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WDR 2000/1
What follows is a useful set of notes (with paraphrasing, quotes, and figures from
World Bank, World Development Report, 2000/1,
Attacking Poverty which articulates an influential global orientation toward policy making
geared toward the reduction of poverty.
►
►
participatory approach
“Of the world’s 6 billion people, 2.8 billion – almost half – live on
less than $2 a day, and 1.2 billion – a fifth – live on less than $1
a day, with 44 percent living in South Asia.”

►
capabilities, rights?
Poverty is multidimensional: it includes inadequate food, shelter,
health, education; vulnerability to disease, dislocation, disaster;
and often mistreatment by state and society.
“The experience of multiple deprivations is intense and painful.”
The Voices of the Poor study, which informs this report, gives a
first-hand glimpse of poverty.

►
(italics added)
“Poor people live without fundamental freedoms of action and
choice that the better-off take for granted.”

►
OVERVIEW 1
monetary poverty
“In rich countries,” less than 1 in 100 children die before age 5;
while “in the poorest countries,” as many as 20% do. In rich
countries, <5% children < 5 yrs old are malnourished; in poor
countries, as many as 50%  ten times the percentage.

Inequality, comparison, as definition of poverty
WDReport 2000/1. OVERVIEW 2
►
Global wealth increasing
• “But the distribution of these global gains is extraordinarily
unequal.
• ”The average income in the richest 20 countries is 37 times
the average in the poorest 20 – a gap that has doubled in
the last 40 years.”
►
Regions of the world differ greatly.
o “In East Asia the number of people living on less than $1 a
day fell from 420 million to around 280 million between
1987 and 1998 – even after the setbacks of the financial
crisis.
o “Yet in Latin America, South Asia, and Sub-Saharan Africa,
the numbers of poor people have been rising.
o “And in the countries of Europe and Central Asia in transition
to market economies [ie: former Soviet Block], the number
of people living on less than $1 a day rose more than
twentyfold.”
WDReport 2000/1. OVERVIEW 3:
International/Millennium Development Goals to reach by 2015
1) Income

Reduce by 50% the proportion of people living in extreme
income poverty, on < $1/day
2) Education
•
•
Ensure universal primary education
Eliminate gender disparity in primary and secondary
education
3) Health
 Reduce infant and child mortality by two thirds (ie in 2015
it will be 33% level in 2000)
 Reduce maternal mortality by three-quarters (2015 level
will be 25% 2000 level)
 Ensure universal access to reproductive health services
4) Environment
 Implement national strategies for sustainable development
in every country by 2005, so as to reverse the loss of
environmental resources by 2015.
WDReport 2000/1. OVERVIEW 4:
But how to reduce poverty in all dimensions?
Answers have changed over time.
1. 1950s and 1960s, “large investments in physical
2.
3.
4.
5.
capital and infrastructure”
1970s, “health and education”
1980s, “improving economic management and
allowing greater play for market forces.”
1990 WDR promoted labor intensive growth
through economic openness and infrastructure and
providing basic services
1990s, “governance and institutions moved toward
center state – as did issues of vulnerability at the
local and national levels.”
WDReport 2000/1. OVERVIEW 5:
►
This report builds on cumulative learning
►
Proposes a strategy for attacking poverty in
three ways, by
1) Promoting Opportunity
2) Facilitating Empowerment
3) Enhancing Security
WDReport 2000/1. OVERVIEW 6: Focus 1:
Promoting Opportunity
►
►
For poor people, material opportunities mean jobs, credit, roads,
electricity, markets for produce, schools, water, sanitation,
health services  note: capability + participatory approach
“Overall economic growth is crucial for generating opportunity.
 “So is the pattern or quality of growth. (growth = money = PCGDP)
 “Market reforms can be central in expanding opportunities for poor
people, but reforms need to reflect local institutional and structural
conditions.
 “And mechanisms need to be in place to create new opportunities
and compensate the potential losers in transitions. (exclusion)
►
“In societies with high inequality, greater equity is particularly
important for rapid progress in reducing poverty.
