Helping the Poor (Really!)

May 23, 2008

Thomas writes:

There is very little connection between the growth of the GDP in a country and “helping the poor” in that country.

Logically, there is no necessary connection between helping the poor and GDP growth. You can imagine a world in which all GDP growth goes to the already wealthy, and the poor pretty much stay poor. You can even imagine a world in which, along with general GDP growth, “the rich get richer and the poor get poorer.” Yes, you can imagine those worlds.

Empirically, in this world, there is a strong connection between GDP growth and poverty relief. As The Economist reports this week, “the number of poor in China fell by almost 407m from 1990 to 2004.” So in this period of tremendous GDP growth in China, we have observed a huge reduction in the absolute number of poor people. Such data suggest that strong growth in China has brought these people out of poverty. At a minimum, we can say that it’s simply untrue that all the benefits of GDP growth have gone to the rich and powerful.

Jagadish Bhagwati points to another useful comparison in his book In Defense of Globalization, citing the work of Xavier Sala-i-Martin:

The last three decades saw a reversal of roles between Africa and Asia: in the 1970s, 11% of the world’s poor were in Africa and 76% in Asia. By 1998, Africa hosted 66% of the poor and Asia’s share had declined to 15%. Clearly, this reversal was caused by the very different aggregate growth performances. Poverty reduced remarkably in Asia because Asian countries grew. Poverty increased dramatically in Africa because African countries did not grow. (p. 65)

Grand, sweeping views of how “global capitalism” supposedly functions may be important in some metaphysical sense, but in this exercise, we need to set aside anecdotes and generalizations about the evils of capitalism and look at actual, observed poverty reduction in the countries that have experienced tremendous GDP growth. As poverty reduction tools, free trade and free markets work.

Suppose Mr. Chomsky is correct: globalization is conducted at the behest of rich and powerful corporations, and all benefits to others are incidental. Do you think the 407 million people lifted out of poverty in China would be willing to give up these benefits in order to spite the wealthy corporations?


3 Responses to “Helping the Poor (Really!)”

  1. tripinchina Says:

    What does “poverty reduction” mean? It’s more problematic than you’d think. Bhagwati and Sala-i-Martin are writing in the economic tradition, using purely economic quantifiers to define “poverty”. To quote Professor Gustavo Esteva “Establishing economic value requires the disvaluing of all other forms of social existence.”

    “Globalization” and third world “Development” are post WWII concepts. The Allied states (who were afraid of returning to the fledgling Depression era economy) took substantive steps to extend the reach of capitalism into previously untouched economies. “Massive poverty” in the modern sense appeared only when the spread of the market economy broke down community ties and deprived millions of people from access to land, water, and other resources. (which are now under the yoke of agribusiness — see any book by Dr. Vandana Shiva for more on this) With the consolidation of capitalism, systematic pauperization became inevitable.

    Millions of people in China and India are now receiving more income than before, since they have moved from the countryside to the cities and found higher paying work. This is true. But it’s an inadequate way of understanding “globalization” as such.

  2. hayley Says:

    Poor William, you are like the lovechild of Miss Informed and Wrongy McWrongerson.

    “data suggest that strong growth in China has brought these people out of poverty.”
    Correlation and Causation seem like they’re the same sometimes, but they’re really just friends that hang out a lot. Just because China has gotten richer and some of it’s people are not as poor as they used to be doesn’t discredit the idea that a large portion of the GDP benefits [in significant ways] a very small percentage of the people.

    “At a minimum, we can say that it’s simply untrue that all the benefits of GDP growth have gone to the rich and powerful.”
    CORRECT! This is not a black and white issue, of course GDP benefits reach non-wealthy people too. It is merely a question of justice with respect to proportion.

    Guatemala has the highest GDP of any country in Central America. Their capital bears the marks of economic strides and progress in development. That said, most of its people live in squalor. Ghastly poverty. Not to go all Sally Struthers infomercial on your ass, but I saw the wealth disparity, and it’s nauseating. And if the wealth disparity can make one puke one’s guts out, the insane corruption and oppression to protect the wealth of a few could give one dysentery.

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