Some thoughts for today:

In observing economic reality and adhering to the logic of the price system, Bauer refuted key propositions of orthodox development economics, the most basic one being the idea of a “vicious circle of poverty.” Poor countries were said to be poor because people had low incomes and could not generate sufficient savings to allow for capital accumulation, one of the prerequisites for economic growth, as spelled out in mainstream growth models. Bauer observed that many people and many countries had moved from poverty to prosperity and that large-scale capital investment is neither necessary nor sufficient for material advance. His study of small holdings in the Malaya (now Malaysia) rubber industry and his observation of the importance of small-scale traders in West Africa convinced him that the reality of development was different from the rhetoric of development experts.

A corollary of the vicious circle is that poor countries cannot become rich without external aid from developed countries. However, the nations that have become rich had no access to foreign aid, while those that have received substantial external aid are for the most part still poor, as in Africa. So Bauer argued that foreign aid is more likely to perpetuate poverty than to alleviate it. And history has borne him out.

Bauer also strongly disagreed with the widely held view that population growth is a drag on development. In his essay “Population Growth: Disaster or Blessing?” he wrote, “Economic achievement and progress depend on people’s conduct not on their numbers.” Unlike many of the development experts who wanted to use government to “help the poor,” Bauer thought that poor people could lift themselves out of poverty through their ownefforts, if only governments would safeguard both economic and personal freedom. When people are free to choose and bear the responsibility for their choices, as they do under a system of private property and free markets, they will be more able to improve themselves and provide for their families—as well as have stronger incentives to do so—than when they are dependent primarily on the state.

From P.T. Bauer's Market-Liberal Vision.