Global Poverty and Inequality
KeywordsForeign Direct Investment Gross Domestic Product United Nations Human Development Index Poverty Alleviation
The combined impact of global poverty and inequality is one of the most significant moral and political issues in global politics. While contemporary levels of global poverty are improving in overall terms, they still lead to the death of many vulnerable people around the world from poverty-related causes of starvation, malnutrition, or disease. Coupled with global poverty are wide and growing forms of inequality within and between societies around the world. Consequently, global poverty and its consequences of insecurity, despair, and powerlessness have become contentious issues as demonstrated by the activism of civil society organizations (CSOs), the policies of international governmental organizations (IGOs) such as the United Nations (UN), and the continual pressure of less developed countries (LDCs) that possess the bulk of the global poor. This entry examines the scale and nature of contemporary global poverty and inequality, outlines the drivers of these forms of poverty and inequality, and considers the main policy measures that have been arranged to promote development and address global poverty.
The Scale of Global Poverty and Inequality
Before global poverty is analyzed, it is important to consider the idea of socioeconomic “development” and, more importantly, the contested nature of this term. While the term development has various intellectual origins, the modern conception of development really only emerged in the postwar era as the colonial powers left or were expelled from their former colonies. Most definitions of development focus upon improvements in economic well-being and the measurements of a given nation’s material prosperity. From this perspective, development is interpreted through an economic prism as an improvement in the economic productivity and material well-being of a country’s inhabitants in terms of economic growth. Material well-being, and development, can therefore be measured in purely quantitative terms by calculating a nation’s gross domestic product (GDP) or gross national income (GNI) divided by its population to define overall average or per capita incomes. The World Bank also determines the number of people with personal incomes below the US $1.90 per day threshold for extreme poverty (The World Bank Overview 2017). Many in the economics profession continue to view development in such terms – and with good reason given that GDP is a good measure of the welfare of nation – but it certainly does not capture all the characteristics of social life which constitute a population’s well-being.
Consequently, since the early 1990s, there has been a shift away from purely quantitative definitions to measurements which assess the broader social, cultural, and environmental aspects which define well-being. This perspective has been led by the UN (Jolly et al. 2004) and considers development as an increase in the capacity of individuals in a given society to conduct their lives as they choose. This means that qualitative social indicators have increasingly been employed to gauge the overall “quality of life” of a people within a given state or region. The most prominent example is the UN’s approach of human development and is calculated and expressed in the Human Development Index (HDI) as a number between 0 and 1, which is published annually in the United Nations Development Programme’s (UNDP) Human Development Report which ranks countries according to their relative life expectancy, education levels, and income (United Nations Development Programme 2017). This qualitative and multidimensional view recognizes broader notions from health indicators – such as life expectancy, infant mortality rates, and HIV rates – to more socially defined measures, such as functional literacy and primary school enrolments. As such, absolute poverty is understood by the UN as “a condition characterized by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information” (World Summit for Social Development 1995, p. 38).
The overall picture of development and global poverty is extremely problematic despite significant progress in the last two decades. The improvement in income-based measures has been dramatic in recent decades. According to income-based measures of poverty determined by the World Bank: “in 2013, 767 million people lived on less than $1.90 a day, down from 881 million in 2012 and 1.85 billion in 1990” (The World Bank Overview 2017). This means that in 2013 that 10.7 percent of the world’s population lived below the US$1.90 a day threshold, compared to 35 percent in 1990 (The World Bank Overview 2017). In qualitative terms there have also been improvements. The 2010 Human Development Report notes that the world average HDI increased to 0.68 in 2010 from 0.57 in 1990 and 0.48 in 1970 (United Nations Development Programme 2010, p. 26). Furthermore, all but 3 of the 135 countries measured had a higher HDI in 2010 than in 1970 (the exceptions were the Democratic Republic of the Congo, Zambia, and Zimbabwe) (United Nations Development Programme 2010, p. 27). The aggregate global measurements are strongly influenced by the sustained progress in populous countries such as China and India over the last few decades.
