Poverty Around The World

Introduction

What does it mean to be poor? How is poverty measured? Third World countries are often described as developing while the First World, industrialized nations are often developed. What does it mean to describe a nation as developing? A lack of material wealth does not necessarily mean that one is deprived. A strong economy in a developed nation doesn’t mean much when a significant percentage (even a majority) of the population is struggling to survive.

Successful development can imply many things, such as (though not limited to):

• An improvement in living standards and access to all basic needs such that a person has enough food, water, shelter, clothing, health, education, etc;
• A stable political, social and economic environment, with associated political, social and economic freedoms, such as (though not limited to) equitable ownership of land and property;
• The ability to make free and informed choices that are not coerced;
• Be able to participate in a democratic environment with the ability to have a say in one’s own future;
• To have the full potential for what the United Nations calls Human Development:

  Human development is about much more than the rise or fall of national incomes. It is about creating an environment in which people can develop their full potential and lead productive, creative lives in accord with their needs and interests. People are the real wealth of nations. Development is thus about expanding the choices people have to lead lives that they value. And it is thus about much more than economic growth, which is only a means—if a very important one—of enlarging people’s choices.

At household, community, societal, national and international levels, various aspects of the above need to be provided, as well as commitment to various democratic institutions that do not become corrupted by special interests and agendas.

Yet, for a variety of reasons, these full rights are not available in many segments of various societies from the richest to the poorest. When political agendas deprive these possibilities in some nations, how can a nation develop? Is this progress?

Politics have led to dire conditions in many poorer nations. In many cases, international political interests have led to a diversion of available resources from domestic needs to western markets. (See the structural adjustment section to find out more about this.) This has resulted in a lack of basic access to food, water, health, education and other important social services. This is a major obstacle to equitable development.

Back to top

Inequality

While poverty alleviation is important, so too is tackling inequality. Inequality is often discussed in the context of relative poverty, as opposed to absolute poverty.

That is, even in the wealthiest countries, the poor may not be in absolute poverty (the most basic of provisions may be obtainable for many) or their level of poverty may be a lot higher than those in developing countries, but in terms of their standing in society, their relative poverty can also have serious consequences such as deteriorating social cohesion, increasing crime and violence, and poorer health.

Some of these things are hard to measure, such as social cohesion and the level of trust and comfort people will have in interacting with one another in the society. Nonetheless, over the years, numerous studies have shown that sometimes the poor in wealthy countries can be unhappier or finding it harder to cope than poor people in poorer countries.

In the context of tackling poverty then, the Overseas Development Institute (ODI) for example sees poverty reduction as a twin function of

1. The rate of growth, and
2. Changes in income distribution.

The ODI also adds that as well as increased growth, additional key factors to reducing poverty will be:

• The reduction in inequality
• The reduction in income differences

A few places around the world do see increasing rates of growth in a positive sense. But globally, there is also a negative change in income distribution. The reality unfortunately is that the gap between the rich and poor is quite wide in most places. For example:

• About 0.13% of the world’s population controlled 25% of the world’s assets in 2004.
• The wealthiest 20% of the world’s population consumes 76.6% of the world’s goods while 80% of humanity gets the remainder.

(See poverty facts and stats on this site for more examples.)

Inequality in Industrialized Nations

Professors Richard Wilkinson and Kate Pickett, from the Equality Trust, produced an informative lecture video titled Inequality: The enemy between us? based on their recently released book, The Spirit Level; Why More Equal Societies Almost Always Do Better (Penguin, March 2009).

In the lecture, compelling evidence is presented by the two professors that once nations are industrialized, more equal societies almost always do better in terms of health, well-being and social cohesion and that large income inequalities within societies destroys the social fabric and quality of life for everyone:

As they studied the data for industrialized nations, they noticed a clear tendency for countries which do badly (or well) on one outcome to do badly (or well) on others.

They looked at a wide range of health and social problems and found that,

• Outcomes are substantially worse in more unequal societies
• The problems tend to move together, implying that they share an underlying cause
• Whether their findings are tested internationally among the rich countries, or among the 50 states of the USA, there is almost always the same tendency for outcomes to be much worse in more unequal societies.

As they note in a presentation of their findings:

• Health is related to income differences within rich societies, not between them
• Health and social problems are worse in more unequal countries
• Health and social problems are not related to average income in rich countries
• Child well-being is better in more equal rich countries
• Child well-being is unrelated to average incomes in rich countries
• Levels of trust are higher in more equal rich countries
• The prevalence of mental illness is higher in more unequal rich countries
• Drug use is more common in more unequal countries
• Life expectancy is longer in more equal rich countries
• Infant mortality rates are higher in more unequal countries
• More adults are obese in more unequal rich countries
• Educational scores are higher in more equal rich countries
• Teenage birth rates are higher in more unequal rich countries
• Homicide rates are higher in more unequal rich countries
• Children experience more conflict in more unequal societies
• Rates of imprisonment are higher in more unequal societies
• Social mobility is higher in more equal rich countries
• More equal societies are more innovative
• More equal countries rank better on recycling

An interesting point they make is that economic growth alone — which is supposed to raise the income of all — is not necessarily a good determinant of life-expectancy and well-being: individuals in some developing countries can attain a level of life-expectancy comparable to industrialized nations even when their income may be far lower:

In other words, economic growth is important when developing, but after that equality may be more important.

