I was quite happy the other days to have received a call from a long time friend whose news I had not had for at least a year. After the usual exchanges, he switched to a slightly more ironic tone and said: “The main reason for my call is to shake you out of your pessimism about the evolution of world poverty. According to the latest figures from the International Monetary Fund (IMF), the world poverty rate has fallen dramatically. You should rejoice.”
Indeed, there is nothing that I would have liked better but for my suspicion about how international institutions, dominated by ideologues, interpret data; although the IMF is not the worst of the lot.
The first questions that came to me were: How was “poverty” defined, by how much had the rate fallen, were the numerous pockets of poverty in rich countries included, etc. Of course, the need for answers drove me straight to the figures to which my friend referred.
I should first stress that my fundamental disagreement with these statistics arises from my belief that poverty should be viewed in a broader sense, even though that would make it more difficult to define and to measure. In addition, whatever it is, we should not restrict it to the so-called developing or Southern countries. In countries classified as “rich”, i.e., member countries of the Organization for Economic Cooperation and Development (OECD), there exist significant pockets of poverty, however defined. I do not see why poverty in rich countries should be omitted from institutional discourses. For example, in the US , a country where the rich are getting richer while the poor are regressing, some 13 percent of the population live below the poverty line, as defined by the government itself. For sure specific studies have been carried out, but cross-rich-country data are hard to come by. And lo and behold, IMF’s World Economic Outlook (WEO) of April 2004 focuses on countries of the South. That is, Sub-Sahara Africa, the Middle East and North Africa, Developing Asia, and Latin America (often designated Western Hemisphere ). Of course, I was not surprised not to find what I did not expect to find, but that compels me too to focus on the same areas, that is, where poverty is most prevalent. However, what should be borne in mind throughout is that rich countries have the resources to reduce poverty to insignificance if they so choose; the failure to do so is ascribable more to a question of greed and to a low priority driven by some irrational dislike of poor people. Poor countries, on the other hand, can not do it without assistance. With that clarification out of the way, let us return to the main point.
The approximate percentages of the total population of these areas that were classified as poor ( WEO , April 2004:48) were as follows:
Sub-Sahara Africa (pop. 690m)49
Middle East and North Africa (pop. 307m)2.5
Developing Asia (pop. 3,239m)24.8
Latin America (pop. 526m)11.
The figure for Developing Asia is a weighted average of South Asia and East Asia and the Pacific; it excludes Central Asia . What is not shown, though important for a greater understanding, is that, compared with a decade ago, East Asia and the Pacific have had the biggest reduction in poverty, while in Sub-Sahara Africa the situation has worsened.
The above are the figures to which my friend referred, but two important qualifications seem to have escaped his notice. First, the figures refer to the year 2000; we then do not know what has happened over the last 4 ½ years. In addition, the rates in question were defined as the percent of the total population living on less than $1.08 a day. In other words, the figures are not only old but they refer to “abject income poverty”. And here is the problem. We are left to understand that now about 23 percent of the “world” population are living on $1.0 a day. Not long ago, the data were saying that some 40 percent were living on $2.0 a day. I wonder whether I could extrapolate to some 60 percent on $3.0 a day. Or had the IMF defined poverty as living on $0.5 a day, would poverty have disappeared all together? Moreover, elsewhere ( WEO , April 2004: 31), poverty is not defined, but we can see in the most populous countries of Latin America, i. e., Brazil and Mexico, the rates for 2001 were 37 and 42 percent, respectively. The next countries in terms of population are Colombia , Argentina , Peru and Venezuela . There, rates were 55, 30, 49, and 48 percent, respectively. Hence, it takes a real restrictive definition to arrive at a global 11 percent for Latin America as a whole one-year earlier.
This sort of confusion is precisely what nourishes my suspicion about the number-magicians of these institutions. Not long ago, they had produced a chart showing that the share of the world population on $1.0 a day had fallen from 83 percent in 1820 to 24 percent in 1994. The IMF has simply updated the latter figure to 23 percent in 2000, but shied away from questioning the validity of the data on poverty in 1820. Regardless though, I guess that every reasonable person would agree that that business of one-dollar-a-day is too restrictive as a definition. Why then these institutions keep on pushing it?
I can think of two good reasons. The first certainly has something to do with keeping us on course, i. e., partly to continue putting every aspects of human life under the stewardship of the market, and partly to counteract critics of globalization, such as Noam Chomsky and the present author. In 2001, for example, Chomsky was quoted as saying: “Inequality is soaring through the globalization period within countries and across countries.” Many others, including myself, have said essentially the same thing. And that has caused an uproar in some quarters.
