from the September 26, 2002 edition -
http://www.csmonitor.com/2002/0926/p01s02-usec.html
Global progress in slashing povertyStudies suggest big economic strides, but many debate the pace and causes of progress.By David R. Francis | Staff writer of The Christian Science Monitor Broad new studies suggest
that the world has made extraordinary progress in slashing poverty in
recent decades.
The magnitude of the change is the subject of strong debate. But the
research suggests that the pace of economic progress has been rapid and
sustained for decades, built on the foundations of relative political
stability, rising trade, and economic liberalization in the postwar
era. One new study, published Thursday by the Institute for International
Economics in Washington, finds that the proportion of the 6.1 billion
people in the world who live on $1 a day or less shrank from 63 percent in
1950 to 35 percent in 1980 and 12 percent in 1999 (adjusted for
inflation). By some other measures, the progress has been more modest.
Still, economists agree that poverty has plunged in key nations such as
India and especially China, thanks to slowing population growth as well as
economic freedom. "This is a smashing success for the world as a whole," says Harvard
University economist Richard Cooper. "We are doing something right." The news comes as the World Bank is about to open its annual meeting in
Washington – an event that has been dogged in recent years by vocal
protests that the Bank and its sister institution, the International
Monetary Fund (IMF), have done too little for the world's poor. The new economic research will not put an end to that controversy. Vast
populations remain poor, and many still question the wisdom of World Bank
policies. Nonetheless, the research findings are relevant to the question of what
policies should be followed by the those institutions and hundreds of
other development groups striving to hasten the pace of world economic
progress. If dramatic gains are under way, the present mainstream policies –
calling for open markets, free enterprise, and stern fiscal and monetary
discipline – are working and correct. They need only "tinkering," as Mr.
Cooper puts it. But critics of IMF and World Bank policies maintain that such economic
success stories as Japan, Taiwan, China, South Korea, and Singapore are
rooted in more than just "free" markets. These nations have managed to
grow rapidly, and thereby reduce poverty, by restraining imports when
their domestic industries were young, pushing exports to rich nations, and
putting controls on purely international financial flows. They have been
open to foreign-owned factories but have often insisted that those
investors share know-how on modern technologies. Thus, some of the purely capitalist policies urged today, critics say,
are damaging. Measuring incomes and poverty in many developing countries is extremely
difficult. Thus, studies are imprecise and conclusions controversial. A Columbia University professor, Xavier Sala-i-Martin, published two
working papers last spring tending to support the rapid-progress thesis.
Looking at data from 125 nations, he finds that the number of extremely
poor people declined by 235 million between 1976 and 1998, even though
population grew hugely. The $1-a-day poverty rate (in 1985 value dollars;
$532 a year in today's dollars) fell from 20 percent to 5 percent. "Looking at the planet as a whole, never in history has poverty been
eradicated so fast," says Mr. Sala-i-Martin. "The numbers have never
looked better. The world is a better place." CURIOUSLY, World Bank statistics show a far less positive picture. The
Human Development Report of the United Nations Development Program (UNDP)
finds that the number of people living in extreme poverty fell only to
22.7 percent in 1999 from 29 percent in 1990. The number of people living
on $1 a day slipped to 1.15 billion from 1.27 billion. "The level remains disturbingly high," the report notes. The gap between the rich and poor in the world is clearly "grotesque,"
says UNDP economist David Stewart. But whether inequality within poor
countries is shrinking is "ambiguous." A key reason for the difference between the studies is varying
statistical techniques. The Institute for International Economics study,
by Indian economist Surjit Bhalla, uses national household surveys of
income to find the distribution of income, and thus the level of poverty.
This he mixes with aggregate national income statistics. The World Bank uses the national household surveys of both consumption
and income, resulting in less progress. Whatever the technique, economists agree that rapid development in
China and India is critical to the world picture. China has 1.3 billion people, more than a fifth of the world's total
population. According to China's official statistics, its economy has
grown about 9 percent a year for two decades. That official number is in
question. About 5 percent is more accurate, says Lester Thurow, an
economist at the Massachusetts Institute of Technology. He looked at the
growth in electricity usage in China's provinces to get his estimate. That
rate is "still pretty good," he says. After long enchantment with socialism and its government controls,
India has moved in the direction of more free enterprise, and growth has
risen for its 1.1 billion people in the last decade. By the $1-a-day measure, America's poor are affluent indeed. But census
numbers released Tuesday show a rise in those classified as poor – income
at $18,104 or less for a family of four – to 32.9 million. Elsewhere in the world, progress has been uneven, and often not so
handsome. Africa with its 500 million people has seen poverty worsen. Latin
American progress has been "disappointing" in the last two decades, says
William Easterly, an economist at the Center for Global Development in
Washington. The Mideast and the former East bloc countries have seen
poverty grow, though Russia has improved in the past two or three
years. Outside China and India, most developing countries are falling further
behind the rich industrial nations, says Mr. Easterly, a former World Bank
economist. At the World Bank meeting this weekend, many critics will be urging
debt forgiveness to help foster growth. To Sala-i-Martin, the key to success in developing nations is not
"charity." The US and other giants can do more by slashing farm subsidies
and opening to imports. Full HTML
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