The poor ain’t what they used to be

Posted on September 29, 2012 in Inclusion History

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TheGlobeandMail.com – commentary
Sep. 29 2012 .   Doug Saunders,New York

As the world’s most powerful leaders met at the United Nations General Assembly this week, another annual ritual was bringing hundreds of scholars, officials, aid workers and journalists to gatherings on the UN’s fringes to discuss the fate of the world’s least powerful people.

There’s a sense, this year, that everything has changed. The poor are still with us, but they aren’t who they used to be. And “ending poverty” doesn’t mean what it used to mean. It’s time to change the game.

The idea of ending world poverty from above – that is, doing something about the dire circumstances that leave about a billion people trying to survive on family incomes of less than $1 a day – is about as old as the UN, and it emerged from a similar sense of postcolonial guilt and beneficence.

At first, it seemed fairly simple: Very poor people lived in very poor countries, and the solution lay in making those countries less poor. To address this challenge, the years after the Second World War saw the birth of an entire multibillion-dollar, million-employee industry known as “development.”

The past 60 years have been a race to spend more public and charitable moneys on improving nations, economies, regions, cities and villages containing very poor people – the “Third World,” then the “underdeveloped countries,” then the “developing countries.”

Now they’ve developed. The 1990s and 2000s saw the most dramatic reduction of poverty in human history, with those living on almost nothing dropping from a more than third to less than a quarter of humanity. Foreign-aid spending and development projects had almost nothing to do with it – the poor became non-poor through economic growth and urbanization.

Now we face what Andy Sumner, who’s probably the most talked-about scholar of poverty, calls the “poverty paradox.” The problem, he says, is that “most of the world’s extreme poor do not live in the world’s poorest countries.”

That wasn’t true 20 years ago. In 1990, about 90 per cent of the world’s poor lived in “low-income countries,” where average incomes were close to the incomes of the poor. Your nation’s wealth determined your wealth. Today, nearly 80 per cent of the world’s poor live in “middle-income countries” – states, most formerly poor, that now have buoyant economies, large middle classes and surging economic growth propelled by exports to the West.

Significantly, these countries aren’t dependent on foreign aid; rather, they’re large-scale givers of aid. They no longer need our “development”; they’re developing themselves. And, as Dr. Sumner has calculated, they have enough money to end poverty within their borders – at least in theory.

“In the past, there was an easy relationship between rich and poor countries,” Dr. Sumner tells me from his office at London’s King’s College. “There was a moral and ethical argument for global redistribution – essentially taxing citizens in the rich countries to pay for poverty reduction.”

But now that the inequality is no longer international but within nations, there’s a “need for a fundamental reframing of global poverty as largely a matter of domestic distribution.” As a consequence, he says, “it also suggests that national politics will start to replace aid.”

Countries such as Canada that spend on foreign aid will face two problems. Their own taxpayers may not like the idea of anti-poverty money going to countries that are already selling them most of the goods on their shelves. And the governments of those countries won’t take well to being told how to manage their domestic inequality problems.

Those countries will need help, though, because they seem to be caught in a trap. They earn enough to end poverty. Dr. Sumner estimates it would cost them between 1 per cent and 2 per cent of GDP to eliminate the worst of it. (This is what these states typically spend on their militaries.)

To free up that money, they’ll need to tax the middle class. But this “middle,” like the countries themselves, often consists of people who have recently escaped poverty and aren’t making much more than $2 a day.

“Growth by itself isn’t going to do it,” Dr. Sumner says. “There will still be a lot of poor. They’re going to have to find a way to put their wealth to work – and that’s where aid could help.” We’re no longer the wealthy superiors, but fellow countries facing a common problem.

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