The following graphs (reproduced with kind permission) are just examples of the problems they looked at, but the trends are always the same: the more unequal the society, the worse the problem generally:

From the source for the above graph, the Equality Trust notes that, The link between inequality and homicide rates has been shown in as many as 40 studies, and the differences are large: there are five-fold differences in murder rates between different countries related to inequality. The most important reason why violence is more common in more unequal societies is that it is often triggered by people feeling looked down, disrespected and loss of face.

The next example compares social mobility (the ability for someone to move up the social ladder, escape poverty etc) with inequality:

It may be surprising to see the US at the low end of social mobility when it is touted as the land of dreams and possibilities for anyone, no matter who they are. The UK is also surprisingly at the low end.

Interestingly, the US and UK are the biggest proponents of neoliberal economic ideology, which has often played down concerns about inequality and instead focused more on raising the lot for everyone (as the interview with Tony Blair noted further below reveals). Yet, the Equality Trust finds that,

It looks as if the American Dream is far more likely to remain a dream for Americans than it is for people living in Scandinavian countries. Greater inequalities of outcome seem to make it easier for rich parents to pass on their advantages. While income differences have widened in Britain and the USA, social mobility has slowed. Bigger income differences may make it harder to achieve equality of opportunity because they increase social class differentiation and perhaps prejudice.

The implications of all these findings are important in many ways. For example, it is often said that to develop and industrialize, developing nations’ carbon emissions must increase, as industrialization implies a more energy-intensive economy. However, what is less discussed is whether that means carbon emissions of poorer countries must be similar to today’s industrialized nations.

Many of today’s industrialized nations are often seen as over consuming with respect to the planet’s health (climate change being something largely a result of greenhouse emissions from wealthier nations, for example).

As the next graph shows, a number of developing nations have achieved average life expectancies that are close to industrialized nations, but with far less carbon emissions in the process:

Addressing inequality implies tackling many, many social, political, economic and environmental issues, for they are all inter-related in many ways.

(Interestingly, the data they used for the study came from the early 2000s, so are not distorted by the global financial crisis that started around 2008.)

Further below there is more about poverty in industrialized nations, but first, some more on inequality.

Inequality in the US

The US for a long time has had the largest gap and inequality between rich and poor compared to all the other industrialized nations. For example in 2003, the top 1% received more money than the bottom 40% with the gap widest in 70 years. Furthermore, in the last 20 years while the share of income going to the top 1% has increased, it has decreased for the poorest 40%.

Inter Press Service also summarizes an updated report by the US Census Bureau that 1 in 7 people in the US are in poverty. In 2009, 43.6 million people — 14.6 percent of the population — were living in poverty in the U.S., up from 13.2 percent of the population in 2008. The United States currently has the highest number of people in poverty it has ever had since the government began counting in 1959, although the percentage of people this represents is lower than it was then (due to the increased population size since then).

IPS also notes factors such as the global financial crisis, stagnant wages and more contribute to this deepening poverty. But the article also adds that the poverty estimate may be understated because of assumptions made in calculations years ago and changes in costs of living since then as well as regional differences.

The US Congressional Budget Office released updated figures for US household income between 1979 and 2007 which showed that the top 1% were driving the main increases in income. Their income had grown some 275% over that period, some 7 times more than the remaining 99%.

This is likely to add fuel to the so-called Occupy protest movement in the US and around the world, where in the US in particular, we are the 99% (or its variations) are popular slogans in the protests against the current economic conditions and those who largely caused it or are benefiting from it.

Factors included more market income in the top percentages, a larger increase in wage rates for those at the top, increases in corporate pay, the expansion of technology disproportionately benefiting those at the top, increasing pay for those working in the financial and legal professions, the expansion of financial services, etc.

The report notes similar findings to that in earlier years, mentioned further above that the top 1% received more than the bottom 40%:

As a result of that uneven income growth, the share of total after-tax income received by the 1 percent of the population in households with the highest income more than doubled between 1979 and 2007, whereas the share received by low- and middle-income households declined…. The share of income received by the top 1 percent grew from about 8 percent in 1979 to over 17 percent in 2007.… In 2007, those shares were 53 percent and 47 percent, respectively. In 1979, the top 1 percent received about the same share of income as the lowest income quintile; by 2007, the top percentile received more than the lowest two income quintiles combined.