Global poverty remains a crucial problem despite this progress. Declines in poverty have been extremely uneven with poverty reduction dramatically less evident in sub-Saharan Africa than the significant improvements in South Asia and especially the massive improvements in South East Asia and China (The World Bank Overview 2017, p. 96). While rural poverty remains an issue for LDCs, the UN has also estimated that more than one-third of people living in cities in the developing countries (approximately 863 million people) live in slum-like conditions with inadequate housing, water supply, and sanitation (UN Habitat 2013). Furthermore, in human development terms despite improving incomes, almost 1.75 billion people in 104 developing countries are living with overlapping deprivations in health, education, and living standards (United Nations Development Programme 2010, p. 86). These deprivations lead to high levels of personal insecurity and poverty-related deaths. To put the current levels of extreme poverty in their starkest, we can look at the current levels of poverty-related deaths as one of the most staggering events in human history. As the philosopher Thomas Pogge claims “massive poverty caused by human agency is certainly not unprecedented” with British colonial institutions and policies being blamed for up to one million poverty deaths in the Irish potato famine of 1846–1849; Stalin’s economic policies during 1930–1933, which caused some seven to ten million famine deaths; and Mao Zedong’s “Great Leap Forward” in China during 1959–1962 which caused approximately 30 million poverty deaths (Pogge 2005, pp. 721 and 741). However, compared to contemporary global poverty, “these historical catastrophes were of more limited duration and even at their height did not reach the present and ongoing rate of 18 million poverty deaths per annum” (Pogge 2005, p. 741).
The statistics relating to global inequality are also stark and even more unrelenting with inequality rising between and within countries. In overall terms in 2014, “the richest 1 percent held 48 percent of global wealth” and “around 80 percent of the world’s people have just 6 percent of global wealth” (United Nations Development Programme 2015, p. 65). Inequality between societies is increasing. The UNDP notes that the ratio of income of the world’s poorest fifth compared to the richest fifth has increased from 74 to 1 in 1997, up from 60 to 1 in 1990 and 30 to 1 in 1960 (United Nations Development Programme 1997, p. 35). In 1990 the average American was 38 times wealthier than the average person from Tanzania, while in 2005 the average American was 61 times wealthier (United Nations Development Programme 2005, p. 37). Inequality within societies is also increasing in both developed and developing societies. This is evident with sharp rises in income inequality weighted toward the very rich. For example, “between 1976 and 2011 the share of total annual income received by the richest 1 percent of the population in the United States rose from 9 percent to 20 percent” (United Nations Development Programme 2015, p. 65). Inequality has wider manifestations than wealth or income, with growing differentials in HDI measurements of health and other qualitative indicators. Clearly women and vulnerable minorities are often subject to economic and social inequality and marginalization in many societies. Furthermore, divides of opportunity to access work remain which creates forecasts of intergenerational poverty persisting and therefore inequality and social immobility becoming entrenched in many societies.
As a result of poverty and inequality, many people are bearing the brunt of personal vulnerability, marginalization, and insecurity that stems from these conditions. For poor people living on less than a US $1.90 a day, poverty is not some statistical abstraction but a case of personal subjection that makes it impossible to live a full and dignified life. Indeed, it is crucial to state that there remain 795 million severely undernourished people in the world with particular impacts on women and children which leads to lasting ill health (Food and Agriculture Organization of the United Nations 2015). The important issue to consider is how these patterns of poverty and inequality have transpired.
Drivers of Global Poverty and Inequality
There are several key interlocking drivers or factors which are often used to explain the existing forms of extreme global poverty and inequality and the separation of the world into a developed and wealthy “North” and the LDCs of the “South.” However, we must be aware that there are many local political, cultural, and climatic particulars which affect development outcomes and patterns of poverty in particular states. Furthermore, in overall terms, different accounts of political economy scholarship give different weighting to the various drivers.
The first driver of global poverty is the history of colonialism. One key common feature of nearly all LDCs is that they were colonialized by outside powers. The impact of colonialism varied due to the policies of the specific colonial powers and the patterns of resistance that occurred in particular locations, but typical in these cases of colonialism were systematic forms of exploitation, the extraction of natural resources, and the subordination of the local population. In the 1950s and 1960s, processes of decolonization and self-determination meant that the goal of development had become the paramount concerns of new states. However, many if not most colonial states were locked into dependent economic roles that persisted after the colonial power formally left. These colonial states were never set up to be autonomously functioning political or economic entities and were often lacking an authentic common political culture or a robust apparatus of a state able to develop an independent strategy of economic development. This has made it hard for states to embark on a process of development that effectively addresses poverty because they are economically dependent upon certain primary production sectors – especially agriculture and mining – that are useful to formal colonial markets or other external markets. Thus colonialism can be seen to have shifted from formal political and military subordination to economic subordination, also referred to as neocolonialism.
