A.1.             WORLD POVERTY IS A MAJOR WORLD PROBLEM

It ought to be a matter of concern to everyone, if for no other reason than that there can be adverse effects worldwide if 3/4 of the world population is not able to escape the poverty trap in which they appear to be caught. Most of the people in three whole continents and some people in nearly every other country are caught in a poverty trap from which they find escape difficult. So this is one of the major social and economic problems facing the world in this 21st century.

It is helpful to get a realistic picture of the extent of poverty in different countries, but this is not provided by statistics that compare the average incomes of different countries. Averages are distorted by the number of the rich in each country. Moreover, each country uses a different currency, so the only way to make comparisons between two countries is to convert their income figures to a common currency by using the exchange rates between the currencies. But the exchange rates are affected by speculation and other factors that may distort the resulting comparisons and even make them meaningless. When told that people in less developed countries (LDCs) who are poor earn only about $200 a year on the average, one knows that the figure would imply that all those must all be starving to death, because that would happen here or in any more developed country (MDC) if one had only $200 a year. While many are in abject poverty in LDCs, the average person in poverty is not starving to death, though many may be starving.

It is necessary instead to get comparisons of what those in poverty in different countries actually have to live on by comparison with what people not in poverty have to live on. In addition we can make comparisons between countries in the number of people who are literate, the number who get different amounts of education, the number who die of diseases that are cured in more developed countries, and so on. This also tells us something about the opportunities that the poor have by comparison with non-poor in the same country or in any other country.

Indeed this latter type of information can help people in any LDC or any MDC to decide how much attention and effort should be put into improving each aspect of life for the people in the poverty trap. Indeed since in some countries people of one ethnic or racial group, or of one gender or the other, or of one age group or region or another suffer most and need most help. So those matters also need to be investigated.

One of the social scientists who is most knowledgeable about the problem being discussed here and who writes clearly about it is an Indian economist named Amartya Sen. In 1999 Random House Anchor Books published a paperback edition of Sen’s book “FREEDOM AS DEVELOPMENT”.

It gives an excellent in depth treatment of the opportunities that others have that the poverty-stricken do not have but have every reason to obtain.

It may be helpful to readers if I now resort to outline form to provide a quick and easy way to grasp what are usually regarded as the major things needed for the sort of economic and social development required to lift nations and people out of the poverty in which they are often now trapped. So here goes:


TO ESCAPE THE POVERTY TRAP

1. The per hour productivity of human labor must increase and be directed to improving human life generally (as suggested by Sen), starting with meeting basic needs for everybody.

2. The general economic formula for increasing per hour labor productivity

a) Increase efficiency in terms of each of the goals of development (again Sen’s concept of goals).

Start by eliminating unemployment.

b) Increase the capital to labor ratio.

Especially invest in human capital by appropriate schooling and training. for all types of labor (including management skills in business and government).

c) Improve technologies and innovational abilities.

d) Increase specialization and expand trade.

3. Increased productivity in agriculture is basic

a) The smaller the population required to provide everyone an adequate and healthy diet, the larger the fraction of the population available to produce other goods and services.

b) This may require improved technologies, changes in land tenure systems, and improved services to and marketing for farmers.

4. Ideological, institutional and cultural changes may be necessary.

a) But there is no need whatsoever for all cultures to be the same, but a fatalistic philosophy anywhere is fatal to escaping the poverty trap.

5. The development of export enclaves will not meet the basic needs of the people, although this is still a common formula for development.

6. Dedicated and intelligent internal leadership is needed to plan wisely & to enable people to help themselves do things to improve their lot.

7. Despite all the things that have been wrong with foreign aid and with the roles of transnational firms, LDCs need both of these to assist in providing some outside capital, some scarce skills, and some appropriate technological help.

a) But LDCs need to have the upper hand in limiting outside influences to whatever will help them develop properly. They need to have access to a   UN agency that can help them negotiate mutually favorable terms with outside business firms. That way they might be able to avoid the exploitation that some outside businesses have been guilty of in the deals they have made when investing in less developed countries.



MAJOR OBSTACLES TO ECONOMIC DEVELOPMENT

1. International or internal violence

2. Political instability, or leadership hostile to development

3. Cultures hostile to what is required for development.

4. Rapid population growth

a) This makes it very difficult to overcome food and other deficiencies, and requires big increases in capital just to keep peoples incomes from falling.

b) Nothing could improve development prospects as readily as a permanent drop on birth rates, since this would directly reduce the high LDC dependency ratios.

5. Relations with MDCs (more developed countries) have been alleged to be a major obstacle to development. It is not that development would be furthered more rapidly if such relations were cut off, but that relations more favorable to development are possible and are desired by the LDCs. The case can be made that this could also be beneficial to MDCs in the long run, but it would entail elimination of any short run exploitation by MDCs.

a) The U.S. role has been less favorable than we imagine. Some people fear that aiding development would be slitting our throats by developing competitors. They would treat LDCs as King George treated American colonies. But Adam Smith was right that more profit is made in trade with developed countries than by exploiting poor countries. But making LDCs adopt free trade is not o.k. The U.S. protected infant industries & LDCs will.

There are some major differences among LDC continents as to the major obstacles they have to overcome for development (generally according to J. K. Galbraith):

1. Africa: Shortage of trained personnel. Now Aids.

2. Asia: The population problem.

3. Latin America: A hostile power structure.


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