This is a long overdue post to counter the claim from those who oppose domestic redistribution that it is somehow nationalistic – that if we truly care about the poor, we should redistribute to poor countries, not our comparatively rich countrymen.
From a purely aesthetic perspective, the reason people vote for domestic redistribution is because that is the poverty they are most aware of, and where they can easily see the effects of redistribution. This is due to both availability bias and a general lack of capacity to process the amount of poverty in the world. Launching tirades against voters because of this is, therefore, akin to mocking people for behaving like real people rather than rational economic people.
However, this isn’t the main problem. Redistributing large amounts to developing countries is undesirable for two other reasons.
The first is a laffer-curve style argument: if we were to collect as much as possible in the short term and redistribute it, our economy would be heavily taxed and we wouldn’t even be spending it on public services. In other words, we’d bankrupt the public sector and the economy would grind to a halt, eliminating our capacity for long term redistribution. The long term aid maximising amount of redistribution is probably fairly low as % of GDP, given that taxes cannot be so excessively high as to slow down growth, and enough of the tax revenue needs to be spent in the domestic economy to keep it going. Add political limitations to this and you’re looking at a level of redistribution not dissimilar to what we have now.
Secondly, and most importantly, is the false equivalence between domestic and international redistribution. This is best phrased as follows:
Economic growth is the cure for absolute poverty.
Redistribution is the cure for relative poverty.
The second statement is almost true by definition, whilst the first is clearly borne out by the facts (and I suspect, would not be opposed by those I am disagreeing with here). After all, is there a single example of a poor country developing due to aid? Sure, individual acts of redistribution may extend some lives in the short term, but in many cases it simply destroys industries and reduces the country’s capacity for development in the long term.
Similarly, there is not an example of a country that has grown its way out of relative poverty – the U.S. is the largest economy in the world, yet inequality is rife. Meanwhile, many Northern/Central European countries – though they do very well on growth too, incidentally – are effectively absent of relative poverty.
Now, we can discuss whether domestic redistribution is desirable or not, and whether relative poverty is ‘actually’ a problem or was just made up by Stalin, but for now, defending inequality on the grounds that people in developing countries are even poorer will not suffice.