The third-order approach requires three essential components: a republican form of government, rule of law, and economic freedom. A classic example of a country that overcame poverty by following these components is Hong Kong. In the 1950s Hong Kong looked like most struggling third world countries. Today it boasts of an average annual income above European countries such as Great Britain and Italy. Hong Kong has a land area of roughly 400 square miles with no natural resources to sustain it’s population of 7 million people. Yet its citizens maintain a high standard of living.
We can look at Hong Kong and also at the United States of America as an example of prosperity and freedom. Our founding fathers established the framework for this country to become the richest country in the world. They understood the importance of a limited government and rule of law. In their wisdom they decentralized power and gave us a republic which provided economic freedom, the framework for the “American Dream.”
On the other hand we can look at countries who have centrally planned economies and limited economic freedom. Countries such as India and Sierra Leone have centrally planned economies, yet despite extensive government intervention they have some of the highest rates of poverty in the world. It is counterintuitive to think that government leaders, albeit experts in their fields, can cause such poor outcomes. Milton Friedman once commented on having government officials directing an economy by saying “There is nothing that does so much harm as good intentions.”
Several years ago I had the opportunity to live in the Dominican Republic and was able to see the influence of these principles at work. Like many Latin American governments there is corruption there, but the government is improving and foreign investors are noticing. The government has certain places called “Free Trade Zones” where foreign companies can build clothing factories and take advantage of the cheap labor with limited tariffs. These factories give people work and allow their children to have a better future. The economic pie is not fixed but grows because the universal law of comparative advantage prevails.
So how should one respond to issues such as severe poverty, hunger, and healthcare? I would suggest that it comes down to education, education, and more education. An individual must educate him or herself first and then educate others. Ayn Rand’s philosophy holds that historical trends are the inescapable product of philosophy. Fighting for the victory of ideas can defeat widely held ideologies that threaten liberty, private property rights, economic and individual freedom.
The major battlegrounds in this fight are the very places where students learn ideas that shape their lives such as high schools and universities. There are many organizations that are trying to spearhead a cultural renaissance and reverse trends of anti-freedom and anti-individualism such as the Mises Institute, the Cato Institute, the John Birch Society, etc. Learning from these institution can give an individual the tools necessary to promote the third-order approach.
As mentioned before there are many approaches to solve the problems in the world. The first-order approach is very satisfying for everyone involved, but it is not sustainable and does not address the underlying cause of the problem. The third-order approach, although more difficult to measure, is the best approach. It is incumbent for everyone to learn about these ideas and promote them, whether it be through financial contributions to these organizations or through educating other individuals. I am not suggesting we neglect the needs of people today in order to promote ideas we hope they will grasp tomorrow. By the same token we should not be distracted by doing something good or something better, when we can be working towards the best solution which solves the problem and prevents it from happening.