 “This requires action by the state to support the buildup of human,
land, and infrastructure assets that poor people own or to which
they have access.”
 [NOTE: high and increasing inequality AMONG national economies
in global economic growth system is NOT part of this discussion.]
WDReport 2000/1. OVERVIEW 7: Promoting Opportunity 2
► Core
policies and institutions for creating
more opportunity involve complementary
actions




to stimulate economic growth,
make markets work for poor people,
and build their assets –
including addressing deep-seated inequalities in
the distribution of such endowments as education”
WDReport 2000/1. OVERVIEW 8: Promoting Opportunity 3
►
Growth requires encouraging effective private investment.
 Investment and technological innovation are the main drivers of growth in jobs
and labor incomes
►
Fostering investment requires reducing risk for private investors:





►
with stable fiscal and monetary policies,
in stable investment regimes,
with sound financial systems,
and a clear and transparent business environment.
It also involves ensuring the rule of law and taking measures to fight corruption
Special measures are frequently required to ensure that small and microenterprises participate effectively in markets.
 credit (financial deepening),
 lowering transactions costs of reaching consumers by expanding access to
Internet technology,
 promoting trade at fairs, etc.;
 improving transportation in disadvantaged localities
WDR 2000/1, discussion
►
The next set of slides presents figures from WDR
2000/1, chapter 3, on “opportunity,”
 The chapter stresses the productive role of overall
economic growth in poverty reduction.
 It also indicates how various national economies
have channeled additional wealth (acquired
through economic growth) into poverty alleviation
WDR 2000/1, discussion
► The
WDR does argue that aggregate (or general)
economic growth (increasing total national
wealth/capita) facilitates poverty reduction.
► But does economic growth CAUSE poverty reduction?
► Is increasing wealth a necessary or sufficient
condition for poverty reduction?
► Keep in mind the multidimensional character of
poverty: growth might reduce poverty in some
dimensions (e.g. income) more than others
WDR 2000/1, discussion
►
The WDR does not argue that increasing wealth is a
necessary, let alone sufficient, condition for poverty
reduction
 Interpreting WDR figures below indicates why
►
We can explore the relationship between data and
arguments by looking closely at these figures
 The are excellent examples of data revealing more on
close examination than first meets the eye.
Note the statement atop this figure
presents a correlation, a statistical
pattern; it ALSO implies causality:
more wealth means less poverty.
Thus policies to increase wealth
might tend “in general” to reduce
policy. (note sample)
Q1: National wealth data and
income poverty are measured quite
differently. What is the difference?
Does it matter for interpreting
these data?
Q2: These two graphs can be
interpreted to mean that on
average, poorer people live in
poorer countries. Do these data
suggest anything else?
A1: National wealth data derive from national
accounts. X axis values are percapita
consumption = (GDP - inventory – savings –
exports + imports)/ total population
Poverty data and hence quintiles of
consumption cost (y axis values) derive from
sample survey data.
Hence some incommensurability appears in
each data point.
More serious problems arise for cross country
comparisons.
PPP = purchasing power parity. A calculation
designed to compensate for variations in
value of money and cost of goods and
services across countries.
PPP figures reduce problems of cross country
comparisons to acceptable level for such
analysis.
Reading trick:
interpret the three oval
and three rectangular
clusters
ovals: richer and poorer
societies have similar
consumption levels for
poorest 20%
rectangles: societies
with the same total
wealth have lower and
higher consumption
levels for poorest 20%;
and range of variation is
smallest in poorest
societies.
Thus, the “in general”
statement is true (blue
trend line)
But data ALSO point in other
directions:
(1: ovals) more wealth does
not always mean more
consumption for poorest
20%; and
(2: rectangles) the poorest
20% have higher and lower
consumption levels in
societies with the same
percapita wealth.
Red line indicates an axis of
national wealth increase
with decline in poorest 20%
consumption.
Interpret in words
(1) the clustering of these
data points around 0:0 and
(2) statistical differences
among countries in
(a) each quadrant
separately, and
(b) each quadrant
comparatively.
