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Newsweek International EditionNewsweek  
Davos FrontDavos 2005
The Poor Problem
The war on poverty is gaining momentum, and will figure high on the agenda at Davos this week, against a sobering backdrop: the war is not going as well as many thought.
Aijaz Rahi / AP
No Change: Poverty is up in rural India, even as the economy booms
By Karen Lowry Miller
Newsweek International

Jan. 31 issue - A different war is now competing for the world's headlines—the war on poverty. British Prime Minister Tony Blair has made fighting African poverty a cornerstone of his leadership of the G8 this year, and will devote the March Finance ministers' meeting to it, while Chancellor of the Exchequer Gordon Brown is pushing a Marshall Plan for Africa. Both men are featured players at the World Economic Forum summit in Davos, Switzerland, this week; there, poverty will stand high on the agenda, fast on the heels of an ambitious blueprint released last week by the United Nations, aiming to revive its Millennium Development Goals, a project launched in 2000 to halve global poverty by 2015.

These efforts emerge against the backdrop of a sobering realization: the war is going worse than thought. The consensus view among the elites who gather in Davos has been that, no matter what street protesters and U.N. do-gooders may say, globalization is good for the poor. The recent boom in international trade and finance has reversed the course of history, shrinking the number of poor for the first time ever.

The statistical cornerstone of this world view is the work of Columbia University professor Xavier Sala-i-Martin, who has calculated that as global trade, travel and communications have boomed since 1970, the number of poor people worldwide has fallen by between 300 million and 500 million; between 1970 and 2000 the minority who live on less than $2 a day dropped from 29.6 percent to 10.6 percent. The problem, or so it was thought, was that the gains against poverty were mainly in the export powerhouses of Asia, while large swaths of Africa and Central Asia, held back by war, isolation, poor governance or a lack of natural resources, lay beyond the enriching reach of globalization.

It turns out that progress is much more spotty than that picture suggests. In December, the U.N. Food and Agriculture Organization (FAO) released a study claiming the number of hungry people worldwide rose in the second half of the 1990s, particularly because of India, where the number of hungry people rose by 18 million, and stalled progress in China. The claim is widely disputed. Sala-i-Martin calls the FAO methodology "bogus." But some Indian authorities do not dispute the basic trend: they say the number of poor people is rising in absolute terms, though not as a share of the population. Even World Bank senior development research adviser Martin Ravallion, who argues that the number of poor people in India is falling by about 1 percent a year, says the rate of poverty reduction is lagging far behind economic growth, which is now better than 7 percent. "The pattern is not as pro-poor as it potentially could be," says Ravallion. "It will constrain the ability of the poor to participate in growth and ultimately constrain India from growing."

The obvious conclusion is that opening national borders to globalization is not enough. Parts of Indian states like Bihar, Uttar Pradesh, and Orissa are as removed from international trade as Africa or Central Asia, and as badly governed. Agricultural economist M. S. Swaminathan says that 30 percent of rural Indians have no land, no fishponds, no assets of any kind. "Our problem of undernutrition... is a lack of purchasing power," says Swaminathan. "We need to create jobs in rural areas."

Swaminathan, who chairs a commission on hunger reduction, and other Indian analysts believe the new government, led by Prime Minister Manmohan Singh, is on the right track. It is looking into such measures as a guarantee that at least one member of a rural family has at least 100 days of employment each year, and that schoolchildren receive a mid-day meal. It is looking at food processing for the first time, because some 25 percent of the milk, fruit and vegetables produced for domestic consumption end up spoiling.

India's moves reflect a widespread questioning of the "Washington consensus," which places a priority on free markets and unrestricted capital flows. In December, the U.N. General Assembly resolved to pursue the Millennium goals under the rubric of "fair globalization." What that means in essence is that the war on poverty will be waged as Sweden (not the United States) might do it: with a focus on social programs to fill the gaps where the free market doesn't reach.

The Millennium report has targeted problems causing poverty, such as poor health care and education, and wants rich countries to pony up an extra $50 billion or so in aid per year to make it happen. Jeffrey Sachs, the Columbia professor who led the Millennium review, hopes the ideological debate is over. He wants to concentrate on practical solutions: roads, water wells, mosquito nets. "This is not a morality story," he says. "Globalization has bypassed people caught in the poverty trap." And there are far too many of them.

With Jason Overdorf in New Delhi

© 2005 Newsweek, Inc.

Newsweek: International Editions Section Front


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