The result of colonialism and neocolonialism is that many LDCs have gone through periods of having a state apparatus that is weak or suffers from legitimacy problems. As such, developing states have also been beset by corruption and maladministration by local elites during and after the Cold War. The impact of corruption and poor governance on development is a significant issue. It is clear that corruption does have a bad and insidious impact on people’s everyday lives in corrupt societies and frustrates development by reducing the effectiveness and legitimacy of national government and diminishing the impact of external assistance (United Nations Development Programme 2005, p. 92). Also Western governments and transnational corporations have carried part of the responsibility for the corruption in LDCs due to Western corporate interests being those that have often supplied the bribe payments. Indeed, until the 1990s, governments of Western states not only allowed these corrupt practices, but they even rewarded them with tax deductibility. The 1999 Organization for Economic Cooperation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions has delegitimized this practice.
The second driver of global poverty is the continuation of neocolonialism evident in the current institutionalization of economic policies and practices that systematically advantage the developed world at the expense of the developing world. This institutionalization does not adequately include developing world in the current economic policymaking and international financial institutions (IFIs), such as the World Bank, International Monetary Fund (IMF), and the World Trade Organization. A key purpose of these institutions has been to provide assistance and advice to developing countries with regard to how they can participate in the global economy. However, it must be remembered that these institutions have been primarily created and financed by developed states and are therefore under the control of these developed states. These IFIs have profoundly influenced the development trajectory of many developing countries, and developing states have had little voice or input into these policies. In effect, the LDCs were born into a political-economic order with rules they have no voice in creating – most developing states were not present at the Bretton Woods conference in 1944 where the IFIs were created. The decision-making procedures of these institutions favored, and continue to favor, their western creators. Whereas the UN General Assembly was based on the principle of one nation, one vote, the influence of countries in the IMF and the World Bank are weighted according to the size of their economies, meaning that they give overwhelming influence to Western and developed states. Therefore, it could be claimed that it is difficult for these institutions to effectively address poverty when they reflect the interests and perspectives of wealthy developed states.
Consequently, the economic ideas and policies of IFIs can be seen to also reflect this bias against LDCs. In particular, the IFIs have largely followed developed world trends in international economic policy from Keynesian policies between the late 1940s and the 1970s to a more neoliberal pro-market stance since the 1980s – with the view to encouraging economic growth and capital accumulation as the only path to development. The term “Washington Consensus” refers to a consensus of US government and development economists in the 1980s that minimum government and free markets were achievable and necessary across the developing world in order to promote development. However, the rise of neo-liberalism and the Washington Consensus can be seen to have a significant impact on poverty and inequality because some neoliberal policies – in particular structural adjustment programs (SAPs) – involved lending money to developing countries on the condition of reforming their domestic economies along neoliberal, free-market lines. However, SAPs did not work to effectively promote development, and the World Bank accepted this and eventually reformed many of its policies from 1999 onward to better consider the domestic institutions needed to support development in LDCs. Structural adjustment focused only on economic growth and did not take account of broader measures; for instance, it never included a consideration of human rights, welfare minimums, environmental protections, or the need to strengthen fundamental institutions in society to help facilitate effective capitalism. Despite the concerns of LDCs, and an increased concerns about the domestic institutions required to support capitalist development, it must be noted that neoliberals and many liberals still believe that economic growth in the long run is the best strategy to promote poverty reduction and that the best way to promote economic growth is free markets. They also believe that free trade and deregulation are the best ways to achieve the progress that we have seen in the last 30 years.