What can you
say
comparatively
about countries,
based on this
figure?
(see next slide)
General statement:
Health performance varies
greatly among countries
with similar PCGDP.
Provide details.
Q:
Where on this chart is the
poorest country with health
performance comparable to
rich countries?
The winner
Compare
(1) South Asia
and SubSaharan Africa
(2) China and
Thailand
Note the two timescales.
What is their implication for current trends?
Interpret the distribution of countries in this figure.
Drawing concentric circles might help.
If this
general
statement
applies
inside
countries,
might it
also apply
across
countries?
Q1: What does the ratio in
this figure indicate?
Q2: What does a ratio
>100 mean?
Q3: Does this data
indicate literacy levels?
Q3: What are other useful
interpretations of this
data?
 Consider the range of
ratios among countries
with $1,000 PCGPD
 Consider the PCGDP
range among countries
with and full gender
equality in literacy rates.
WDR 2000/1 summary, continued
►
WB national strategy has three parts
1. Promoting Opportunity (Chapters 3-5)
2. Facilitating Empowerment (Chapters 6-7)
3. Enhancing Security (Chapters 8-9)
►
National strategy supplemented by
International Action (Chapters 10-11)
1. Promoting Opportunity
► Chapter




3 summary last week
Focus:
the primacy of economic growth
Growth and inequality
Income growth and nonincome poverty
WDR 2000/1
Chap 4: Making Markets Work Better for Poor People
THE IMPACT OF INFLATION
An Extreme Cast:
Collapse in Real Wage (entitlement to food) caused starvation
in The Great Bengal Famine
Indexes of Food Supplies and Prices in Bengal, 1939-44
450
400
350
300
Wage Index
index values
Foodgrains price index
250
Index of exchange rate
total grain
200
grain per cap
150
100
50
0
1939-40
1940-41
1941-42
years
1942-43
1st half 1943-4
Wage and price trends affect income groups differently
Transition to (A) Destitution and (B) Destitution or Husking Paddy for Different
Occupations (Sen Table 6.7)
5
35
4.5
30
4
Peasant cultivation and share-cropping
Non-cultivating owners
3
20
2.5
15
2
% for line series
% for column series
Part peasant, part labour
25
3.5
Profession and services
Trade
Craft
Non-agricultural labour
Other productive occupations
Agricultural labour
Transport
1.5
10
Fishing
Husking paddy
1
5
0.5
0
0
%A 1/39 - 1/43
%B 1/39-1/43
%A 1/43-5/44
periods of transition
%B 1/43-5/44
Current Trends in Bangladesh
(from Daily Star 16 July 2005)
Note
 Rice accounts for 60-70%
of inflation rate
 Female Daily Agr Wage is
75% male wage
% increase
Rice Price and Agr Wages in Bangladesh
Inflation Rate in Bangladesh, 2001-2005
35%
30%
25%
20%
15%
10%
5%
0%
8
6
Agr Labor Daily Wage Avg Rice Price top range Avg Rice Price increase in
Increase 2001-4
increase 2001-4
2005
4
2
0
2001 Jan
2002 Jan
2003 Feb
2004 Mar
2005 May
Wage trends favor skilled workers and
industry in general over agriculture
Wage Rate Ratios in Bangladesh
Ratio %
400
2001
2004
300
200
100
0
Skilled/Unskilled Top/Bottom Range Top/Bottom Range Unskilled Indust
Skilled Indust
Industrial Workers Skilled Industrial Unskilled Industrial workers Bottom
Workers Top
Workers
Workers
Range/Agr Labor Range/Agr Labor
Economic Growth and Overall Increase in National Wealth includes
Upward shift in commodity value/prices
►
Higher Value Labor
(Daily Star 19 July 2005)
 19% decrease in labor exports from Bangladesh in Jan-May
2005 compared to same period in 2004
 19% increase in receipts remitted from export labor
 Reason: increasing demand abroad for skilled labor; declining
demand for unskilled labor; hence lower numbers, higher wages
►
High Value Agriculture. IFPRI research
 Per capita grain consumption declining or growing at less than
1% per year in eight Asian countries (Bangladesh, Pakistan,
India, Indonesia, Philippines, Thailand, Vietnam, and China)
 Per capita consumption of HVA (fruits and vegetables) increasing
at 2-10% per year
 In Thailand and Philippines, >50% of all food is sold in
supermarkets
 In Dhaka city, about 15% of food sold passes through
supermarkets
 Market-connections-finance direct links between retailers and
producers through supply systems generate specialized
production-consumption commodity chains (e.g. BRAC in
Chandina, where 30% poor farmer income is in vegetables.)
