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Global Poverty Persists Despite Efforts - 2004-03-31

Despite years of efforts, millions of people in the world continue to live in abject poverty, lacking sufficient food, shelter and health care. But what exactly constitutes poverty, what causes it and how it can be reduced are matters of intense debate. Zlatica Hoke has more.

Poverty means different things to different people. That makes it difficult to determine how many people are poor and to compare poverty levels in different countries. The World Bank and the International Monetary Fund, two of the world’s largest organizations engaged in efforts to reduce global poverty use the so-called “dollar-a-day” standard. That means people living on less than a dollar a day are considered extremely poor.

“The region with the highest incidence of poverty now is sub-Saharan Africa at around 50 percent by that standard. So roughly 50 percent of the population of sub-Saharan Africa as a whole falls below that line,” says Martin Ravaillon, a manager in the World Bank’s Development Research Group. He says Sierra Leone, Tanzania, Ethiopia, Zambia and some other African nations are among the world’s poorest. This is a change from some twenty years ago when south-east Asia was the poorest region in the world.

“Looking back ten, certainly 20 years, the region that had the highest poverty used to be East Asia, and now the East Asia poverty rate has fallen from about 60 percent in 1981 to under 20 percent now, a huge decline there. And south Asia used to have a higher incidence of poverty than sub-Saharan Africa, but it has declined there. So there’s really been a dramatic change in the composition of poverty in the world,” says Mr. Ravaillon.

According to World Bank estimates, about 1.3 billion people, or about one sixth of the world population, live in poverty today. Most are in developing countries. But Mr. Ravaillon says, despite the increase in Africa, global poverty has declined in the past twenty years.

“If you look at the developing world as whole, things look pretty good. Over a 20-year period, the poverty rate has halved from about 40 percent to about 20 percent between 1981 and 2001. And that’s an impressive performance," says Mr. Ravaillon. "Looking at the developing world as a whole, there’s huge progress. The number of poor has fallen by nearly 400 million over that 20-year period by our estimates,” he adds.

But those estimates are wrong, say others. Many analysts criticize the very premise of counting among the world’s poor only those who live on less than a dollar a day.

Michel Chossudovsky, professor of economics at the University of Ottawa and author of the new book “The Globalization of Poverty,” notes that the US Census Bureau sets 14 dollars a day as a poverty level in the United States. In his opinion, life in developing countries is not much cheaper.

“We are living in the era of free trade and for basic commodities -- food, fuel -- the prices are not substantially different in developing countries," says Professor Chossudovsky. "There may be differences, but they are not one to 14. The cost of living in some of the developing countries is as high as in the United States.”

Professor Chossudovsky says, for example, the cost of living in large South American cities such as Sao Paulo in Brazil and Buenos Aires in Argentina is comparable to that of some North American cities. And in some countries the cost of food and gas is higher than in the United States.

So according to his estimates, more than one sixth of the world population is poor and poverty is on the rise: “The levels of world poverty have increased dramatically since the 1980-s, and the various international organizations which measure poverty have misled us because they define poverty in particular ways, which I think is erroneous, because to say that you can live on a dollar a day is a misstatement. And obviously, if you redefine that and say it’s two or three or four or five dollars a day, which is required to meet basic requirements, the levels of poverty in the world would be much, much higher," says Professor Chossudovsky. "And we are not talking about 1.3 billion people, as suggested by the World Bank. We are talking about three or four billion people in the world.”

If they are at odds about numbers, analysts also disagree about the causes of poverty. Some blame interventions by western financial institutions for adding to the problem by urging liberalization of an economy: “The reasons for this impoverishment are the applications of deadly macroeconomic reforms, which curtail social programs, depress wages and trigger the demise of local industry and agriculture,” says Michel Chossudovsky.

He adds some of these reforms have caused poverty in countries that were doing relatively well in the past, such as Argentina. In Malaysia, he says, government intervention against World Bank demands helped avert the Asian crisis.

Marian Tupy, an economic researcher at Washington’s Cato Institute, disagrees. He says poverty is caused by a country’s internal problems, not by liberalizing its economy along western lines.

“Much of Africa suffers from very profound misrule and it continues to suffer from high degree of corruption among government officials," says Mr. Tupy. "In a situation where there is political instability, there is no rule of law and economic conditions generally are not favorable to investment, international companies and international investment tend to stay away. When that happens, it is very difficult for countries to become prosperous.”

However, Mr. Tupy adds, there are ways western countries can improve the standard of living in the developing world: “They could, for example, stop subsidizing their agriculture. They could free up the trade and allow sub-Saharan African countries to export their produce to the first world.”

Marian Tupy says what the west should not do is send aid, which can be disastrous:“Foreign aid as a general rule provides disincentives for African governments to undertake economic reforms and it also supports corrupt regimes. Most of the money that the west provides to sub-Saharan Africa, for example, goes straight back to the Swiss accounts of the ruling classes and also in support of the repressive institutions domestically, such as the police force and the army.”

Western aid can also be used to support wars. Cato analyst Marian Tupy says history shows that with the right economic incentives nations can move relatively fast from poverty to prosperity.

“If you look at South Korea, if you look at Taiwan, if you look at Singapore, if you look at Chile, these countries have not been large recipients of foreign aid," notes Mr. Tupy. "And yet, these are among the richest countries in the world. Now, how did that happen? It happened because these countries have embraced the free market. They have embraced limited government. They have dramatically improved their domestic institutions that have protected the rule of law and private property.”

But some observers say economic development does not necessarily end poverty. In fact, they note, the poor can become even poorer, especially in agricultural areas, neglected by investors. Critics add most developed countries have maintained some tariffs and subsidies to protect their farmers, while pressing poor nations to eliminate such barriers to trade.

Analysts disagree about the level of control a government should have over an economy, but most say a recipe for success in one country may fail in another. So efforts for development and reduction of poverty must come from within a nation.