I should recall that during the 1990s, globalization was widely perceived as the engine of worldwide economic progress. Poor countries were assumed to be able to achieve economic growth if they privatize, liberalize, and pursue good governance. Economic growth, in turn, would have brought widespread improvements in nutrition, housing, health, education and access to basic infrastructure. These improvements would have allowed poor countries to break free of the poverty trap. We now know that globalization has benefited a handful of countries and has hurt most. We also know that there has been some economic growth lately, due to China . But, if anything, economic growth, while it may reduce absolute poverty, normally increases relative poverty. Therefore, Chomsky’s assertion is essentially true. But the task of the number-magicians was to disprove it, hence the insistence on the dollar-a-day thing.
There is a second reason for this unwarranted optimism, I believe. It is to show that we are on our way to meeting the first goal of the UN Millennium Declaration of 2000. This point needs to be expanded because that Declaration, if anything, implicitly offers a much broader view of world poverty.
The Declaration was adopted in September 2000. It commits political leaders to genuine global efforts to reduce poverty, to improve health, to promote world peace, human rights, environmental sustainability, etc. It consists of 8 goals encapsulated in 18 specific targets, which were reaffirmed in the so-called Monterrey Consensus that emerged from the UN Financing Development Meeting of March 2002 and again in the World Summit of Sustainable Development of September 2002. The Declaration is in fact an offer of partnership in the fight against poverty, meaning that rich countries would provide market access and increased assistance to meet the goals, while poor countries would privatize to account better for such donors’ assistance, and to improve governance, etc. Also, it implicitly recognizes that poverty can not be reduced without tackling its causes.
Those that are genuinely concerned with poverty in our world always see it as a multi-dimensional affair. But, short of an accepted definition, they are content to just emphasize the following: To be poor is to lack fundamental freedoms of action, food, shelter, health, and education. To be vulnerable to ill treatment by individuals and institutions, to natural disasters, to economic dislocations, to have no input into policies affecting one’s life, etc. The authors of the UN Millennium Declaration must have been in agreement with these dimensions of poverty, since every one of the 18 specific targets seem to have a direct bearing on poverty reduction.
Now, the connection between the dollar-a-day and the Declaration is the following. The date limit to reach the targets of the Declaration is 2015. Yet, already, the ideologues in the international institutions have serious doubt as to whether these targets can be met. The reasoning is then as follows: just one more failure, that is, one more disappointment on this score stands to discredit rich countries’ clichéd discourse on poverty reduction and sounds the death knell of globalization. The threat to globalization and like schemes seem to be driving that useless exercise of defining as poor the proportion of the world’s population living on less than $1.08 a day. For a serious exposé on the squalid conditions in which billions of humans live would certainly shame world political leaders.
As already noted, during the 1990s, the same institutions put out a plan to eliminate poverty, consisting of macroeconomic stability, the reinforcement of local institutions, and the empowerment of people to decide their future. What have we achieved thus far? Well, according to the Human Development Report 2003 , 54 countries are now poorer than in 1990 (this is addressed in Target 1). In 21 countries, a larger proportion of the population is going to bed hungry (target 2). In 12, primary school enrollments are falling (target 3). In 14, more children are dying before the age of five (target 5). In 34, life expectancy has fallen (targets 6 and 7). In 37 of 67 countries for which up-to-date data are available, the poverty rate has increased. In 21 countries, the Human Development Index (a summary measure of three dimensions of poverty) has declined. More than one billion poor people do not have access to safe water, a situation that is getting worse. Finally, some 2.4 billion do not have access to adequate sanitation, that situation too is worsening. These numbers not only eloquently describe the scourge known as poverty, they also reflect the need to regroup.
The Millennium Declaration is commendable for its intention, but it is at the same time comprehensive. The higher the ambition, the higher the risk of failure. Since it emphasizes cooperation, it should, in my humble opinion, thrust itself on the following poverty-causing factors, as they appear thus far insuperable:
Some 70 percent of the world population live in rural areas, where two main factors combine to thwart agricultural productivity. Inadequate land tenure is one; in poor countries, it is simply appalling. The other is the loss of fertile land. At a rate of 10 million hectares per year, mass irrigation has already turned one third of fertile land into salty wasteland, while soil degradation has already affected another 2 billion hectares; poor countries do not have the resources to develop plant resistance to poor soil and salt. And this is not all. The lack of market access for poor farmers’ products is mainly due to the level of subsidies received by rich farmers in rich countries. Such subsidies are also the main block to the conclusion of the Doha Trade Talks. The elimination of these subsides would be a real economic boost, and the rich nations themselves would have more resources to tackle their own pockets of poverty, should they suddenly see the light. But we are not there yet. On the contrary, according to OECD figures, far from being eliminated or even reduced in response to international criticism, agricultural subsidies rose from $314 bn in 2002 to $349 in 2003.
