Capitalism: the cure for poverty

THE New Testament says: "The poor are always with you". It is too resigned. The Bible seems to limit its poverty policies to the duty of alms-giving. I was encouraged to learn then that "the poor" really only means the Gentiles, as they are impoverished in not being a party to the Lord’s Covenant.

I usually find it prudent to avoid religious quotations. They invite correction and friction. Yet poverty, its causes and consequences, remains central to both politics and economics.

It seems to me those of the Left have co-opted it as "their" topic. The representatives of capitalism - the CBI or the Chambers of Commerce or even the Institute of Directors - avoid the theme, beyond suggesting that companies exist to be creamed for taxes so the state can help the poor.

I argue it is bold, liberalising projects that will invest those on the most modest incomes with dignity. Poverty, at its core, is about more than relative income streams. It is about extending choices that make life better and probably longer.

It is markets and capitalism that will lift everyone out of poverty - if it is opened up in ways that we seem too timid to touch.

I acknowledge the good intentions of many left-wing thinkers. I repudiate the results of their policies. One definition of poverty involves the proportion of income spent on food. A wealthy professional may eat very well, but his or her food budget is no more than 10 per cent of total budget.

For those at the bottom of the spectrum, 40 per cent goes on food. Yet the cost of our groceries is grossly too high because of the autarchic policies of the European Commission. The European Union protects the agricultural sector so tightly that the cost of food in our supermarkets is acknowledged to be at least 25 per cent higher than it need be.

That agreed sum may understate matters. If the commission lowered its tariff barriers, vast acres of land on other continents would come back under husbandry and prices would fall further. It seems plain to me that prices would fall immediately by 40 per cent and in many foodstuffs it would be 50 per cent. In the case of some commodities, such as sugar and bananas, falls would exceed 50 per cent.

This is a tangible and vivid way to dilute poverty yet who speaks out clearly against the inequity of the common agricultural policy? All the candidates in the Euro-elections in June are mute on CAP reform. Above all, why does Labour not scream from the rooftops? The Left, alert to the truth, ought to be tireless in abusing the malignant CAP.

The prospect of GM foods is treated as a threat of some nature. In fact, GM techniques will be a great blessing to the poor of the planet. The Green Revolution has enhanced the harvests more than the incremental improvements of the past 2,000 years. It is agronomists whose names we never know who have done more to mitigate poverty than high-minded European socialists.

The other dominant expenditure for those at the lower end of the income spectrum is housing - usually expressed as rent because ownership is usually not an option. Every community in Scotland is seeing the price of homes surge, whether it be in urban Edinburgh or remote rural communities.

The poor are marginalised even further. Often they are locked into the worst municipal housing schemes where life is grim and bleak. Scotland has no shortage of land. Prices are high only because of the constrictions we preserve.

If you want to make life easier - or cheaper - then land use has to be liberalised. Supply and demand is an equation we all know works in every other market, but in housing the principles of economics have to be suspended to preserve the ritual or ceremonial roles of councillors and planning officials.

Scotland’s Labour establishment seems blind to the notion of permitting many more new homes. Some would be on new sites, but much of it would be adaptation of present structures. It is simply ludicrous rural Scotland pretends it has no space.

Another cause of sustained poverty seems to me to be dreadful schooling. A poor education makes for a poor life. At its most simple if, after ten years of state schooling, you emerge unable to read or write or count your life chances are stunted.

Chancellor Gordon Brown can pour billions into "education", but success eludes him as the system crushes any element of choice. I believe that a legal test-case brought by an 18-year-old graduating from an Edinburgh school without elementary skills might transform the opportunities.

We need a mechanism that allows pupils to select strands of education and also one that rewards teachers that show real merit. I think our more dreadful schools stunt the lives of millions of kids. They are as bright as the rest of us, but are repelled by grottier schools.

There are some strands to the phenomenon of poverty that may be more intractable. Many people may seem slothful or incapacitated from normal work routines not because they are lazy or inept but because they have psychological or psychiatric problems - mostly undiagnosed.

Nonetheless, it would be feeble not to agree that the social-security system is nourishing a class of professional welfare beneficiaries who are adept at avoiding work. I was arrested by the Newsnight Scotland disclosure that one-third of Glaswegians now live off benefits. I am not contesting legitimate claimants, but I do think a high proportion of "the poor" are choosing not to work. This may be entirely rational behaviour. Why work if you are no better off after income tax and national insurance?

So, I offer three policies to liberate the poor: free trade in foodstuffs to halve the price of groceries; relaxing land-use impediments to dissolve the cost of housing and radical reform of schooling to break the cycle of stunted learning.

I can understand why politicians prefer to preserve the present systems, but the more imaginative must see that capitalism will lift the poor. It is socialism that keeps people crushed.

• John Blundell is the director general of the Institute of Economic Affairs