A third driver in the continuation of global poverty that connects with neocolonial arguments is the problem of continuing LDC debt. Although figures on the level of indebtedness of developing countries are generally difficult to determine, the average relative debt payment burden of LDCs is forecasted between 2011 and 2024 to increase “by between 85% and 250%” (Jubilee Debt Campaign 2014). Such high levels of debt are a crushing burden on economic fortunes and development in many of the poorest countries, and in the past debt servicing has prevented poor countries from making adequate investments in health and education. Countries such as the Philippines, El Salvador, Jamaica, and Sri Lanka spend more on debt than either health or education (Jubilee Debt Campaign 2017). While debt relief is often trumpeted by the Western leaders, it is not always matched with concrete action. The Heavily Indebted Poor Countries’ (HIPC) initiative is the current international debt relief scheme which has helped 36 countries to the value of $75 billion since 1996 (IMF 2017). But this still falls short of what is needed to effectively help LDCs address poverty.
The fourth driver of global poverty is the problems facing the LDCs when it comes to having access to the global economy. LDCs have problems accessing lucrative developed markets in heavily protected sectors of agriculture and textile markets. This is a substantial impediment to LDC development. In the 1990s, countries belonging to the OECD provide about $1 billion a day in domestic agriculture subsidies – more than six times what they spend on official development assistance for developing countries (United Nations Development Programme 2002, p. 33). If developing countries were able to increase their market share in the developed markets, they would be able to lift some of the world’s poorest workers out of poverty. Likewise the access of LDCs to foreign direct investment (FDI) is important because it can be an important stimulus for economic activity and development. Transnational corporations can invest capital in LDC business ventures, which can provide opportunities and private enterprise and jobs. However, many LDCs are still not capable of attracting such investment. FDI is unevenly spread around the developing world. For instance, in the 1990s only roughly one quarter of global FDI went to developing countries; but Asia received around 20 times more investment than sub-Saharan Africa (Annan 2000).
A fifth driver of global poverty is persistent forms of insecurity and civil conflict. The legacy of colonialism is also evident in the fact that many states around the world are colonial constructs which often have low levels of social cohesion and have been beset by civil conflicts and ethnic cleavages. These conflicts were particularly significant in the 1990s with the end of the Cold War (Collier 2007). Basically, many postcolonial states are weak or failing states. The 2005 Human Development Report claims that “there is a strong association between low human development and violent conflict” (United Nations Development Programme 2005, p. 154). Some of the evidence regarding countries recently affected or engaged in civil conflict includes 22 out of 32 countries with a low HDI ranking, 9 out of the 10 lowest HDI countries, 9 out of 10 countries with the highest infant and under-five mortality rates, and 9 out of the 18 countries that had a decline in their HDI in the 1990s (United Nations Development Programme 2005, p. 154). The 2005 Human Development Report also indicates that diseases like HIV and Malaria spread more rapidly in conflict or post-conflict societies because health and educational infrastructure is destroyed and societies obviously put resources into military. Low-HDI countries in conflict in 2002 spent on average 3.7% of GDP on their militaries but only 2.4% on health care (United Nations Development Programme 2005, p. 160). The poverty–conflict cycle creates a trap which makes it hard for a poor country to escape and is thus a powerful issue in the persistence of extreme global poverty in many developing societies.
No one of these drivers alone can easily be seen to cause global poverty and inequality. For the catastrophic levels of extreme poverty and poverty-related deaths – most significantly in Africa – there has to be a combination of factors operating. While many of these factors have been especially evident in the 1990s and early 2000s, these factors continue to shape the incidence of global poverty. Reoccurring economic crises such as the global financial crisis (2009) and the world food price crisis (2007–2008) have ongoing social impacts which affect poor people around the world long after the crisis is considered to have concluded. Furthermore, these ongoing factors are being joined by the emerging and future impact of climate change which has the heaviest impact on the poorest and the potential to sharply reverse the development gains that have occurred (United Nations Development Programme 2007/2008). Despite these ongoing and emerging challenges, there have also been various measures created which seek to highlight and address global poverty.