Nobel prize winner for economics, Paul Krugman, comments on earlier CBO data that even within the top 1% the big gains have gone to the top 0.1%. The 99%/Occupy protest movement is aiming too low he remarks!

Krugman also notes that lack of education is not a driving factor for inequality in the US as some have argued. Instead, inequality in America is mainly a story about a small elite pulling away from everyone else, including ordinary college grads.

In a short follow-up, Krugman adds that the change in income share in that period shows that just about all of the redistribution has taken place from the bottom 80 to the top 1. And stressing his point about education, It’s a tiny minority, not a broad class of well-educated Americans, who have been winning here.

Noting that around the world there is a new global working wealthy dominating the new global elite, an earlier New York Times article notes for the US that the gap [in the US] between the super rich and everybody else is now greater than at any time since before the Depression of the 1930s. Furthermore, The richest one-hundredth of 1 percent of American families — about 15,000 — accounted for less than 1 percent of national income in 1974. By 2007, the figure was 6 percent, according to Tyler Cowen, an economist at George Mason University outside Washington. That difference translates into hundreds of billions of dollars.

Countries like Russia have been seen as having an oligarchical structure. But for a while many have talked of countries like the US also showing similar patterns. And so a long-time concern is that a lot of this increased concentration in wealth is not just from successful business practices, but collusion, corruption and undue influences:

One concern some economists express about the emergence of a global plutocracy is that it may be driven, not only by seemingly benign forces like the technology revolution and global trade, but also by malign ones, particularly the elite’s ability to shape government and other public policy activities in its own self-interest.

…

The rise of government-connected plutocrats is not just a phenomenon in places like Russia, India and China. The generous government bailouts of United States financial institutions prompted Simon Johnson, a professor of economics at the Massachusetts Institute of Technology, to compare American bankers with emerging-market oligarchs. In an article in The Atlantic magazine, which he later expanded into a book, Mr. Johnson wrote that American financiers had pulled off a quiet coup.

Inequality in Cities Around the World

Inequality is usually associated with poorer, developing nations. But for many years, studies have shown that many wealthier nations also suffer from inequality, sometimes at levels similar to those of some developing countries.

For example, the UN Habitat’s State of the World’s Cities 2008/2009 report has found that disparities within cities and between cities and regions within the same country are growing as some areas benefit more than others from public services, infrastructure and other investments.

In addition, and almost counter to conventional wisdom, the report finds that cities with high levels of inequality increases the chance that disparities get worse with economic growth, not get reduced. This is because high levels of urban inequality have a dampening effect on economic growth and contribute to a less favorable environment for investment.

The report also added that in such cities, the lack of social mobility tends to reduce people’s participation in the formal sector of the economy and their integration in society. This exacerbates insecurity and social unrest which, in turn, diverts public and private resources from social services and productive investments to expenditures for safety and security.

In another UN Habitat report, the issue of equality was noted:

As a municipal official, one has to decide whether to spend taxpayers’ money on road infrastructure, which in developing cities mostly serves higher income citizens with cars, or to spend it on public utilities and amenities, thus providing for a majority of the population, particularly benefiting the poor. This is why the major issues for today’s cities have to do with equality and politics, rather than engineering alone.

Factoring in democratic principles also makes things harder: Government has many roles but a fundamental one, in democracy, is to build equality. For legitimacy to exist in society, citizens must perceive that inclusion and equality are fundamental objectives of public authorities. (p.9)

Yet different priorities and interests easily result. For example, the report adds that in many developing cities, wealthier citizens live in private spaces and may even avoid visiting or walking around in city centers. As a result, they do not care much about city’s parks or public schools but may be more interested in better roads, for example.

There is therefore a dilemma that the public sector faces compared to the private sector: for the private sector, deciding where to invest usually boils down to where the best returns will be. By contrast, in the public sector every project is ‘good’, a police station, a road, a school or a park all provide a benefit which is difficult to measure.

In parallel with growing cities are growing informal settlements or slums. Numerous factors create this rise, from poverty in the countryside, changes towards neoliberal economic ideology, corruption, globalization factors and so on. The problem is so immense that, according to UN Habitat, approximately 1 billion people live in slums in the cities of the world — approximately 1 in every 6 people on the planet.

While there have been some successes in reducing the number of people living in such areas in recent years by about a tenth (mostly in China and India), numerous problems persist.

Without the ability to make their voices heard, people in informal settlements often find that in addition to less services, the threat of forced eviction is commonplace as private developers often want prime land for development. Amnesty International provides numerous examples of this from around the world. A short video summarizes a number of other videos they have compiled on this.