Chap 5: Expanding Poor People’s Participation
Joint forest
management
brings poor
people into
process of state
control over
forest resources
2. Empowerment
Chap 6: Making State Institutions More Responsive
to Poor People
Localizing Governance
Chap 7:
Removing
Social
Barriers and
Building
Social
Institutions
Public investment
CHT in Bangladesh
UNICEF/BRAC/BBS 2004
lbw anemia study:
LBW (<250g) Bdesh = 33.7%
urban children (6-59 mo)= 56%
CHT children = 62%
CHT infants (6-11 mo) = 90%
Anemia
urban adolescent girls = 29%
urban adolescent boys = 17%
(lowest of all groups)
CHT adolescent boys = 40%
CHT adolescent girls = 50%
3. Enhancing Security
Chap 8: Helping Poor People Manage Risk
Dealing with Types of Risk (previous slide): Means of
Reduction, Mitigation, Coping (note )
Non-State, non-market asset transfers
for dealing with risk and crisis
Social Program Expenditure
Using communities to allocate benefits
Creative examples
Chap 9: Managing Economic Crises and Natural Disasters
Crisis impact on HDI indicators
The burden of disasters greatest where
national assets for coping, prevention, and
mitigation lowest
Dealing with catastrophe
3. International Action
Chap 10: Harnessing Global Forces for Poor People
Privatisation of
intellectual
property rights
has transferred
assets
produced by
public funds
into profit
sector
Chap 11: Reforming Development Cooperation to
Attack Poverty
World Bank initiatives 1
World Bank initiatives 2
NGO growth.
National Debt Burden
Concessional (aid) transfers and
nonconcessional (market rate) transfers
Debt relief and poverty reduction
Some critical considerations of WB approach
to poverty reduction
FOCUS:
The Market-led-growth-first orientation to
poverty reduction
 It is based on the DEBATABLE IDEA that aggregate
national wealth increase helps to reduce and can be
relied upon to eliminate poverty, when combined with
supportive state and private policies to make growth
“pro-poor”
 Its concept of poverty, measures of poverty, ideas
about causation, and policies follow from and support
this basic orientation
Does economic growth reduce poverty?
► Note:
the WB argues only that growth
facilitates poverty reduction.
► A 2004 DFID study of 14 countries in E.Europe,
Africa, and Asia (including Bangladesh) argues
more strongly that “growth reduces poverty.”
 “on average a 1 percent increase in income
percapita reduced poverty by 1.7 percent” during
1993 – 2002, according to DFID study
 Causal connection made very forcefully, based on
correlations: growth and poverty headcount.
Empirical Complications.
Other explanations.
►
DFID conclusions based on headcount poverty reductions
►
DFID findings of poverty reduction during growth are
compatible with the argument that
 (1) factors other than growth reduced poverty during economic
growth and
 (2) that lower headcount poverty resulted from a trend increase
in inequality around the poverty line,
► which
raised barely-poor people above the line,
► left poverty gap and severity intact (or perhaps increased both)
► and also raised non-poor incomes disproportionately
►
It is therefore possible to interpret the claim that growth
reduces poverty as a moral and political justification for
the increasing inequality that accompanies market-led
economic growth
Counter-Market policies may be reducing poverty
during economic growth and might thus be making
growth appear to “pro-poor”
► Vietnam
is strongest case for “pro poor growth”
causal connection in the DFID study
► Vietnam also country with strong social programs
organizing market operations particularly in rural
areas
► The state provides broadly egalitarian education,
health care, market access, production cost
control, etc. all through non-market mechanisms
► The case could thus be made here that an
effective socialist state makes the market work
best for the poor
Challenging Trends
Several empirical trends challenge the idea
that market-led economic growth and the
aggregate wealth increase which it
facilitates are effective means for reducing
poverty substantially in the foreseeable
future.
