDRI:
“The MDRI for its smooth functioning and efficient conduct of work, will have its headquarters in a building in a pleasant neighbourhood of Yangon. The building will have all the facilities associated with such institutes throughout the Asia and Pacific region. It will also be provided with secretarial support, telephone, fax, e-mail and Internet facilities, as well as with technical and administrative backstopping services.”
The Proposal’s Flaws
The underlying problem with Dr. U Myint’s plan is that the current government would execute it. The government is illegitimate. It is a mistake to indulge the junta’s pretense of a “nation building and democratization process.” The government lacks the legal or moral authority to rule the country, and has brought Burma to its current unhappy circumstances.
The junta that shot protesting Buddhist monks in 2007, and maintains Burma as a police state, is in no position to help the country’s economy. It is time for the junta to give up power and allow Daw Suu Kyi to lead Burma to a better future. The junta is the country’s problem, and cannot be the solution.
The plan, though, is inherently flawed even apart from its reliance on the junta. This means Burma’s successor government should decline to accept the plan, while recognizing that it does broadly note some areas of needed reform.
The following are some of the flaws:
- The idea of a national poverty plan is a conceptual fallacy. Burma is made up of individuals with their own goals. As noted by Edward H. Crane, president of The Cato Institute, the legitimate role of government, as reflected in the U.S.’s Declaration of Independence, is to secure individuals’ rights to life, liberty, and pursuit of happiness.
- Any national economic plan is really a government plan. Public choice economics warn us that governments almost always favor themselves and special interests, to the detriment of the public.
- The plan looks to government, with the help of the MDRI, to alleviate poverty. This would entail endless measurement, studies, monitoring, and review. This would serve the needs of government employees and the MDRI, but not the people of Burma.
- Government cannot alleviate poverty. It creates poverty through the denial of freedom and the encouragement of corruption.
- The plan would not only fail, but in fact would be counter-productive. It would encourage the poverty industry. The government and international bureaucracies purportedly addressing poverty would have an incentive to prevent its eradication. In addition, as discussed below, the intervention would in fact hurt the economy.
- The people of Burma need freedom: political, civil, and economic. Poverty in Burma, as elsewhere, is a symptom of the lack of freedom. Freedom allows individuals to create the growth and prosperity that eliminates poverty. Burma does not need a plan to alleviate poverty. It needs something broader and more inspirational: the freedom that will bring prosperity.
- The institutions of economic freedom that allow people to prosper include property rights, free markets, free trade, stable money, and the rule of law. Burma is weak in all of these areas, and suffers from corruption.
- Since we know the cause of poverty, i.e., the denial of freedom, studying and managing poverty squanders time and money. We do not study and manage the darkness of an unplugged electric lamp. Instead, we plug it in, and it shines.
- The plan’s reliance on government rather than freedom is reflected by the fact that “government” appears in the text twenty-three times, while the words “freedom,” “liberty,” and “property” are absent. The word “free,” in the context of referring to lack of control by the government, appears only once. (“[T]he rice trade must operate in an environment of free and fair competition…”) (Even with this use, it appears Dr. U Myint is not recommending a truly free market, in view of the proposals for government influence on the market.)
- The recommendations regarding the rice industry are misguided:
- First, pursuing the goal of “ensuring food security for the poor by making sure that there is sufficient rice on the local market that can be bought at prices they can afford” would only encourage shortages. The free market and free trade are the only reliable means of ensuring supplies of any goods or services. The market will encourage the production of rice to meet demand. The market will also determine prices, and price is an essential signal for buyers and sellers.
- Second, prosperity will generally moot the concern regarding affordability of food. If some people need assistance, it is better to provide them charity rather than to intervene in pricing.
- Third, determining that the country should focus on exporting rice is based on central planning. Central planning is based on the “fatal conceit,” in the expression of Friedrich A. Hayek, that government is wiser than markets.
- Fourth, only through a free market and free trade can Burma determine its comparative advantage, meaning the goods and services it should export.
- Finally, the stress on exporting is based on the mercantilist fallacy that exports are more important than imports and the flow of capital. Burma needs free trade and investment freedom, not a government program pushing exports.
- China and Vietnam are poor models. Both are Communist police states. The growth in their economies has come despite, not because of, central planning, and because of an increase in freedom. Both countries, like Burma, need liberty.
- The concern with measuring and responding to “inequality” is a bad idea. The goal should be a free economy where all people can achieve their potential. The reality is that some people will achieve more than others. Objecting to this reality encourages the use of government coercion to satisfy envy.
- The results are usually redistribution and progressive taxation, both of which the paper recommends. Redistribution schemes should be avoided, and a low, simple flat tax system will help Burma become internationally competitive.
- The government should allow the private sector to provide health care and education.
- Health care and education are services, and the market delivers services much more reliably and efficiently than government.
- Having government provide education allows it to control the curriculum, which will favor the views of the state and special interests.
- The experience in India, China, and Africa is that private schools in poor communities can be highly successful, as described in James Tooley’s book, The Beautiful Tree: A Personal Journey Into How the World’s Poorest People Are Educating Themselves, excerpted in a three-part series.
- The government should also avoid providing pensions, insurance, aid, and social welfare. The private sector can better deliver these programs. Private charitable organizations can meet the need for aid, and private financial firms can provide savings, insurance, and investment programs.
- When government engages in these activities, it crowds out the private sector.
- The experience of failing countries around the world serves as a caution that welfare states risk ruin.
- Some village commons may benefit from privatization. Private owners tend to be better stewards of resources than government. Other commons may be properly managed through the process of local cooperation described by Elinor Ostrom.
- Burma should consider dispensing with government currency, allowing free banking and private currency. This would avoid the problems that result with the central planning of central banks, including inflation and the manipulation of interest rates.
The Alternative
As suggested by the discussion above, the alternative to the proposed program of poverty alleviation is the creation of freedom. Freedom is not only its own virtue, but it also leads to peace and prosperity.
Burma needs political, civil, and economic freedom. It needs to address government corruption, and build the institutions of economic freedom: property rights, free markets, free trade, stable money, and the rule of law.
With freedom, the people of Burma can pursue happiness, take pride that they have emerged from oppression, enjoy peace, and prosper.
Conclusion
We hope this discussion is helpful to the people of Burma in building the country’s future. Each country has to find its own path; a path guided by freedom offers the best hope.
