All Commentary
Wednesday, July 7, 2010

Education Is the Effect, Not the Cause, of Affluence

Government Fiat Cannot Eliminate Endemic Misery

Despite its abysmal record, the United Nations wears a mantle of legitimacy in the popular discourse. Almost every daily newspaper or nightly newscast reports some UN-sponsored agency’s activities regarding world hunger, climate change, disease, or some other problem. All too often the UN is on the wrong side of reality. Take its latest “solution” to third-world poverty: state education.

The UN’s International Labor Organization (ILO) recently asserted that third-world poverty could be drastically reduced by heavy investments in government schools. According to Frans Roeselaers, director of the ILO’s International Programme on the Elimination of Child Labour, a child who attends school rather than toiling away in a factory “gives enormous, almost astronomical returns in terms of both productivity and increased wages as the child grows up and becomes a worker.”1 Thus the ILO recommends a massive wealth transfer overseen by government. That it would recommend such a program should come as no surprise to anyone familiar with its history and ideology.

Although created at the post-World War I Paris Peace Conference in 1919 and established in Geneva a year later, the ILO harks back to the ideas of the nineteenth-century Welsh communitarian Robert Owen and the French industrialist Daniel Legrand, both of whom died in the 1850s.2 From its inception the ILO has agitated for increased government control over the labor market.

During the organization’s golden age of the 1950s and ’60s, under the leadership of an American, David Morse, “the budget grew five-fold and the number of officials quadrupled.”3 In 1969 it was awarded the Nobel Peace Prize. The history of the ILO is eerily similar to most UN agencies: little or no achievement coupled with massive increases in budget, payrolls, and prestige.

The guiding principles of the ILO foretell an organization committed to statist notions of “justice” and “freedom.” Article II of its Declaration Concerning the Aims and Purposes of the International Labour Organization, the annex to the ILO constitution, declares that “lasting peace can be established only if it is based on social justice.”4 But as Thomas Sowell has noted, there is no form of justice that isn’t social.5 Law resides in the realm of man only, and as such, it is a wholly social concept. Nobel laureate F. A. Hayek pointed out that “social justice” is a fairly nebulous term. More often than not, it is used synonymously with income redistribution. “The most common attempts to give meaning to the concept of ‘social justice,’ ” Hayek wrote, “resort to egalitarian considerations and argue that every departure from equality of material benefits enjoyed has to be justified by some recognizable common interest which these differences serve.”6

With “social justice” as the ILO’s guiding principle, it follows that Article III of the Declaration states that the ILO will work to “ensure a just share of the fruits of progress to all.”7 But exactly what is a “just” share of the world’s wealth? Who will decide this amount? How will it be obtained? One can assume that it will be left up to the state. As Roeselaers bluntly puts it, “This is primarily a political rather than economic question.”8

Nowhere does the ILO even glimpse the price to be paid for such a policy. “In the open and free society,” the great development economist P. T. Bauer wrote, “political action which deliberately aimed to minimize, or even remove, economic differences would entail such extensive coercion that the society would cease to be open and free. The successful pursuit of the unholy grail of economic equality would exchange the promised reduction or removal of differences in income and wealth for much greater actual inequality of power between rulers and subjects.”9 Bauer’s principle would hold true in third-world countries where dictatorial governments expropriate the wealthy in an attempt to subsidize the masses. But once a government asserts that the fruits of one’s efforts belong to society, the major incentive for saving and investment is destroyed.

Starvation by Redistribution

Zimbabwe provides a painful illustration of “social justice” at work. By expropriating the property of the landed farmers, President Robert Mugabe effectively destroyed the nation’s ability to feed itself. Starvation and poverty have been the explicit outcome of government distribution.10 Capital in the hands of the productive is beneficial for both the capital owners and society at large. Those who create wealth should be left free to do so—prosperity for the masses depends on it. Government’s role in alleviating poverty is to augment capital creation, something it can only do by supporting property rights and establishing a uniform rule of law.

By calling for universal health care, child welfare, maternity protection, full employment, and “equality of educational and vocational opportunity,”11 the ILO essentially agitates for a welfare state on a global scale. But that is not a promising route out of poverty.

Those employed by the ILO undoubtedly care about the poor. So it is ironic that the organization continues to subject the poor to all manner of disastrous schemes.12 From global minimum wages to condoms to foreign aid, the panacea for third-world growth has eluded these UN planners. But this has not slowed down the flow of programs, taxes, and aid schemes.

The latest is education through government wealth transfers.

The ILO plan has three parts.13 First, there would be a massive expansion of school construction and purchase of educational materials, as well as a reduction in class size. Second, governments would introduce “income transfer programs” to “target all families with school-age children now living in poverty, providing benefits according to a formula taking into account the average value of children’s work, the number of children per household and the degree of the household’s poverty.”14 Last, the ILO seeks a “programme of interventions aiming at the urgent elimination of the worst forms of child labour.”15

In its study on the elimination of child labor, the ILO makes some specious economic and methodological assumptions. At the outset the study declares, “The study does not tell us whether to eliminate child labour—these commitments are already in place.”16 How is a reader to trust the data used and the conclusions reached by a study that proclaims on page one that the authors have already made their minds up before data was even collected? Second, the ILO researchers brush off the need to factor in the costs of income transfers. The transfers are “not regarded as an economic cost, since no ‘real’ resources are allocated in conjunction with the money.”17 Frederic Bastiat proved over 150 years ago that there are costs incurred when the holder of wealth loses the opportunity to spend his resources the way he feels they will benefit him the most.

