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Global Poverty

August 13, 2008


Washington Post columnist Robert J. Samuelson wrote a column a few months ago in which he identified global poverty as mankind’s greatest moral challenge [“Rx for Global Poverty,” 28 May 2008]. He begins his column by succinctly laying out his case for putting poverty at the top of the priority list of global challenges:

“What’s the world’s greatest moral challenge, as judged by its capacity to inflict human tragedy? It is not, I think, global warming, whose effects — if they become as grim as predicted — will occur over many years and provide societies time to adapt. A case can be made for preventing nuclear proliferation, which threatens untold deaths and a collapse of the world economy. But the most urgent present moral challenge, I submit, is the most obvious: global poverty.”

Because poverty seems to be ever present, it can easily become part of the global landscape and thus easily ignored. Jesus famously said, “For ye have the poor always with you.” Like all great moral teachers, however, he went on to encourage his followers to and reduce poverty and relieve the suffering of those caught in its awful grasp. Samuelson writes about the extent of the challenge today.

“There are roughly 6 billion people on the planet; in 2004, perhaps 2.5 billion survived on $2 a day or less, says the World Bank. By 2050, the world may have 3 billion more people; many will be similarly impoverished.”

Most predictions are that when the world reaches 9 billion people (around 2050) the world will start depopulating. Those predictions are primarily based on statistics that indicate relatively fewer people will be gripped by poverty and birthrates will be correspondingly lower. Samuelson’s point is that we know how to eliminate poverty, yet it persists.

“What’s baffling and frustrating about extreme poverty is that much of the world has eliminated it. In 1800, almost everyone was desperately poor. But the developed world has essentially abolished starvation, homelessness and material deprivation. The solution to being poor is getting rich. It’s economic growth. We know this. The mystery is why all societies have not adopted the obvious remedies.”

Okay, it may not be too much of a mystery. There are geographical reasons (some areas simply lack the resources and climate necessary for a prosperous society). There are political reasons (corruption and bad leadership). There are societal reasons (lack of appreciation for education, especially for girls). The list goes on, but the point is that most of these challenges can be successfully addressed. Samuelson continues:

“Just recently, the 21-member Commission on Growth and Development — including two Nobel-prize winning economists, former prime ministers of South Korea and Peru, and a former president of Mexico — examined the puzzle. Since 1950, the panel found, 13 economies have grown at an average annual rate of 7 percent for at least 25 years. These were: Botswana, Brazil, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Malta, Oman, Singapore, Taiwan and Thailand. Some gains are astonishing. From 1960 to 2005, per capita income in South Korea rose from $1,100 to $13,200. Other societies started from such low levels that even rapid economic growth, combined with larger populations, left sizable poverty. In 2005, Indonesia’s per capita income averaged just $900, up from $200 in 1966. Still, all these economies had advanced substantially. The panel identified five common elements of success:

  • Openness to global trade and, usually, an eagerness to attract foreign investment.
  • Political stability and ‘capable’ governments ‘committed’ to economic growth, though not necessarily democracy (China, South Korea and Indonesia all grew with authoritarian regimes).
  • High rates of saving and investment, usually at least 25 percent of national income.
  • Economic stability, keeping government budgets and inflation under control and avoiding a broad collapse in production.
  • A willingness to ‘let markets allocate resources,’ meaning that governments didn’t try to run industry.”

For long-time readers of this blog, that list should sound somewhat familiar. In my discussions about Development-in-a-Box™, I have touched on all of these points with the possible exception of the last. Although it is easy to list pre-conditions for sustainable development, implementation is much more difficult. For example, a country might be eager to attract foreign direct investment, but that often means having in place the necessary infrastructure to make such investments worthwhile. No company is going to build a plant in an area where the manufactured products have no way of getting efficiently to market. Installing “capable” governments is not easy either. Historically, corrupt leaders do not give up power — just look at Robert Mugabe in Zimbabwe. High rates of savings and investment are not easy to achieve either when most people are struggling to find enough to eat and to keep their families sheltered. Faced with such conundrums, it’s really not so baffling or mystifying that countries remain mired in poverty. The question remains, what can they do to break the cycle of poverty? Samuelson offers a couple of prescriptions.

“One is: Globalization works. Countries don’t get rich by staying isolated. Those that embrace trade and foreign investment acquire know-how and technologies, can buy advanced products abroad, and are forced to improve their competitiveness. The transmission of new ideas and products is faster than ever. After its invention, the telegram took 90 years to spread to four-fifths of developing countries; for the cellphone, the comparable diffusion was 16 years.

“A second is: Outside benevolence can’t rescue countries from poverty. There is a role for foreign aid, technical assistance and charity in relieving global poverty. But it is a small role. It can improve health, alleviate suffering from natural disasters or wars, and provide some types of skills. But it cannot single-handedly stimulate the policies and habits that foster self-sustaining growth. Japan and China (to cite easy examples) have grown rapidly not because they received foreign aid but because they pursued pro-growth policies and embraced pro-growth values.”

I don’t disagree with either of those broad lessons, but again identifying them is easier than implementing them. No one can honestly expect Samuelson to lay out a blueprint for solving world poverty in a short column, and he doesn’t. He simply points out that challenges exist in many areas and that others elsewhere have overcome them. He concludes:

“The hard question (which the panel ducks) is why all societies haven’t adopted [these lessons]. One reason is politics; some regimes are more interested in preserving their power and privileges than in promoting growth. But the larger answer, I think, is culture, as Lawrence Harrison of Tufts University argues. Traditional values, social systems or religious views are often hostile to risk-taking, wealth accumulation and economic growth. In his latest book, ‘The Central Liberal Truth,’ Harrison contends that politics can alter culture, but it isn’t easy. Globalization has moral as well as economic and political dimensions. The United States and other wealthy countries are experiencing an anti-globalization backlash. Americans and others are entitled to defend themselves from economic harm, but many of the allegations against globalization are wildly exaggerated. Today, for example, the biggest drag on the U.S. economy — the housing crisis — is mainly a domestic problem. By making globalization an all-purpose scapegoat for economic complaints, many ‘progressives’ are actually undermining the most powerful force for eradicating global poverty.”

I believe that Samuelson is correct and I have repeatedly said so in my blogs. I, too, am concerned that the current economic downturn and emerging “neighborhood effect” [see my post Changing Supply Lines] will delay or crush the hopes of millions of people who could be helped by globalization. We need global vision and leadership as well as national vision and leadership. The poor may always be with us, but there needn’t be so many poor.

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