Some settlements don’t have official recognition. As a result, residents have been denied a range of essential services provided by the government to other residents … [such as] water, sanitation, electricity, garbage collection, health, education, access roads and transport (from Amnesty International’s report: Kenya: the unseen majority; Nairobi’s two million slum-dwellers , June 2009, p.7).

Kenya’s Kibera slum, Sub-Sharan Africa’s largest informal settlement, is an example of a massive settlement without official recognition which has been around for decades. The video clip shows that despite the hardships there is still a sense of vibrant humanity. Share The World’s Resources, an organization that produced the video, released the book Megaslumming which described this further, highlighting that despite the grinding reality of poverty, human nature can still prevail and people work together to help each other and are enterprising despite all the circumstances.

In developing countries, where some 1 in 3 people living in cities are living in slum areas, the urgency to address this has never been more.

With increasing migration to cities (almost half of humanity lives in urban areas), there is increasing pressures on providing sufficient resources in a sustainable way.

Furthermore, as cities grow in this way, addressing greenhouse emissions from urban areas can go a long way to helping combat climate change.

Some of the other findings the 2008/2009 UN Habitat reported included that

• Some 3 million people per week were added to cities of developing world.
• Some American cities are as unequal as African and Latin American cities. For example, New York was found to be the 9th most unequal in the world while Atlanta, New Orleans, Washington, and Miami had similar inequality levels to those of Nairobi, Kenya Abidjan and Ivory Coast.
• Race is one of the most important factors determining levels of inequality in the US and Canada. For example, The life expectancy of African-Americans in the US is about the same as that of people living in China and some states of India, despite the fact that the US is far richer than the other two countries.
• India was becoming more unequal as a direct result of economic liberalization and globalization.
• The most unequal cities were in South Africa and Namibia and Latin America.
• Beijing was now the most egalitarian city in the world, just ahead of cities such as Jakarta in Indonesia and Dire Dawa in Ethiopia.
• Europe was found to be generally more egalitarian than other continents. Denmark, Finland, the Netherlands and Slovenia were classed as the most equal countries while Greece, the UK and Spain were among the most unequal.

Conventional thinking on development issues is often characterized by many assumptions, clichés and rationalizations about the residents of slums. Challenging some of these core myths about slums can help focus on the structural causes of urban poverty that result in the rapid growth of informal settlements, as Adam Parsons from Share the World’s Resources organization notes.

Although the above focuses on cities, more generally, rural areas exhibit more poverty than urban areas which is briefly looked at next. In addition, the section further below on poverty in industrialized areas also suggests that inequality is unfortunately widespread.

Inequality in Rural Areas

Poverty and inequality in rural areas is also high, particularly in the developing world.

The International Fund for Agricultural Development (IFAD), an international financial institution and a specialized UN agency, released a major report on the state of rural poverty in the developing world in December 2010.

The Rural Poverty Report 2011 contains updated estimates by IFAD of the number of rural poor people living in the developing world, poverty rates in rural areas, and the percentage of poor people residing in rural areas.

The report also includes new information on how many people move in and out of poverty over time. It points to what it describes as emerging opportunities for rural growth and development and suggests how to help rural women and men move out of poverty and become part of the solution for the global food security challenges of the next several decades.

The report adds that despite an historic shift towards urbanization, poverty remains largely a rural problem, and a majority of the world’s poor will live in rural areas for many decades to come. In addition, of the 1.4 billion people living in extreme poverty [less than US$1.25/day] in 2005, approximately 1 billion — around 70 per cent — lived in rural areas. (p.47)

Changes over time are not the same in all regions, however.

As the IFAD chart shows,

• As a total average, yo% of those in extreme poverty live in rural areas
• East Asia has reduced the rural share of total poverty to just over 50 per cent
• Latin America and the Caribbean, and the Middle East and North Africa, the most urbanized regions, a majority of the poor now live in urban areas
• In South Asia, South East Asia and sub-Saharan Africa, by contrast, over three-quarters of the poor live in rural areas, and the proportion is barely declining, despite urbanization

But rural areas are not with poor only. In recent years, many have been lifted out of poverty:

As the IFAD chart shows, as a total average across developing nations, just under 35% of the total rural population of developing countries is classified as extremely poor, down from around 54% in 1988. The various regions have fared differently, however. For example,

• Rural poverty has declined more slowly in South Asia, where the incidence is still more than 45 per cent for extreme poverty and over 80 per cent for US$2/day poverty
• Likewise, sub-Saharan Africa’s rural poverty decline is also slow, where more than 60% of the rural population lives on less than US$1.25 a day, and almost 90% lives on less than US$2/day.

Even within these regions, the IFAD reports that some countries and sub-regions fared better than others.

