What do you call the “tale of catching up”?
The dominant story that is handed down to us from technocrats and the media is that global poverty is rapidly decreasing, thanks to free-market globalization. But this narrative relies on a very low poverty line. If we look at more accurate poverty lines, it’s clear that the reality is more complex. The number of people living on less than $5 per day (2005 PPP), the minimum necessary for good nutrition and normal human life expectancy, has increased dramatically since the 1980s, particularly during the era of structural adjustment. It is estimated that 4.2 billion people live with less than this amount; it is nearly 60% of the world’s population. This is a blistering indictment of our global economy, and it suggests that our usual approach to development has basically failed.
Why are poor countries poor? Why massive poverty still exists in a world of plenty?
We tend to imagine that the poverty of poor countries has to do with their internal domestic problems – maybe it’s corruption, or weak institutions. Of course, that has something to do with it. But we too often ignore the much more significant external forces that perpetuate poverty. Take the debt system, for example. Poor countries have to bend to the wishes of creditors and investors, who prohibit the use of tariffs, subsidies, capital controls and regulations – key tools that Western countries used to build their own economies. At the World Bank and IMF, horrible imbalances in voting power mean that a handful of rich nations get to dictate macroeconomic policy across much of the global South. At the World Trade Organization, bargaining power is determined by market size, so rich countries get to push through policies that primarily benefit themselves.
We like to think that rich donor countries are helping poor countries up the development ladder. But the opposite is true: as Cambridge economist Ha-Joon Chang has put it, rich countries are kicking away the very ladder that they used to climb to the top.
In The Divide, you write that poor countries are effectively developing rich countries, can you explain how?
In 2017 Global Financial Integrity published new data looking at all the money that flows between the global North and the global South. They found that the South receives about $1.3 trillion per year from the North, in the form of aid, FDI, remittances, everything. But at the same time $3.3 trillion flows the other way, in the form of interest on debt, repatriated profits by multinational companies, and – most importantly – illicit financial flows. So, the South is a net creditor to the North: poor countries are developing rich countries, not the other way around. Conclusion: for every $1 of aid that the South receives, they lose $24 in net outflows. The aid narrative has it exactly backward.
What evolutions do you recommend to promote a more equal exchange?
It is delusional to believe that aid is a meaningful solution to the problem of global poverty and inequality. These are political problems, and demand political solutions. We need to shift from a paradigm of charity to a paradigm of justice to end poverty. We need to find ways to make the global economy fundamentally fairer for the world’s majority.
What does that look like? Well, for one, it’s time to cancel unpayable debts, and liberate poor countries from the policy diktats of creditors. We need to democratize the institutions of global economic governance – the World Bank, the IMF and the WTO – to ensure that poor countries get a fair say in the policies that affect them. We need to allow poor countries to use tariffs, subsidies, and capital controls, without rich countries responding to these measures with crushing sanctions. We need to reform the TRIPS agreement so that poor countries can access the technologies and medicines they need at affordable prices. And we need to end tax evasion by closing down the tax havens – most of which are controlled by the governments of rich countries.
In The Divide I explore a number of other exciting solutions, including how we might implement a global minimum wage, and even a universal basic income extended to all humans on the planet.
What should be the role of development agencies?
It’s clear that development agencies need to shift their focus beyond aid to tackle the structural determinants of global poverty and inequality. And they need to find ways to create a new and more meaningful public narrative. Instead of representing poverty as a problem that’s out there, unconnected to the rich world, we need to help people understand that it is a problem that is perpetuated in large part by the rules of the global economic system, and that we can and should work together to change those rules.
According to you, GDP growth cannot be equivalent anymore to human progress. Can you explain? What means degrowth ?
The obvious problem with GDP is that it includes no cost accounting. If you chop down a forest and sell the timber, GDP goes up, but it says nothing about the cost of losing the forest as a sink for carbon, or a home for endangered species, or a future resource. In fact, even the economists who first designed the GDP metric warned that it should never be used as a measure of progress. And yet that’s exactly what we do today. We are desperately in need of a saner metric. One of the most popular alternatives is the Genuine Progress Indicator (GPI). It starts with GDP and then subtracts social and ecological negatives from it. If our politicians were set the task of pursuing something like GPI instead of GDP, then they would be incentivized to improve social goods while minimizing ecological bads. That’s the shift we need to make, and urgently.
Is it possible to eradicate poverty while we have already overpassed the ecological limits of our planet?
Yes, it is possible to end poverty! We already know that it is possible to achieve high levels of human development with relatively low ecological impact, because some countries have already done it, like Costa Rica and Cuba. We can hold such countries up as models for other developing countries to emulate. When it comes to sustainable development, poor countries are the “easy” part. It is rich countries that are the hard part.
[display_quote quote=”When it comes to sustainable development, poor countries are the “easy” part. It is rich countries that are the real development challenge of the 21st century.”][/display_quote]
I explain myself. On a global scale, we are already overshooting a number of key planetary boundaries. Importantly, the vast majority of this overshoot is being driven by excess consumption in rich countries. If we are to prevent ecological collapse, then rich countries will need to dramatically reduce their ecological footprint. Is it possible to make such reductions while at the same time pursuing GDP growth? The answer – according to all available studies – is no. That means that rich countries need to shift to a completely different economic model – one that, instead of relying on endless growth, enables human flourishing in the absence of growth.
This completely changes the development narrative, from a focus on the failures of poor countries to a focus on the violent excesses of rich countries. It is rich countries that are the real development challenge of the 21st century. If we don’t arrest our trajectory toward ecological breakdown, we will be headed toward mass human suffering, and the gains against poverty that have been accomplished over the past few decades will be reversed.
How to build an alternative to the endless growth model?
We need to realize that our world is an abundant place, with more than enough for everyone. The problem is that it is very unevenly distributed. The first step, then, is to share what we already have more fairly, so that we don’t need to plunder the earth for more. We can end poverty right now, without any additional aggregate global growth, simply by changing the rules of the global economy so that poor countries capture a fairer share of global income.
The second step is for rich nations to shift toward a post-growth economic model. There are lots of ways we can move in this direction. For instance, a shorter working week would allow us to scale down socially unnecessary economic activity (marketing, derivatives, single-use products) without causing unemployment to rise. A universal basic income would allow people to walk away from what David Graeber calls bullshit jobs, which have little or even negative social value. Decommoditizing key social goods like healthcare, education and perhaps even housing would allow people to access the resources they need to live well without endlessly increasing their incomes to do so.
There are dozens of exciting ideas out there that it’s time to start experimenting. It’s time to evolve beyond capitalism toward something better: something more caring, more intimate, more beautiful and more ecological.
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