Thomas Sowell, The fallacy of avoiding to be exploited

Perhaps the most detrimental consequences of the implicit assumption of zero-sum transactions have been in poor countries that have kept out foreign trade and foreign investments, in order to avoid being “exploited.”

Large disparities between the prosperity of the countries from which trade and investment come and the poverty in the countries receiving this trade and investment have led some to conclude that the rich have gotten rich by taking from the poor.

Various versions of this zero-sum view— from Lenin’s theory of imperialism to “dependency theory” in Latin America— achieved widespread acceptance in the twentieth century and proved to be very resistant to contrary evidence.

Eventually, however, the fact that many once-poor places like Hong Kong, South Korea, and Singapore achieved prosperity through freer international trade and investment became so blatant and so widely known that, by the end of the twentieth century, the governments of many other countries began abandoning their zero-sum view of economic transactions.

China and India have been striking examples of poor countries whose abandonment of severe international trade and investment restrictions led to dramatic increases in their economic growth rates, which in turn led to tens of millions of their citizens rising out of poverty.

Another way of looking at this is that the zero-sum fallacy had kept millions of very poor people needlessly mired in poverty for generations before such notions were abandoned. That is an enormously high price to pay for an unsubstantiated assumption. Fallacies can have huge impacts.

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