IFAD also noted that the number of those living on less than $2 a day is also down, from around 80% of all rural populations to around 60% (but mostly due to massive rural poverty reduction in East Asia (mostly China) where today the incidence of rural poverty is around 15% for the US$1.25/day line and 35% for the US$2/day line. (p.48)

Despite successes in areas like Latin America when using the internationally comparable $1.25/day poverty line, the report also warns that the numbers there that can be classified in poverty would be higher if using their own national poverty lines. In other words, inequality is high even while absolute poverty is slowly being reduced.

In addition, in terms of raw numbers of people, South Asia and sub-Saharan Africa are where most rural poor live:

Although the graphs seem to show progress, the report warns of complacency as further efforts to reduce rural poverty will be complicated by

• Increasingly volatile food prices as seen in 2008
• The uncertainties and effects of climate change, and
• A range of natural resource constraints

Inequality Between Genders

IFAD also notes that women tend to do more work (for less pay) and are the primary care givers in virtually all rural societies, yet barely feature in recognition or policy.

IFAD also adds that The general implication of these findings is that achieving gender equality requires challenging social institutions, and that doing so is crucial to address interlocking deprivations which result in poverty – not only for women, but poverty more broadly. … women’s access to better paid, more secure jobs is not only beneficial to them and their families, but also to the growth of the wider economy. (p.63)

For more information, see this site’s section on women’s rights which goes into the above further.

Back to top

The Wealthy and the Poor

In the developing world, there is a pattern of inequality caused by the powerful subjugating the poor and keeping them dependent. Outside influence is often a large factor and access to trade and resources is the usual cause. It is often asked why the people of these countries do not stand up for themselves. In most cases when they do, they face incredible and often violent oppression from their ruling elites and from outsiders who see their national interests threatened.

Consider the following from the United Nations:

And contrast that with the following around the same time, from a key superpower that helped create the United Nations. It is from George Kennan, head of the US State Department planning staff until 1950, and his comments on US relations with Far East:

While it is recognized that strong institutions, a functioning and non-corrupt democracy, an impartial media, equitable distribution of land and a well structured judicial system (and other such factors), etc. all help in realizing a successful nation and society, a lack of any of these things can lead to a marginalization of a sector of people. Often, it can be a very large sector.

For example, those likely to lose out in such an equalizing effect are the rich, elite power holders.

As a result of their ability to own and/or influence one of these above-mentioned things, they affect the lives of millions. This is a pattern seen throughout history. Take for example the medieval days of Europe where the wealthy of the time controlled land via a feudal ruling system and hence impoverished the common people intentionally.

• The rulers (Kings etc), would proclaim their Divine Right to rule over their subjects.
• They had an army of Lords and Bishops to advise on policies that benefited these groups (religion was used—and still is—to control and influence people, while Lords and Knights were an extension to the ruling family that would carry out the wishes.)
• They would heavily tax the people of their land.
• Not allowing the peasants to own the land upon which they lived meant that they would be stuck in poverty and dependency.
• When the elite could no longer tax the poor, they started to tax the wealthy nobility.
  • It was only at that point did the revolutions such as the French Revolution take hold (because now the nobility had their wealth affected and were able to influence the peasants to fight for their cause.)
  • While this helped bring more rights, once the people won, there were concessions made that allowed the elite to retain their power, but to share it a bit more.

Trading superiority was maintained by raiding and plundering areas deemed as a threat. Summarizing from the works of the Institute for Economic Democracy:

• The old European city states, which were centers of wealth, would control their countryside as the source of their resources and production, and hence, the source of their wealth. If the countryside became more efficient and produced better, or threatened to trade with other neighboring cities, this would be seen as a threat to the wealth, power and influence of the city. These peripheries would therefore be raided and their means of production would be destroyed.
• The cities would fight over each other for similar reasons.
• For continual support, those rulers would proclaim various reasons to their people, of maintaining security and so on (not unlike what we hear today about national security). Even some laws were established that basically allow these practices.
• A strong military was therefore necessary (just as it is today) to ensure those trade advantages were unfairly maintained.
• Those European city states evolved into nation states and imperial powers, and the countryside expanded to include today’s third world, which was much of the rest of the world. The effects of colonialism and imperialism are still felt today.

The discovery of the Americas, expansion of trade routes etc brought much wealth to these centers of empire which helped fuel the industrial revolution, which required even more resources and wealth to be appropriated, to continue this growth. Mass luxury consumption in Europe expanded as well as a result of the increased production from the industrial revolution.

But this had a further negative impact on the colonized nations, the country side, or the resource-providers. For example, to keep profits up and costs down, they used slavery where they could, sometimes transferring people across continents, introducing others when indigenous populations had either been wiped out, decimated, or proved too resistant in some way.

Europeans also carved out artificial borders to reflect their territorial acquisitions, sometimes bringing different groups of people into the same borders that had never been forced to live together in such short times. (Some poorer countries today still suffer the effects of this.)

