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Why the Third World Needs Capital Not Charity

By Kris Sayce - posted Friday, 29 October 2010


It seems their egos have gotten the better of them.

You'd think that with their firsthand experience of building companies from the ground floor upwards that they'd understand the importance of capital, investment and the drive to succeed.

But no, they've fallen into the trap that central banks have fallen into, and that is, it's better to just give money to people rather than letting them work for it.

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I know that may seem cold hearted. But the facts speak for themselves.

Charitable organisations have been trying to save the poor in the third world for decades, and what have they achieved? A bit, perhaps. But not much if we're honest.

Maybe someone else knows the numbers better than we do. But in a head-to-head contest we'll bet our bottom dollar that Microsoft, Nike and Coca-Cola have created more jobs and lifted more people out of poverty in Africa and Asia than Oxfam or World Vision combined.

The simple fact is that capitalism and the selfish desire for profits and wealth by rich individuals, ordinary investors and corporations brings more wealth to more people than charitable giving.

What's keeping poor people poor isn't that they can't get food or water, it's that they don't have access to the most important thing needed to create wealth - and that's access to capital.

It's no different to Western civilisation. Without access to capital we'd all still be crawling around in the mud begging for scraps from a noble Lord of the manor.

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Think about it this way. You often hear the trade unions moaning about greedy bosses. And how without the workers' labour the bosses wouldn't be able to make the whacking great profits they make.

That's partially true. Not entirely, but partially. After all, if the trade unions price their workers out of the market, the bosses may look towards more automation.

But again that's not necessarily a bad thing. If a machine can perform the work more efficiently than a human, then that simply enables other industries to gain access to an increased labour force, which can see wages fall, production costs fall, prices fall, and employment increase.

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About the Author

Kris Sayce is editor of Money Morning. He began his financial career in the City of London as a broker specializing in small cap stocks listed on London’s Alternative Investment Market (AIM). At one of Australia’s leading wealth management firms, Kris was a fully accredited adviser in Shares, Options and Warrants, and Foreign Exchange. Kris was instrumental in helping to establish the Australian version of the Daily Reckoning e-newsletter in 2005. In late 2006, he joined the Melbourne team of the leading CFD provider in Australia.

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