Trends that challenge the market-growth-first policy model of
poverty alleviation
► Broad
increases in inequality separating rich and
poor countries more and more dramatically during
recent rapid growth (especially 1990s)
► Growth in poor countries concentrates in growth
sectors tied to world markets
 Generating higher value commodities (wealth) [e.g.
vegetables, skilled labor, and education] for wealthier
segments of the population.
incomes and living standards most among
the non-poor and least among the poorest, inside
and across national economies
► Regional rich-poor differentiation: e.g. India and
China; urban-rural divide generally.
► Raising
Inequality is dynamic force allocating growth
benefits: Where does the new wealth go?
Share of Global Income Going to Richest 20% and
Poorest 20% of World Population
Year
Share of
Richest
20%
Share of
Poorest
20%
Ratio of Richest to Poorest
1960
70.2%
2.3%
30 to 1
1970
73.9%
2.3%
32 to 1
1980
76.3%
1.7%
45 to 1
1.4%
59 to 1
Source: United Nations, Human
Development Report, 1992.
1989
82.7%
US Income Disparities
Percent
Share of
all
Income
Percent
Share of
all
Income
Average After
Tax Income
($000)
Average
After Tax
Income
($000)
1977
1999
1977
1999
bottom 20%
5.7
4.2
10
8.8
second lowest 20%
11.5
9.7
22.1
20
middle 20%
16.4
14.7
32.4
31.4
second highest 20%
22.8
21.3
42.6
45.1
highest 20%
44.2
50.4
74
102.3
highest 1%
7.3
12.9
234.7
515.6
Household Groups
note: percentages do not add to 100 due to
rounding
Source: New York Times Sunday Sept 5, 1999.
National Section p.16,
based on Congressional Budget Office data
analyzed by Center on Budget and Policy
Priorities
Winners and losers
Apr 26th 2001
From The Economist print edition
The global distribution of income is becoming ever more
unequal. That should be a matter of greater concern than it is,
argues Robert Wade
WADE continued
CHARTS MISSING – WILL BE ADDED
Chart 1 (above) shows the distribution of the worlds population by average
income of each country (using compatible data from 1993, the most recent
year available). Income is measured in terms of purchasing power over
comparable bundles of goods and services, or purchasing-power parity
(PPP), rather than in terms of actual exchange rates. China and India, with
between them almost 40% of world population, are each divided into
urban and rural sectors and treated as four separate countries.
The distribution has two poles. One, at the bottom end, is at an average
income of less than $1,500 a year. It contains the populations of most of
Africa, India, Indonesia and rural China. At the other pole, with average
PPP incomes of more than $11,500, are the United States, Japan, Germany,
France, Britain and Italy. Some of the space between $1,500 and $11,500
is occupied by countries such as urban China, Russia and Mexico.
But notice the strange missing middle: relatively few people live in
countries with average PPP incomes that fall between $5,000 and $11,500.
If incomes were measured using actual exchange rates, the range from
poorest to richest would be much larger
.
WADE continued
Having ignored world income distribution for decades, international economics has lately
seen a burst of interest. But the statistical difficulties are so formidable that the debate
has so far revolved around questions of econometric technique. Standing back from the
fray, we can see that much of the controversy concerns how to compare income in
different countries.
The answer to what is happening to world income distribution turns out to depend
heavily on whether countries are weighted by population, and whether income in
different countries is measured in PPP terms or by using actual exchange rates. These
two criteria can be set out in a matrix of four cells, with countries treated equally or
weighted by population on one axis, and income measured in current exchange rates or
in PPP terms on the other. Table 2 summarises the findings of the existing literature,
dividing the studies among the four cells
.