As with the previous wars throughout Europe’s rise, World War I and II were also battles amongst the various European empires who struggled over each other to control more of the world’s resources and who would decide the rules of unequal trade.

Plundering the countryside to maintain dominance and control of the wealth-producing process has been an age-old process.

These mercantilist processes continue today. Those policies of plunder by raid have continued, but include a more sophisticated plunder by trade:

The geopolitical events of the post World War II era have been crucial for their impacts on poverty and most other issues. J.W. Smith summarizes this:

While European nations are now more cooperative amongst themselves (in comparison to the horrors of World War II) and the U.S. had long taken the lead in the international arena, for the rest of the world, international trade arrangements and various economic policies still lead to the same result. Prosperity for a few has increased, as has poverty for the majority.

Today’s corporate globalization, is an example where the wealthier companies and nations are able to determine the rules, shape the international institutions and influence the communication mechanisms that disseminate information to people.

In this backdrop, how do developing nations contend with poverty?

• During the Post World War II period, during the Cold War, poorer country governments often found that if they tried to improve the situation for their people, they could have been perceived as a threat or worse still going communist. They may have faced external pressure, external meddling in internal affairs or even military intervention by the powerful nations.
• The powerful nations would of course claim this was necessary for something like world stability, national interest, or to save the other country from themselves, but it would often be to do with protecting their national interests, such as a secure and constant supply of cheap resources or some other reason related ultimately to maintaining influence and power.
• Dictators and other corrupt rulers have often been placed/supported in power by the wealthier nations to help fulfill those national interests in a similar way the old rulers of Europe used the Lords and Knights to control the peripheries and direct resources to the centers of capital. (Although, now, increasingly, democracies are supported, but ones where the economic choices are so limited, that the democracy provides a similar environment that a dictatorship did, for foreign investors, but without the overt violence and oppression.)
• This means that it is hard to break out from poverty, or to reduce dependency from the US/IMF/World Bank etc.

Structural Adjustment (SAP), as described in a previous section on this web site, is an example of that dependency. Neoliberal economic ideology has been almost blindly prescribed to poor countries to open up their economies.

The idea is that opening markets for foreign investment will also help improve exports and contribute to economic growth. Cutting back on social spending (e.g. health and education) which are seen as inefficient will also help pay back loans and debts.

But what ends up happening is the poorer nations lose their space to develop their own policies and local businesses end up competing with well-established multinationals, sometimes themselves subsidized (hinting a more mercantilist economic policy for the rich, even though free market capitalism is the claim and the prescription for others).

Hence, many back the economic neoliberal policies without realizing the background to it. It is another example that while international trade and globalization is what probably most would like to see, the reality of it is that it is not matching the rhetoric that is broadcast.

J.W. Smith has researched this in depth and the following offers a relevant summary:

(To find out more about the political dimensions of the economy of the world and to see the detailed links between history (how it is both told and repeated), politics that are always at play and the effects on the economy the world over, visit the Institute for Economic Democracy web site. It provides much more in-depth research into these backgrounds and in far more detail than what I have summarized above.)

With this in mind, why would so many people not oppose such things? There are many reasons, including:

• Most people don’t know—this is not an accident. It is in the interest of power-holders to ensure as little is questioned by outsiders as possible. Whether it be via an aristocracy or by simple distortion of information, educational systems, or whatever, different nations have had various means to handle this.

  The smart way to keep people passive and obedient is to strictly limit the spectrum of acceptable opinion, but allow very lively debate within that spectrum—even encourage the more critical and dissident views. That gives people the sense that there’s free thinking going on, while all the time the presuppositions of the system are being reinforced by the limits put on the range of the debate.

• Those that have opposed such things in the past may have been persecuted in some way. In some societies those who try to say something may just face ridicule due to the embedded belief systems which are being questioned, while in other societies, people may even face violent oppositions.
• Some dare not entertain the thought that the work they may be doing could be at the expense and exploitation of someone else. The following summarizes this aspect quite well:

  [W]e should be familiar with the sincerity with which people will protect the economic territory that provides them their livelihood and wealth. Besides the necessity of a job or other source of income for survival, people need to feel that they are good and useful to society. Few even admit, even to themselves, that their hard work may not be fully productive. This emotional shield requires most people to say with equal sincerity that those on welfare are lazy, ignorant, and nonfunctional.

  Those above the poverty level vigorously insist that they are honest and productive and fulfill a social need. It is important to their emotional well-being that they believe this. They dare not acknowledge that their segment of the economy may have 30 to 70 percent more workers than necessary or that the displaced should have a relatively equal share of jobs and income. This would expose their redundancy and, under current social rules, undermine their moral claim to their share. Such an admission could lead to the loss of their economic niche in society. They would then have to find another territory within the economy or drop into poverty themselves.

