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Geopolitics

Don't Confuse Poverty And Wealth Inequality

Even as anger rises about the gap between rich and poor, looking hard at the numbers shows global poverty is decreasing. And government aid is not the reason.

Taking it easy in Santiago
Taking it easy in Santiago
Juan José Toribio

-OpEd-

SANTIAGO — Are the rich getting richer, and the poor, poorer? That is the so-called "populist" message of the moment of a world economy that is inflating social inequalities like never before. If this is indeed true, we need to think about ways to improve the situation. Even if we can agree that poverty is the biggest social and economic problem of our time, we must be careful how we think about it.

First, poverty and inequality are two different realities that don't necessarily run parallel. Of course you can find extreme poverty in countries where the income gap is increasing, as is happening in some of the economies of developed OECD countries. But you can also have pockets of deep poverty in relatively egalitarian economies. That is the case in sub-Saharan Africa or Bangladesh. In both situations measures are needed to eradicate misery, or the worst poverty, though such measures do not necessarily yield the same results in different settings.

Let me focus on the results recently obtained in the fight against poverty, which elicit a measure of optimism. At the September 2000 United Nations summit, world leaders set their Millennium Development Goals (MDG) intended to defend dignity, equality and equity. The first MDG proposed eradicating extreme poverty and hunger. Those that followed added new goals of universal primary education, promoting gender equality and reducing child mortality.

The proviso is that MDGs were forged in a general climate of adhesion to liberal democratic and market economy principles, widely accepted after the fall of Communism. And while people accepted the market's ability to promote global economic growth, there was distrust of its ability to bring the least favored sectors of the population out of poverty and to reach the remaining MDGs. Critics said these goals could only be attained through much more active state intervention within countries, and the massive transfer of public resources toward developing countries. The amount cited for this was put at no less than 0.7% of the GDP of advanced economies.

The more interventionist policies were never put into practice. On the contrary, a financial crisis erupted in 2007 that eventually roiled the budgets of many governments, effectively shelving plans to make massive donations to developing countries. Yet the least favored sectors of the world population have managed to make material progress as never before in history, even in the wake of the global financial crisis.

The UN found in its 2014 report on MDGs that while 47% of those living in less developed regions lived on less than $1.25 a day in 1990, in 2010 the number of people at this level of poverty had fallen to 22% of the world's population. That means that 700 million people have left behind extreme poverty in the last 20 years.

It is noteworthy that more than half of them are in China, which has not exactly been a big aid recipient, but did dismantle its collectivist structures and open itself to the free market. The same could be said of the success attained against poverty in such countries as India, Bangladesh, Malaysia, Indonesia and more dynamic parts of Africa or Latin America.

The same report also observed major advances made in other MDGs: nowadays, it noted, 90% of the world's population has better access to drinking water, and there is a narrowing of differences between the number of boys and girls registered for school in developing countries. Likewise the number of malnourished people fell from 24% of the population in 1990-92 to 14% two decades later. The UN also sees world trade favoring developing nations and their debts levels remaining relatively low.

No one imagines that the fight against worldwide misery is over, even if a single person remains excluded. But should one assert that there is more or less misery today than before? What does it mean that many poverty-reduction objectives have been met in spite of the global slump of recent years?

This has happened thanks to economic liberalization, globalized finances, geographic diversification of production, technical innovations and greater acceptance of private enterprise. It is all this, not aid, that has ensured the better allocation of resources to those in need.

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