Introduction

What does it mean to be poor? How is poverty measured? Third World countries are often described as developing while the First World, industrialized nations are often developed. What does it mean to describe a nation as developing? A lack of material wealth does not necessarily mean that one is deprived. A strong economy in a developed nation doesn’t mean much when a significant percentage (even a majority) of the population is struggling to survive.

Successful development can imply many things, such as (though not limited to):

• An improvement in living standards and access to all basic needs such that a person has enough food, water, shelter, clothing, health, education, etc;
• A stable political, social and economic environment, with associated political, social and economic freedoms, such as (though not limited to) equitable ownership of land and property;
• The ability to make free and informed choices that are not coerced;
• Be able to participate in a democratic environment with the ability to have a say in one’s own future;
• To have the full potential for what the United Nations calls Human Development:
  

  Human development is about much more than the rise or fall of national incomes. It is about creating an environment in which people can develop their full potential and lead productive, creative lives in accord with their needs and interests. People are the real wealth of nations. Development is thus about expanding the choices people have to lead lives that they value. And it is thus about much more than economic growth, which is only a means—if a very important one—of enlarging people’s choices.

At household, community, societal, national and international levels, various aspects of the above need to be provided, as well as commitment to various democratic institutions that do not become corrupted by special interests and agendas.

Yet, for a variety of reasons, these full rights are not available in many segments of various societies from the richest to the poorest. When political agendas deprive these possibilities in some nations, how can a nation develop? Is this progress?

Politics have led to dire conditions in many poorer nations. In many cases, international political interests have led to a diversion of available resources from domestic needs to western markets. (See the structural adjustment section to find out more about this.) This has resulted in a lack of basic access to food, water, health, education and other important social services. This is a major obstacle to equitable development.

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Inequality

While poverty alleviation is important, so too is tackling inequality. Inequality is often discussed in the context of relative poverty, as opposed to absolute poverty.

That is, even in the wealthiest countries, the poor may not be in absolute poverty (the most basic of provisions may be obtainable for many) or their level of poverty may be a lot higher than those in developing countries, but in terms of their standing in society, their relative poverty can also have serious consequences such as deteriorating social cohesion, increasing crime and violence, and poorer health.

Some of these things are hard to measure, such as social cohesion and the level of trust and comfort people will have in interacting with one another in the society. Nonetheless, over the years, numerous studies have shown that sometimes the poor in wealthy countries can be unhappier or finding it harder to cope than poor people in poorer countries.

In the context of tackling poverty then, the Overseas Development Institute (ODI) for example sees poverty reduction as a twin function of

1. The rate of growth, and
2. Changes in income distribution.

The ODI also adds that as well as increased growth, additional key factors to reducing poverty will be:

• The reduction in inequality
• The reduction in income differences

A few places around the world do see increasing rates of growth in a positive sense. But globally, there is also a negative change in income distribution. The reality unfortunately is that the gap between the rich and poor is quite wide in most places. For example:

• The wealthiest 20% of the world’s population consumes 76.6% of the world’s goods while 80% of humanity gets the remainder.

(See poverty facts and stats on this site for more examples.)

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The Wealthy and the Poor

In the developing world, there is a pattern of inequality caused by the powerful subjugating the poor and keeping them dependent. Outside influence is often a large factor and access to trade and resources is the usual cause. It is often asked why the people of these countries do not stand up for themselves. In most cases when they do, they face incredible and often violent oppression from their ruling elites and from outsiders who see their national interests threatened.

Consider the following from the United Nations:

And contrast that with the following around the same time, from a key superpower that helped create the United Nations. It is from George Kennan, head of the US State Department planning staff until 1950, and his comments on US relations with Far East:

While it is recognized that strong institutions, a functioning and non-corrupt democracy, an impartial media, equitable distribution of land and a well structured judicial system (and other such factors), etc. all help in realizing a successful nation and society, a lack of any of these things can lead to a marginalization of a sector of people. Often, it can be a very large sector.

For example, those likely to lose out in such an equalizing effect are the rich, elite power holders.

As a result of their ability to own and/or influence one of these above-mentioned things, they affect the lives of millions. This is a pattern seen throughout history. Take for example the medieval days of Europe where the wealthy of the time controlled land via a feudal ruling system and hence impoverished the common people intentionally.

• The rulers (Kings etc), would proclaim their Divine Right to rule over their subjects.
• They had an army of Lords and Bishops to advise on policies that benefited these groups (religion was used—and still is—to control and influence people, while Lords and Knights were an extension to the ruling family that would carry out the wishes.)
• They would heavily tax the people of their land.
• Not allowing the peasants to own the land upon which they lived meant that they would be stuck in poverty and dependency.
• When the elite could no longer tax the poor, they started to tax the wealthy nobility.
  • It was only at that point did the revolutions such as the French Revolution take hold (because now the nobility had their wealth affected and were able to influence the peasants to fight for their cause.)
  • While this helped bring more rights, once the people won, there were concessions made that allowed the elite to retain their power, but to share it a bit more.

