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The End Of Economic Growth

By       Message Adam W. Parsons     Permalink
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Economic growth cuts poverty!” is forever the inveterate, unrelenting dictum of World Bank statisticians. These four simple words, stale and contentious as they are, were in fact the title of a recent Forbes magazine article based on World Bank predictions for eliminating poverty in South East Asia [1]. As reported in the American journal that speaks to the super-rich, if economic growth continues to increase in this region of the world with the largest concentration of poor people, then “poverty can be significantly reduced, if not eliminated, within a generation.”

This prognosis, made by the bank’s Operations Director for South Asia, was shortly followed by their World Development Indicators for 2007[2] and the apparently good news that absolute poverty levels have fallen beneath one billion people. The bank’s Chief Economist, François Bourguignon, was careful to point out that these figures “go beyond growth” to ask how income is distributed and whether health care and education are conjointly improving, but the unspoken assumptions remained clear; globalisation is good, free trade and liberalisation is a prerequisite for ending poverty, and the only answer to human needs is a market-based world economy as defined by the Washington Consensus.

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The release of the annual figures, which this year seemed to be almost swept under the carpet by the international media, is still crucially important for two reasons; not only are the World Bank’s statistics the only view we have on whether the incomes of poor people are rising or falling, but the implied success they demonstrate in tackling poverty is used as powerful ammunition by the rich nations who seek to perpetuate and defend the existing economic architecture which is inherently biased in their favour. The basic motivation for the World Bank to continue propagating these figures, according to many interpreters [3], is to vindicate their policies and prove they are working. It is worthwhile, in this context, to repeatedly examine and demystify the basic arguments of the pro-globalisation thinkers and so-called ‘trickle-down theorists’.

How Not to Count the Poor

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In 2002, a report titled How not to count the poor was published by two US academics, Sanjay Reddy and Thomas Pogge, who contended that the World Bank figures on how many poor people there are in the world were “misleading and innaccurate”, “neither meaningful nor reliable”, and extrapolated “incorrectly from limited data”[4]. So conclusive and unequivocal was this assessment that the United Nations followed it up with their own damning summary of faulty methodology and “conceptual errors”[5].

When the annual figures on world income were released in the following year, many activists and NGOs naturally didn’t hesitate to question them; the arguments weren’t simply focused on the technical minutiae of ‘conversion factors’ and ‘Purchasing Power Parity’ measurements, however, but on the underlying implications of what such shoddily researched yet supposedly authoritative information really means. As one commentator in the UK wrote [6]: “That the key global economic statistic has for so long been derived by means which are patently useless is a telling indication of how little the men who run the world care about the impact of their policies. If they cannot be bothered even to produce a meaningful measure of global poverty, we have no reason to believe their claim that they wish to address it.”

The latest World Bank figures are more cautiously presented, with a notable emphasis this year on the inclusion of China and India. In the first two World Development Reports in 1990 and 2000/01 these two largest nations on earth were embarrassingly not even mentioned, which was consequently a major argument against the reports lack of veracity, although they are now both referred to as a chief reason for a decrease in world poverty levels – even when you consider developing countries “without these two giants”, we are told, “you still find very high growth rates.”[7]

Putative Successes

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The survey of data goes on to quote a number of putative successes; real per capita income growth in Sub-Saharan Africa has been stronger in the period since 2000 “than any time since the 1960s”, it says, alongside higher growth rates in middle income countries, and there is no hesitation in asserting that “one factor behind this performance is strong macroeconomic polices”, in other words, those policies known collectively as economic liberalism. This growth in low-income countries, it goes on to brazenly attest, has “clearly resulted” in lower poverty incidence.

Some of the other improvements need not be questioned in the same way, such as the 34 million children in the developing world who gained the chance to attend primary school, the nearly doubling of external financing for health and education, and the “significant progress” made on Millennium Goal 7 to halve the proportion of people without access to safe drinking water by 2015, but the overall picture that the report portrays needs to be permanently kept in mind. Extreme poverty is “increasingly concentrated in fragile states”, it says, which comprise 35 stricken countries like Gaza, Zimbabwe, Afghanistan, the Congo and Sudan, although Sub-Saharan Africa is more stricken in general than any other corner of the earth; the share of the region’s people living in extreme poverty may well have dropped 4.7 percentage points between 1999 and 2004, but it still results in 41 percent of the entire population left struggling to survive on less than one dollar a day, and a world in which an estimated 16,000 children die daily from hunger-related causes. Sub-Saharan Africa now accounts for 30 percent of the world’s extreme poor, says the report, compared with 19 percent in 1990, and “only 11 percent” in 1981, still an almost 300 percent difference in less than three decades.

Does the “rapid global growth” in 2006, in this context, really provide cause for the “optimism about progress in advancing the Millennium Development Goals” as the World Bank continues to submit? Is just under one billion people living in extreme poverty, about a sixth of the human population, with almost half of the remaining developing world living on two dollars a day, really cause for a note of “optimism” at all?

Depressing Contradictions

For a report that seeks to subtly toot its own horn, it is amazing how many depressing contradictions can be found when comparing its findings to concurrent happenings in the world. On the day after the World Bank’s poverty figures were released, Ban Ki-moon, the new Secretary-General of the United Nations, visited East Africa to reflect on the fact that the number of slum-dwellers worldwide is set to reach a new high in 2007. Speaking in Nairobi, a city that boasts the largest slum in Sub-Saharan Africa, the U.N. emphasised that unless more private sector help is provided then the developing country governments alone will be increasingly overwhelmed by the challenge to provide adequate housing for the poorest of the poor.

This year has also seen the release of a number of independent and disquieting studies into poverty and wealth distribution; according to the recent McClatchy Newspapers analysis of 2005 census figures in the US, for example, the number of poor Americans living in deep or severe poverty has reached a 32-year high, growing by 26 percent from 2000 to 2005, what they described as “a distressing sidebar to an unusual economic expansion.”[8] Poverty levels are falling, says the World Bank. Poverty levels, at least on a national basis in the richest countries, are actually increasing like never before, say the independent studies. In the UK, even the latest official figures show that poverty has increased for the first time since Tony Blair came to power in 1997. [9]

Crisis of Inequality

The key issue concerns not just poverty levels and the misleading ‘dollar a day’ measure, but the corresponding crisis of inequality. The World Bank report freely admitted that despite abject poverty being on an apparent decline in global terms, inequality among citizens in the same country is on the rise. In the past decade, it also admits, poverty reduction was not always or everywhere commensurate with income growth. As contemporary studies have shown [10], inequality is in fact harmful to economic growth, and income distribution is not only worsening year-on-year, but it results in the paradox of overall decreasing poverty levels and a simultaneous increase in the number of people living in extreme poverty.

The income gap has so widened, according to a recent analysis of tax data in the US [11], that the top 10 percent of Americans have reached a level of national income share not seen since before the Wall Street Crash of 1929. The top one percent of wage earners, it showed, saw an increase of 14 percent, compared to an overall percentage decrease in earnings for 90 percent of the country. The income gap is growing faster in the US, as other figures reveal [12], than in any other developed nation.

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Adam W. Parsons is the editor of Share the World 's Resources (www.stwr.net), an NGO based in London campaigning for global economic and social justice based upon the principle of sharing. He can be contacted at (more...)
 

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