“…. new studies differ from the others in being based solely on
household income and expenditure surveys. The earlier ones
either used average GDP, ignoring inequality within each
country, or used indirect methods to estimate within-country
inequality, including production surveys and revenue surveys,
which typically miss important components of household
incomes. Branko Milanovic at the World Bank assembled the
database, using the Banks formidable statistical organisation
to obtain household survey data from just about all the Banks
members, covering 85% of the worlds population, for the
years 1988 and 1993. The result is probably the most reliable
data set on world income distribution.”
Then Mr Milanovic computed the Gini coefficient for world income
distribution, combining within-country inequality and between-country
inequality, and measuring it in PPP terms. (The Gini coefficient is a
commonly used measure of inequality: 0 signifies perfect equality, 100
means that one person holds all the income.) The results are startling.
World inequality increased from a Gini coefficient of 62.5 in 1988 to 66.0
in 1993. This is a faster rate of increase of inequality than that
experienced within the United States and Britain during the 1980s. By
1993 an American on the average income of the poorest 10% of the
population was better off than two-thirds of the worlds people.
WADE article. Concluded.
The other new study, by Yuri Dikhanov and Michael Ward, uses the same data
set with a different methodology. It confirms that world income distribution
became markedly more unequal between 1988 and 1993. Like the Milanovic
study, it finds that the Gini coefficient increased by about 6%. It finds, further,
that the share of world income going to the poorest 10% of the worlds
population fell by over a quarter, whereas the share of the richest 10% rose
by 8%. The richest 10% pulled away from the median, while the poorest 10%
fell away from the median, falling absolutely by a large amount. In short, we
have to revise cell 4. World PPP income distribution with countries weighted by
population (and China and India split into urban and rural) became much
more unequal between 1988 and 1993 (see table 3).
Growth Raises overall cost of living. Current Trends in Bangladesh
indicate that price and wage rate trends favor populations in
“growth sectors”
(from Daily Star 16 July 2005)
Note
 Rice accounts for 60-70%
of inflation rate
 Female Daily Agr Wage is
75% male wage
% increase
Rice Price and Agr Wages in Bangladesh
Inflation Rate in Bangladesh, 2001-2005
35%
30%
25%
20%
15%
10%
5%
0%
8
6
Agr Labor Daily Wage Avg Rice Price top range Avg Rice Price increase in
Increase 2001-4
increase 2001-4
2005
4
2
0
2001 Jan
2002 Jan
2003 Feb
2004 Mar
2005 May
Wage trends favor skilled workers and
industry in general over agriculture
Wage Rate Ratios in Bangladesh
Ratio %
400
2001
2004
300
200
100
0
Skilled/Unskilled Top/Bottom Range Top/Bottom Range Unskilled Indust
Skilled Indust
Industrial Workers Skilled Industrial Unskilled Industrial workers Bottom
Workers Top
Workers
Workers
Range/Agr Labor Range/Agr Labor
Upward shift in commodity price values with economic growth
(Daily Star 19 July 2005)
►
Higher Value Labor
 19% decrease in labor exports from Bangladesh in Jan-May 2005
compared to same period in 2004
 19% increase in receipts remitted from export labor
 Reason: increasing demand abroad for skilled labor; declining
demand for unskilled labor; hence lower numbers, higher wages
►
High Value Agriculture. IFPRI research
 Per capita grain consumption declining or growing at less than
1% per year in eight Asian countries (Bangladesh, Pakistan,
India, Indonesia, Philippines, Thailand, Vietnam, and China)
 Per capita consumption of HVA (fruits and vegetables) increasing
at 2-10% per year
 In Thailand and Philippines, >50% of all food is sold in
supermarkets
 In Dhaka city, about 15% of food sold passes through
supermarkets
 Market-connections-finance direct links between retailers and
producers through supply systems generate specialized
production-consumption commodity chains (e.g. BRAC in
Chandina, where 30% poor farmer income is in vegetables.)
Education
Consider where the new seats in higher education are being
created in Bangladesh today.
