Essential Leader

Globalization and Poverty

Is there a positive correlation between globalization and poverty? One of the guiding premises of Global Envision, where I have the priviledge to be a Director, is a recognition that “The immense forces of globalization are changing the lives of hundreds of millions of people.” Our guiding underlying assumption is that “The growth of economic globalization and free markets holds great promise for poor communities around the world.” (Guyer)

Several recent studies point to the notion that there is indeed a positive relationship between economic growth as a result of globalization and poverty reduction. A study by Shaohua Chen and Martin Ravallion, “Absolute Poverty Measures for the Developing World, 1981-2004,” published in March 2007, suggested that the percentage of people in the world who are absolutely poor is generally declining. But wait! How can that be? Everyone knows the number of poor in the world is rising. That too, is true. In an intriguing study published in 2002, Satya Chakravarty, Ravi Kanbu, and Diganta Mukherjee document this rise in absolute numbers of poor people as the world’s population continues to increase. But because of more and better access to markets and sources of income, the relative number of the world’s people who live below the international poverty line ($1 - $1.25 a day) has actually declined.

There are some interesting exceptions to this general rise in world income. Urban areas generally have a lower-than-average pace of poverty reduction while rural areas, which are home to three-quarters of the developing world’s poor, have a higher-than-average pace of poverty reduction. Why? Largely because the rural poor are moving to the cities (Chen and Ravallion). According to the World Bank, Sub-Saharan Africa, which has experienced little economic growth, has had little change in the number of people living in abject poverty (Soubbotina, 2000).

Conclusion? While the percentage of absolute poor is dropping, there is spotty success in reducing the total number of the poor. In some regions, like Sub-Saharan Africa, poverty continues to rise. One of the reasons why some areas are more successful than others in reducing the percentage of people living in absolute poverty is that globalization has allowed the poor to access more lucrative markets and given them more options for developing income sources.

Challenge No. 1: Global Poverty

Nobody said it will be easy or simple. Nor can it be relegated to a checklist and a timetable. But its importance bears no dispute. Global poverty is the largest and most crucial challenge facing tomorrow's leaders.

The 2008 World Bank Group Global Poll suggests — nay, it emphatically states — that "improving economic conditions for the world's poor remains both a top priority and the largest development challenge." A triple whammy of shocks—financial meltdown, food insecurity, and fuel price sticker shock—coupled with global warming and widespread war and conflicts have drawn attention away from a glaring basic problem.

"1.4 billion people in the developing world—that's one in four people—are still living on less than US $1.25 a day," according to the World Bank's Marwan Muasher. Global poverty is a primary factor in tens of millions of worldwide deaths in 2007. It is a major social determinant of disease, and it's why people who suffer the most from global warming — the poor — are at greatest risk of loss as a result of environmental disaster.

Poverty eradication is, and must remain, one of democracy's core responsibilities. True, there are other highly important issues that must also be addressed. "Growing and strengthening domestic economies ranked second, and improving governance third," according to the World Bank.

The problem, while definable, offers no solution that is not complex or difficult. There is no magic pill that instantly lifts people out of poverty.

Still, a scan of literature on the topic does offer some hints for courses of action. The first comes from the Global Poll itself. Those countries whose citizens are poorest must take "ownership" of the problem and seek to put in place the internal structure and processes that guarantee that outside aid finds its way to those who most need it.

Second is to focus on education. Studies by the International Monetary Fund and others confirm that better access to education and training is a key to shrinking income disparities and alleviating poverty. An "inclusive education policy" is the only sustainable means to lift the world out of poverty, argues Jean Claude de l'Estrac in his contribution to the book Poverty in Mauritius by Sheila Bunwaree and Roukaya Kasenally of the University of Mauritius.

What is needed is a commitment — a really serious commitment — to a long-term process by citizens and leaders willing to embrace a nonpartisan, collaborative, multinational vision to make the world a better place. It will take data that has not yet been defined, experiments in policy that will require a tolerance for trial-and-error as the best policies are developed, and a timetable that goes beyond election timelines.