J.W. Smith, quoted above, also points out (and details in his work) how we have moved from plunder by raid to plunder by trade in recent centuries. The complexities of some of today’s economics and trading systems also make it harder to address root causes of poverty:

And when considering how today’s global economic model promotes the liberalization of capital more and more, the effects of rapid flows of capital and other impacts of over-liberalization is borne largely by the poorer members of society:

Back to top

The World Bank and Poverty

The World Bank is a major international institution involved in poverty and development. It has the capacity to lend a lot of money and expertise to developing countries and advise on development matters.

The World Bank produces an annual report, called the World Development Report. The Bank regards this as its flagship report. Most mainstream economists use this report in some way or form, and it is one of the few reports on development that the US mainstream media reports on (because it usually shows the US, and its policies that it prescribes to the rest of the world, in a favorable light.)

The way the 2000 report was released highlighted another problem with the World Bank, and how it doesn’t like to accept criticism on the current forms of globalization and neoliberalism. For the 2000 report, Ravi Kanbur, a professor from Cornell University had been asked to lead up the report team.

Kanbur won respect from NGO circles as he tried to be inclusive and take in a wide range of views, something the Bank has been criticized for not doing (which is a problem in itself!). However, as the report was to be published, he resigned because he was unreasonably pressured by the Bank to tone down sections on globalization, which, amongst other things called for developing nations to accept market neoliberalism cautiously.

The World Bank was apparently influenced itself by the US Treasury on this—this is not new though; critics have long pointed out that the Bank is very much influenced by the US, thus affecting the chance of real progress being made on poverty issues around the world.

The following quotes collected from the Bretton Woods Project, reveal some interesting insights:

The World Bank also provides the main source of poverty figures, such as those presented further above. The $1 dollar a day poverty line (now upgraded to $1.25 dollars a day using newer data and updated techniques) has also fallen under criticism in the past.

For example, during the long period the $1 dollar a day measure was used the World Bank was criticized for almost arbitrarily coming up with a definition of a poverty line to mean one dollar per day.

In addition, as also stated in the previous link, in the United States for example, the poverty threshold for a family of four has been estimated to be around eleven dollars per day. The $1 a day (now $1.25) definition then misses out much of humanity. Indeed, as the chart earlier showed, the number of people living on under $10 dollars a day is estimated to be just under 80% of humanity (95% of developing countries).

To be fair, the World Bank did explain why they did not use a $10 dollar a day poverty line. They felt that Learning that (possibly) 95% or more of the [developing country] population is poor by such a standard is unlikely to have much relevance, given that US standards of living are not within the foreseeable reach of most people in a typical developing country.

It does seem sadly true that this level is sadly not attainable in the near future for so many people. However, it serves as a useful figure to remind us how divided the world may indeed be (although, as also mentioned earlier, numbers alone do not capture all the issues; as also mentioned earlier, a number of studies show that some of the poorest in rich countries can be regarded as worse off than some in developing countries, depending on what you measure such as well-being, health, social cohesion, etc.) This can be seen more vividly in that chart also shown earlier:

Another critique of the $1 a day figure came from Columbia University, called How not to count the poor .

The report describes 3 main errors as being:

1. An ill-defined poverty line;
2. A misleading and inaccurate measure of purchasing power equivalence; and
3. Incorrect extrapolation of limited data giving the false impression of precision while masking the high probably error of the estimates.

These errors, they feared, would lead to a large understatement of the extent of global income poverty and to an incorrect inference that it has declined. (Emphasis added). At the same time, it allowed the World Bank to insist that the world is indeed on the right track in terms of poverty reduction strategy, attributing this success to the design and implementation of good or better policies.

Since that report, the World Bank has indeed revised the poverty line as explained earlier and they noted more people were in poverty than previously realized. The links provided earlier from the World Bank do provide a better explanation of why their poverty lines were chosen as they were. And while the data this time significantly includes China and India for the first times, they also acknowledge various challenges with collecting the data. However, while they have also given their reason for not using a $10 a day poverty line (because most poor people are unlikely to reach that level in the foreseeable future), we must still wonder if poverty, and its effects, are worse than the figures reveal.

As an aside, Morgan Spurlock, the Oscar nominee for his documentary Super Size Me where he went 30 days on a diet of burgers to see what the effects would be, produced another documentary where he tried to live on the minimum wage of $5.15 per hour for 30 days. At times he was earning $50 to $70 a day and yet the tremendous hardships he faced was incredible (including a ludicrous $40 for a bandage in a hospital, and some $500 for just being seen to).

Back to top

Poverty in Industrialized Countries

As mentioned earlier, poverty in industrialized nations is also an important issue. While many poor in wealthy countries may not be in absolute poverty as the many poor people in developing countries, the relative poverty and high inequality in many wealthy nations creates significant issues.