Addressing Global Poverty and Inequality
Debate continues regarding the most appropriate mechanisms by which states and IFIs, such as the World Bank or regional development banks such as the Asian Development Bank, can best lift people out of poverty. Poverty alleviation has been pursued through different and overlapping approaches. Clearly, the liberal and neoliberal strategy of free trade and economic growth as an engine of development has been the dominant paradigm. From the period from the 1970s onward, poverty alleviation has been primarily pursued by LDCs promoting economic growth via engagement with global markets and free trade. Some countries have benefitted from the system of free trade and FDI that has developed since the late 1940s by government policies which have sought to engage global markets. Despite the problems noted in the previous section, there is little doubt that access to global markets is a key means by which states, particular across Asia, have improved their development situations.
However, despite the dominance of this model, the UN and the World Bank have also acted to try to address global poverty and development through policies that promote poverty alleviation through educational and health services as well as create and improve basic infrastructure like roads, dams, and other public utilities in target countries. This is normally done through targeted assistance – in the form of grants or long-term loans. Such assistance is sometimes called “aid” or official development assistance (ODA) which can be given by one country to another in a bilateral form or delivered by international agencies such as the World Bank in a multilateral form. The effectiveness of foreign aid in promoting development and addressing global poverty is heavily debated (Sachs and Ayitte 2013). While ODA targeted at poverty alleviation can make an impact, poverty alleviation has not always been a key objective of ODA as both commercial and security objectives have also figured prominently in the delivery of ODA. Also, only six developed countries have met the target established by the UN in 1967 of 0.7% of GDP.
Some official IGOs (primarily the UN and the World Bank) have addressed the conditions that permit world poverty by targeted multilateral ODA. While the IFIs have supported and promoted economic liberalization, the UN and the World Bank now focus on poverty understood as human development and thus focus on services that support the realization of these social indicators. In particular the UN has various programs facilitating development, in partnership with governments and CSOs, and various agencies such as UNDP, United Nations Environment Programme, UN Women, and UN Children’s Fund (UNICEF), for instance, that all have particular areas of competence and responsibility. For instance, UNICEF is the lead UN organization working for the long-term survival, protection, and development of children, and its programs focus on immunization, primary health care, nutrition, and basic education. The World Food Programme is the world’s largest international food aid organization for both emergency relief and the promotion of development which includes food security. Furthermore, the United Nations Human Settlements Programme (UN–Habitat) assists people living in health-threatening housing conditions. In addition to emergency humanitarian assistance, the UN also operates programs to address problems of chronic diseases such as HIV and malaria.
States and IGOs are not the only actors seeking to address global poverty. CSOs and social movements have developed various attempts to address global poverty, such as the ways the anticapitalism movement sought to identify and challenge the shortcoming of free trade orthodoxy and conventional efforts to promote development in the 1990s, and more reformist efforts of the “Make Poverty History” campaign to bring attention to the issue of global poverty and increase ODA in the 2000s. Many of these groups alongside the UN have sought to develop discourses which promote human well-being that emphasize themes of democracy, human rights, the empowerment of women, and sustainable development. Many CSOs have also been involved in the actual delivery of development assistance and humanitarian aid. The size and continued growth of the large nongovernmental organizations like Oxfam, World Vision, and Save the Children points to their significant role in addressing global poverty (Ronalds 2010). There have also been a range of new transnational actors in the promotion of development and poverty alleviation such as philanthropy organizations like the Bill and Melinda Gates Foundation and hybrid organizations comprised of governments, the private sector, and civil society, evident in the Global Fund to Fight AIDS, Tuberculosis, and Malaria (Brown 2009).
The UN has also played an increasingly prominent role with respect to global poverty. While the IFIs have had the main responsibility for crafting the rules of the global economy and are largely controlled by wealthy states, there were attempts by LDCs during the 1970s to use the UN as a forum to advance a restructuring of the global economy in favor of developing countries interests. This attempt was called the New International Economic Order and the G77, which ultimately was not embraced by Western countries and the attempt dissipated. Since the 1990s the UN has attempted to engage more deeply with economic issues and proposed norms and standards for the global economy. The UN also plays a role in highlighting poverty as an important global problem and the need to articulate normative standards in relation to development in the form of socioeconomic human rights and other declarations. After all, the UN asserted the importance of addressing poverty in the UN Charter when it declared “WE THE PEOPLES OF THE UNITED NATIONS DETERMINED … to promote social progress and better standards of life in larger freedom” (UN Charter 1945) and reemphasized the importance via the development of socioeconomic human rights in the 1960s. More recently the UN’s engagement with the issue of global poverty was highlighted in the Millennium Declaration in 2000 and the resulting Millennium Development Goals (MDGs).