► They appear to be increasing disproportionately in private
universities with high tuition, English medium, oriented to
higher income professional employment
► This may also to be true for primary and secondary
education in urban areas generally
► This represents another shift up the commodity value chain
associated with economic growth:
►
 NEW opportunities/capacities seem to be created disproportionately
in more expensive, more productive, more profitable, and higher
wage-rate seeking educational institutions
 ALL this consistent with increase in rate of aggregate national wealth
increase
Energy prices and “oil tax”
►
►
►
►
►
Petroleum prices have just been raised in Bangaldesh
because of increasing world prices, hence import costs,
and declining Taka value in relation to the US dollar, which
is still the dominant world currency
Paying for oil with dollars demands more and more Takas,
spent in Bangladesh to buy imported oil.
Who pays this additional “oil tax” and where does it go?
Resulting price increases will spread across the economy
with additional energy costs.
Income increases will not follow quickly for most people,
and least of all for the poor.
Non-market means are required – even with high economic
growth -- to expand participation, reduce barriers, and
deliver services for the poor
►
►
►
►
►
Policies targeting the poor appear to be “swimming upstream,” or
against the logical force of new asset allocations in the global
market economy as it operates inside Bangladesh
Numerous figures in WDR 2001 can be read as indications that
current conditions in poor countries mitigate against additional
capital investment (see next slide)
High growth rate regions that show substantial reductions in poverty
may not typify trends in many countries (e.g. in East Asia), where
internal inequalities are more entrenched and conditions for global
investment are less attractive
Ethnic and political forces may underlie economic growth. East Asia
in particular has benefited from very high rates of FDI from
expatriate nationals (especially Chinese, but also Koreans), and also
from strong and favorable bilateral ties with US economy.
State delivery of goods and services to the poor are hampered in
poor countries not only by functional weaknesses but also by
financial weaknesses in the international economy (e.g. debt,
exchange rates, unfavorable trade balances, etc.)
The argument that “in general”
increasing wealth correlates with
poverty reduction is true (blue
trend line)
But ovals show more wealth does
not always increase
consumption for poorest 20%.
Rectangles show the poorest
20% have higher and lower
consumption levels in societies
with the same percapita wealth.
The red line show an axis of
national wealth increase with
lower conusmption in poorest
20%.
The Vietnam case indicates that
the “in general” correlation may
not indicate actual causation.
To repeat:
these are current trends that challenge the market-growth-first
policy model of poverty alleviation
► Broad
increases in inequality separating rich and
poor countries more and more dramatically during
recent rapid growth (especially 1990s)
► Growth in poor countries concentrates in growth
sectors tied to world markets
 Generating higher value commodities (wealth) [e.g.
vegetables, skilled labor, and education] for wealthier
segments of the population.
incomes and living standards most among
the non-poor and least among the poorest, inside
and across national economies
► Regional rich-poor differentiation: e.g. India and
China; urban-rural divide generally.
► Raising
The relationship between economic growth,
inequality, and poverty reduction: three images
►
Economic growth, led by free market forces, is the engine that generates
more wealth for whole societies, including the poor, whose disadvantages
amidst inequality need special policy attention to insure that growth is
directed specifically toward poverty reduction, to make growth optimally
“pro-poor.”
►
Reducing poverty is swimming upstream in the strong currents of freemarket-led growth first development policies that now prevail under
globalization of the  strong state commitments to poverty reduction and
strong national economies make it more feasible to succeed, but globally
and nationally, market currents pull wealth to richer sectors, regions, and
populations
►
The rising tide of economic growth lifts all the boats  but richer sectors
rise faster and higher; “poverty reduction” occurs only at the margins of the
market-growth mainstream, though it does occur.
Globalization and Poverty:
two debatable propositions
► Globalization
is the universal spread of market
institutions and thus the progressive inclusion of
everyone in the world in the creative wealthproducing vitality of the market economy. The result
is the eventual elimination of poverty.
► Globalization is the spread of wealth and investment
among productively profitable social segments and
sectors of national economies around the world,
leaving “high risk – low yield” places, people, and
sectors out of the circuit. The result is the perpetual
reproduction of poverty.