A War Worth Fighting

The war on poverty – Most of the wars we’ve fought have been in reaction to the threat of being invaded, but right now we’re fighting wars in two different countries, where we are essentially engaged in the (probably futile) mission of nation-building.

Two economists have found that the quality of political and legal institutions are key in reducing poverty in developing countries. Edinaldo Tebaldi and Ramesh Mohan found that a robust system to control corruption, an effective government, and a stable political system create conditions that promote economic growth, minimize income distribution conflicts, and reduce poverty. On the other hand, corruption, ineffective governments, and political instability not only hurt income levels through market inefficiencies, they escalate the incidence of poverty by increasing income inequality as well.

They say that “institutions, not government spending and financial assistance, are the deep factors affecting poverty and economic performance in developing countries. Policies aimed at reducing poverty should first consider improving institutions as a prerequisite for economic development and poverty eradication. Otherwise, aid programs will have limited and short-term effects.”

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