The current normative standard is the Sustainable Development Goals which entail 17 Sustainable Development Goals (SDGs) established in 2016. These goals follow on from the MDGs, and both are overarching sets of goals for establishing development (Fakudu-Parr 2004; Fukuda-Parr and Hulme 2011). The turn of the century was a symbolic moment for the 189 Member States of the United Nations to articulate and affirm an animating vision for the organization in the form of the Millennium Declaration which stated “while globalization offers great opportunities, at present its benefits are very unevenly shared, while its costs are unevenly distributed” (United Nations, United Nations Millennium Declaration 2000). In 2000 the UN general assembly established eight goals (and clear targets for each goal) that were to be achieved by 2015. These goals reflected a human development conception of development and, most importantly, were established to be a common standard for both the UN and the IFIs (Fakudu-Parr 2004). While not all of the goals were realized in the 15-year timeframe established by the MDGs, they were successful in generating unprecedented political support for human development and a shift away from only focusing on economic growth measures, having been agreed upon by every UN member state with the active support of global civil society. This means that the normative standard articulated by the SDGs/MDGs has significant purchase in discussions relating to global poverty – even with respect to states that do not support them enthusiastically.
For these reasons there was considerable support to continue on the MDG beyond the 2015 target in the form of the expanded SDGs. However, the international community did fall short in achieving the MDGs. The level of ODA has also not risen fast enough to support the development goals. Furthermore, the MDGs and SDGs have not addressed deeper questions of power given the political assumptions about development driving goals (Weber 2015) and that LDCs have not been included in decision-making processes more than what was previously the case. CSOs are quick to note that efforts to promote significant debt relief have been minimal and efforts to include the perspectives of LDCs in the structures of the global economy have been fairly modest. These development goals have not rewritten the rules of the global economy – the same underlying structures and problems prevail. The failure of the WTO to liberalize agriculture or the IMF to substantially reduce LDC debt, for example, remain as crucial problems facing efforts to promote development in LDCs.
There are differences in opinion as to how we can assess the SDGs and the preceding MDGs in addressing global poverty. Some would see free markets and global capitalism as being the keys to promoting development, and the SDGs/MDGs being peripheral to the drive of economic growth enabled by global capitalism. It must be mentioned that many free market economists still believe that economic growth is the best strategy to promote poverty reduction in the long run and the best way to promote economic growth is economic globalization and free markets and thereby continue the progress that we have seen in the last three or four decades. There are also some CSOs and governments which see the SDGs are being a crucial way to couple global capitalism with a social conscience which will address global poverty. They accept the core aspects of the prevailing global order coupled with the full and quick implementation of the SDGs by appropriately supporting these goals. In this context the role of scholarly critics and CSOs who want to put public pressure on governments and public attitudes relating to global poverty are extremely important. But there is also the position that the SDGs and the MDGs are insufficient. Thomas Pogge makes the argument that we need something more dramatic than the MDGs. He goes so far, to say in referencing the first goal of MDGs to halve the proportion of people being hungry, that we should imagine what somebody would have said in 1994 that we had plan to halve those dying in the genocide in Rwanda. He asks why should we treat deaths by poverty different from other acts of harm? (Pogge 2004). Pogge notes the contradictions between human rights set out in the Universal Declaration of Human Rights (that everyone should have access to food, water shelter) and the MDGs (the goal is only to half the proportion of poor who are extremely poor or starving). According to Pogge, human rights should be put at the center of the global economy so that the global poor’s interests are considered and enforced in a more significant and sustained manner.
Clearly it is easy to be skeptical about the past success of the MDGs and future of the SDGs, but they have created a common framework and standard by which global poverty is being addressed by the UN, the IFIs, and CSOs and states around the world. Yet despite the shortcoming of such standards for development, they are indications that world leaders are aware that the combined impact of global poverty and inequality is not only an economic problem but a political and ethical problem as well. Ultimately, addressing global poverty is crucial to supporting the legitimacy of the current system of global capitalism.
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