Methodological differences aside, the ILO seems to have a point as far as it goes. Certainly educating children is in the long run far more productive for a country and the world than having them sew shoes. The formative years of a child’s development should be spent learning and interacting with other children. Yet child labor is a symptom of poverty, not the cause of it, and universal education is not the cause of affluence but rather its result. To advocate the abolition of child labor through universal schooling is to ignore the underlying economic realities that have put children in this position in the first place. Children don’t work because their parents are cruel; they work because in developing economies, capital investment and labor productivity are so low that parents alone can’t support their children.18 If the entire population of sub-Saharan Africa became educated at the Ph.D. level, poverty would still not abate.

According to the ILO, “There are also two principal benefits [to educating children], the added productive capacity a future generation of workers would enjoy due to their increased education, and the economic gains anticipated from improved health due to the elimination of the worst forms of child labour.”19 While this is all fine and good, the problem remains that there is a natural process of development that the ILO thinks can be bypassed. It wants to share in the benefits of an educated, affluent population without the unavoidable and naturally resulting economic progression that has occurred in every other developed nation.

If lack of high-quality government education were indeed the cause of poverty, then it is doubtful that the United States would rank as one of the most prosperous countries in history. The record of “public” education in America has been abysmal. Total spending has increased markedly over the past 100 years, while little or no progress has been made in student performance.20 Yet despite this record of failure, Americans enjoy a quality of life that is among the highest in the world. In the United States, property rights, restrained government, and the freedom to work, save, and invest have provided the foundation for ending poverty. Long before President Lyndon Johnson declared “war” on it, industrial societies had ended the historical phenomenon of crushing poverty.

Government-Made Hurdles

The hurdles to wealth creation are primarily government-made and must be eliminated. If property rights are not protected, how is a factory owner to buy his inputs and sell his wares? If property rights aren’t enforced, how are accurate prices to emerge—prices necessary for rational economic calculation? If prohibitive regulations stifle innovation, how are entrepreneurs to create new wealth? If taxation is confiscatory, how can they reinvest?

Countries that share the legacy of poverty and disease also share one other attribute: oppressive government. From Zimbabwe to North Korea, Iran to Cambodia, the heavy hand of the state dominates all aspects of civil society. Property rights are widely ignored, and the rule of law is nonexistent. Furthermore, using the coercive apparatus of government to transfer massive sums of wealth from one segment of society to another destroys the incentives conducive for prosperity.

What if it were possible to send children to school at little or no cost? Should it naturally fall to government to educate them? Again, the ILO remains loyal to the statist creed. Despite government’s failure in educating children, the ILO’s moral imagination stretches no farther than a nation’s capital. It is as if the ILO believes that simply by sticking children in a government school run by government employees, “education” will automatically occur.

In the debate about world poverty the disagreement is over means, not goals. Most people would prefer to see children learning rather than sweating in a field or factory. That is a worthy goal. Indeed, it is a goal that has been achieved in the United States largely because of the great degree of economic freedom. Endemic misery cannot be alleviated by government fiat. As long as the UN is around, one can expect innumerable plans, schemes, and programs for the elimination of poverty. The lesson of history, however, is unambiguous regarding government’s role in wealth creation: keep property rights secure and leave the people free.


1. Quoted in John Madslien, “ILO: ‘Child Labour Prevents Development,’” BBC News, February 4, 2004, http://news.
2. “ILO History,” at ILO’s website, lish/about/history.htm.
3. Ibid.
4. Constitution, annex, iloconst.htm#annex.
5. Thomas Sowell, The Quest for Cosmic Justice (New York: Free Press, 1999).
6. F.A. Hayek, Law Legislation and Liberty, vol. 2, The Mirage of Social Justice (Chicago: University of Chicago Press, 1976), p. 80.
7. Constitution, annex.
8. “ILO: ‘Child Labour Prevents Development.’”
9. P. T. Bauer, Equality, the Third World, and Economic Delusion (Cambridge, Mass: Harvard University Press, 1981), p. 8.
10. See Martin Meredith, Our Votes, Our Guns: Robert Mugabe and the Tragedy of Zimbabwe (New York: Public Affairs, 2002).
11 Constitution, annex.
12. See Jude Blanchette, “The Futility of Foreign Aid,” The Free Market, July 2003.
13. International Labor Organization, “Investing in Every Child: An Economic Study of the Costs and Benefits of Eliminating Child Labour,” December 2003, pp. 1-2, www.ilo. org/public/english/standards/ipec/publ/download/2003_12_ investingchild.pdf.
14. Ibid., p. 2.
15. Ibid.
16. Ibid. p. 1.
17. Ibid., p. 3.
18. See W. H. Hutt, “The Factory System of the Early Nineteenth Century,” in F. A. Hayek, ed., Capitalism and the Historians (Chicago: University of Chicago Press/Phoenix Books, 1963), pp. 179ff.
19. “Investing in Every Child,” p. 3.
20. See Peter Brimelow, A Worm in the Apple (New York: HarperCollins, 2003).

  • Jude joined the Atlas Network in January 2009 as a member of the Institute Relations team, focusing on think tanks in Asia. Prior to joining Atlas, he was a China-based special correspondent for the Christian Science Monitor, a research assistant at the Cato Institute, and the Henry Hazlitt Research Fellow at the Foundation for Economic Education. He studied economics at Loyola University and Mandarin Chinese at the Beijing Institute of Technology. He currently resides in Shanghai, China.