The World Health Organization (WHO) estimates that $35-40 per capita is the bare minimum to sustain basic health services. Poor countries spend less than $10, although 39m out of the 42m people living with HIV/AIDs are in poor countries. There, tuberculosis is causing some 2m deaths a year, malaria is taking another million, and 500,000 women a year die in pregnancy and childbirth. Medical personnel is scarce, and the poor are unable to pay international prices for life-saving drugs. Countries where the work force is being ravaged by diseases obviously have high proportions of poor people. The children that survive HIV/Aids are growing without parents in squalid conditions, swelling the ranks of the poor.
Another major handicap to poverty reduction is the distribution of income. In poor countries, it is simply appalling. Furthermore, it seems to have deteriorated almost everywhere due to globalization. To measure the extent of it, economists use the Gini Coefficient Index, in which 0 represents perfectly equitable distribution of income and 1.0 stands for perfect inequality. However, the path an economy has to travel from 1.0 to 0 is not linear, and no economy with a score lower than 0.30 has ever been observed. Therefore, I cannot say that an economy with a score of 0.20 would reduce poverty to insignificance, nor that an economy with a score of 0.40 would have twice as much of poverty as one with a score of 0.2. All I know is that a society with a score around 0.37 has relatively little poverty compared with another with scores above 0.5. Latin America , for example, with 44 percent or more of its population in poverty, has one of the worse income distributions of the areas under consideration. Uruguay , with the lowest score of 0.44 in 2001, also had the lowest poverty rate in the region.
At the Monterrey Conference, rich countries promised some $16 bn in additional assistance for 2006. Even if that addition were to materialize, it would only bring the total official assistance to 0.26 per cent of the GDP of the members of OECD’s Development Assistance Committee. The estimated need is about $100 bn. The reason that actual assistance is so low is that many believe that the solution to the poverty problem is more rapid trade induced economic growth. The Group of 20 claims that the only way to go forward on the Doha Round is for the rich countries to eliminate the above agricultural subsidies and open their markets. The rich countries counteract by arguing that only the unblocking of the Doha Round can provide the framework for poverty reduction. In other words, the rich countries too are insisting on market access, but in the other direction. In this regard, the recent United Nations Conference on Trade and Development’s (UNCTAD) meeting was quite timely. For it reminded the rich countries that the poor ones are in no condition to even benefit from greater access to Northern markets. The underlying reason is that UNCTAD perceives capital accumulation and technical progress as the engine of economic growth, while trade is but the fuel for the engine. Accordingly, more trade without specific poverty reduction programs is pointless. It is hard to disagree. Growth at all costs has never been a solution, for it bypasses the poor and damages the environment. Neither is trade alone, when one has just one commodity to trade and when trade expansion is perceived as a substitute for assistance.
At the recent G-7 Meeting, UK ‘s Gordon Brown has argued for the G-7 to double aid to $100 bn a year and to write-off the debt of the poorest countries more aggressively. The accumulated debt of poor countries with arrears or needing rescheduling during 1997-2001 amounts to $795 bn in 2004. Poverty reduction would require the total debt be written-off. In addition, these countries should not be pressured to sell public assets in order to be included in lopsided trade deals. They should instead be allowed to liberalize gradually as their economies strengthen.
I have said elsewhere that the first step in the fight against world poverty consists of a $100 bn of debt forgiveness for the 41 poorest countries (target 13), and a $100 bn a year in un-tied aid. These sums could easily be had from an insignificant Tobin Tax on speculative transfers. Gordon Brown made the same point with regard to debt forgiveness, but he is having all kinds of difficulties convincing himself as well as his G-7 colleagues. I am hoping that I will be more successful convincing my friend, at least.
I would like to end with at least one good news. Target 15 of the UN Millennium Declaration requires that all parties deal comprehensively with the debt problem of developing countries through national and international measures so as to make the debt sustainable in the long run. If the pace indicated in the Table below could be maintained, that target could be met by 2015 without any sacrifice from the rich. The short-term debt, denominated in U. S. dollars, is known to be a major factor in financial crises. In Sub-Sahara Africa, it is a mere 7 percent of the total, and the average 2000-04 rate of increase of the total is 0.5 percent. For the Middle East , the short-term debt is about 10 percent. It is 11.7 percent in Latin America , but a little higher at 16.8 percent in Developing Asia. Put differently, the average rates of increase of the total external debt of these areas are way below their average real rate of economic growth. This can make a dent in poverty reduction provided of course that those savings are properly allocated and provided that the euphoric Chinese growth, net of the impact of greed and environmental degradation, continues.
Real Rate of Economic Growth and the Evolution of the External Debt of Selected Areas, 2000-04 (1)
- Figures for 2004 are projections
Source: IMF, World Economic Outlook , April 2004: 193,249.