The gap between rich and poor has grown in more than three-quarters of rich countries since the mid-1980s, according to a study of income inequality and poverty by the Organization for Economic and Cooperative Development (OECD) released in October 2008.

In addition, the study finds that the economic growth of recent decades has benefited the rich more than the poor.

However, amongst those 30 countries, results are mixed. The study finds, for example, that the past five years saw growing poverty and inequality in two-thirds of OECD countries. Canada, Germany, Norway and the United States are the most affected. The remaining third—particularly Greece, Mexico and the United Kingdom—have seen a shrinking gap between rich and poor since 2000.

As summarized by an OECD briefing , the income of the richest 10% of people is, on average across OECD countries, nearly nine times that of the poorest 10%.

The average hides large variations. For example the top 3 countries with the highest income gaps are:

1. Mexico, where the richest have incomes of more than 25 times those of the poorest
2. Turkey, where the ratio is 17 to 1
3. USA, where the ratio is 16 to 1.

Portugal and Poland also have large gaps, making it the top 5, but their gaps are not as large as those first three. (For many years, the US was regarded as having the largest gap between rich and poor of any industrialized nations, but the group of industrialized nations has slightly grown since to include Mexico and Turkey—also the two poorest OECD countries—amongst others.)

In Nordic countries, however, such as Denmark, Sweden and Finland, the gap is much smaller. The incomes of the richest 10% average around five times those of the poorest 10%.

Although the elderly are more likely to be poor, the risk of them falling into poverty has reduced over the last two decades such that people aged 66-75 are now no more likely to be poor as the population as a whole.

Worryingly, however, children and young adults have poverty rates that are now around 25% higher than the population average, while they were below or close to that average 20 years ago.

The OECD report noted for example UK’s shrinking gap between rich and poor. Back in 2000, the UK was the worst place in Europe to be growing up if you were poor, as more children were likely to be born in to poverty there, compared to elsewhere in the EU.

Despite a period of boom, in April 2000, the UK National Office of Statistics found that disparities between rich and poor continued to grow in UK.

Andrew Simms, policy director of the New Economics Foundation in an article mentioned further above about inequality notes that

However, although there has been some improvement, there is a long way to go. A UNICEF report in February 2007 found that UK is failing its children as it comes bottom of all industrialized nations in terms of child well being. UK child poverty has doubled since 1979, for example.

As another example, it may be surprising for some readers to learn that the United States, although the wealthiest nation on Earth, has often had one of the widest gaps between rich and poor of any industrialized nation.

United For a Fair Economy reported that for 1998 almost 70% of the wealth was in the hand of the top 10%. In another report, they mentioned that the gap had widened in recent decades. In 1989, the United States had 66 billionaires and 31.5 million people living below the official poverty line. A decade later, the United States has 268 billionaires and 34.5 million people living below the poverty line-about $13,000 for a three-person family.

As with Britain, even during the booming economy in the late 1990s and early 2000, there was an increasing gap between the rich and poor. Into 2002, fighting poverty did not appear to have been a major election campaign issue (nor was it in previous election campaigns).

Then chairman of the Federal Reserve, Allan Greenspan, revealed concerns in mid-2005 that the increasing and widening income gap might eventually threaten the stability of democratic capitalism itself in the US.

While health and education are key to any economy or nation to grow and be strong, both of these suffer issues of access, equality and pressure to cut back (including elsewhere around the world as discussed in the structural adjustment part of this site). For example,

• As a summary of a report titled Economic Apartheid in America mentions, that the United States is the only industrialised nation that views health care as a privilege, not a basic human right.. (Unfortunately the report itself not available on the Internet, but is produced by United for a Fair Economy where you can see many extracts and similar reports.)
• In addition, as good education is linked to a strong economy, Business Week reports (February 14, 2002) on a study that analyses OECD data from 1994 to 1998, and summarizes that the literacy of American adults ranks 10th out of 17 industrialized countries. In addition, the issue of inequality was highlighted: More troubling, the U.S. has the largest gap between highly and poorly educated adults, with immigrants and minorities making up the largest chunk of those at the bottom. While Business Week concentrates on the U.S. they also point out that Despite the mediocre U.S. ranking, it still beat out most of its major trading partners except Germany, including France, Britain, and Italy. (Japan didn’t participate [in the study].)

The above-mentioned UNICEF report on child health found that as well as the UK being ranked bottom of all rich countries, the US ranked second to last. The report suggests that absolute wealth isn’t necessarily a guarantor of poverty alleviation or a measure for indicators such as child well-being, and factors such as inequality are also important.

And it isn’t in just these two industrialized nations that these problems persist. A Guardian news report, for example, shows that certain types of poverty in various European cities can be regarded as worse than in some other parts of the world which one would not normally think would compare with Europe, such as India.

Back to top

Corruption

Back to top