The Ultimate Act of Generosity

When an unskilled Mexican laborer crosses the border from Mexico into the U.S., a day's worth of his or her hard work increases by a power of 10 - instead of receiving $6 for a day of work, they can receive $60 for a day of work.  While most of us regard $60 as a low wage, the fact to focus on is that they are receiving 10 times as much as they were before.  No wonder they are willing to risk death to come into the U.S.

When a piece of land in the developing world is designated as a free zone, often (it depends on the design, location, and legal structure of the zone) land values increase 10x or more.  Over time this 10x land value increase can become a 100x increase or more as investors become confident that a world class business environment has been created.

I've noted before that the entire developing world regulates business more than does Scandinavia.  The entire developing world also has weaker property rights and contract enforcement than does Scandinavia.  There is abundant evidence that global poverty is caused by "poor institutions" or a "lack of economic freedom" or the absence of a "world class business environment."  These are all different ways to express an underlying truth - if we could install a business environment that was more like the business environment of Finland or Denmark, the U.S. or Hong Kong, in any developing nation, investment dollars would flow into the country, entrepreneurial start-ups would increase, and GDP per capita would increase. 

Despite the dramatic differences in the legal systems of Finland, Denmark, the U.S., Hong Kong, and other nations with high economic freedom rankings, with respect to their power to alleviate poverty their similarities are more important than their differences.  Strong property rights, contract enforcement, rule of law, and minimal regulation are necessary foundations to an entrepreneurial capitalism that alleviates poverty.  The more quickly we can share these institutions with the peoples of other nations, the more quickly they will experience hope and optimism based on the expectation that their children's lives will be significantly better than their own.

In order to avoid a 21st century that turns out to be even bloodier than the 20th century, I am seeking to communicate these understandings so that we can share the institutions of prosperity with people around the world.  Sharing an understanding of these institutions of prosperity is the ultimate act of generosity.