Trading superiority was maintained by raiding and plundering areas deemed as a threat. Summarizing from the works of the Institute for Economic Democracy:

• The old European city states, which were centers of wealth, would control their countryside as the source of their resources and production, and hence, the source of their wealth. If the countryside became more efficient and produced better, or threatened to trade with other neighboring cities, this would be seen as a threat to the wealth, power and influence of the city. These peripheries would therefore be raided and their means of production would be destroyed.
• The cities would fight over each other for similar reasons.
• For continual support, those rulers would proclaim various reasons to their people, of maintaining security and so on (not unlike what we hear today about national security). Even some laws were established that basically allow these practices.
• A strong military was therefore necessary (just as it is today) to ensure those trade advantages were unfairly maintained.
• Those European city states evolved into nation states and imperial powers, and the countryside expanded to include today’s third world, which was much of the rest of the world. The effects of colonialism and imperialism are still felt today.

The discovery of the Americas, expansion of trade routes etc brought much wealth to these centers of empire which helped fuel the industrial revolution, which required even more resources and wealth to be appropriated, to continue this growth. Mass luxury consumption in Europe expanded as well as a result of the increased production from the industrial revolution.

But this had a further negative impact on the colonized nations, the country side, or the resource-providers. For example, to keep profits up and costs down, they used slavery where they could, sometimes transferring people across continents, introducing others when indigenous populations had either been wiped out, decimated, or proved too resistant in some way.

Europeans also carved out artificial borders to reflect their territorial acquisitions, sometimes bringing different groups of people into the same borders that had never been forced to live together in such short times. (Some poorer countries today still suffer the effects of this.)

As with the previous wars throughout Europe’s rise, World War I and II were also battles amongst the various European empires who struggled over each other to control more of the world’s resources and who would decide the rules of unequal trade.

Plundering the countryside to maintain dominance and control of the wealth-producing process has been an age-old process.

These mercantilist processes continue today. Those policies of plunder by raid have continued, but include a more sophisticated plunder by trade:

The geopolitical events of the post World War II era have been crucial for their impacts on poverty and most other issues. J.W. Smith summarizes this:

While European nations are now more cooperative amongst themselves (in comparison to the horrors of World War II) and the U.S. had long taken the lead in the international arena, for the rest of the world, international trade arrangements and various economic policies still lead to the same result. Prosperity for a few has increased, as has poverty for the majority.

Today’s corporate globalization, is an example where the wealthier companies and nations are able to determine the rules, shape the international institutions and influence the communication mechanisms that disseminate information to people.

In this backdrop, how do developing nations contend with poverty?

• During the Post World War II period, during the Cold War, poorer country governments often found that if they tried to improve the situation for their people, they could have been perceived as a threat or worse still going communist. They may have faced external pressure, external meddling in internal affairs or even military intervention by the powerful nations.
• The powerful nations would of course claim this was necessary for something like world stability, national interest, or to save the other country from themselves, but it would often be to do with protecting their national interests, such as a secure and constant supply of cheap resources or some other reason related ultimately to maintaining influence and power.
• Dictators and other corrupt rulers have often been placed/supported in power by the wealthier nations to help fulfill those national interests in a similar way the old rulers of Europe used the Lords and Knights to control the peripheries and direct resources to the centers of capital. (Although, now, increasingly, democracies are supported, but ones where the economic choices are so limited, that the democracy provides a similar environment that a dictatorship did, for foreign investors, but without the overt violence and oppression.)
• This means that it is hard to break out from poverty, or to reduce dependency from the US/IMF/World Bank etc.

Structural Adjustment (SAP), as described in a previous section on this web site, is an example of that dependency. Neoliberal economic ideology has been almost blindly prescribed to poor countries to open up their economies.

The idea is that opening markets for foreign investment will also help improve exports and contribute to economic growth. Cutting back on social spending (e.g. health and education) which are seen as inefficient will also help pay back loans and debts.

But what ends up happening is the poorer nations lose their space to develop their own policies and local businesses end up competing with well-established multinationals, sometimes themselves subsidized (hinting a more mercantilist economic policy for the rich, even though free market capitalism is the claim and the prescription for others).

Hence, many back the economic neoliberal policies without realizing the background to it. It is another example that while international trade and globalization is what probably most would like to see, the reality of it is that it is not matching the rhetoric that is broadcast.

J.W. Smith has researched this in depth and the following offers a relevant summary:

(To find out more about the political dimensions of the economy of the world and to see the detailed links between history (how it is both told and repeated), politics that are always at play and the effects on the economy the world over, visit the Institute for Economic Democracy web site. It provides much more in-depth research into these backgrounds and in far more detail than what I have summarized above.)

With this in mind, why would so many people not oppose such things? There are many reasons, including:

• Most people don’t know—this is not an accident. It is in the interest of power-holders to ensure as little is questioned by outsiders as possible. Whether it be via an aristocracy or by simple distortion of information, educational systems, or whatever, different nations have had various means to handle this.
  

  The smart way to keep people passive and obedient is to strictly limit the spectrum of acceptable opinion, but allow very lively debate within that spectrum—even encourage the more critical and dissident views. That gives people the sense that there’s free thinking going on, while all the time the presuppositions of the system are being reinforced by the limits put on the range of the debate.

• Those that have opposed such things in the past may have been persecuted in some way. In some societies those who try to say something may just face ridicule due to the embedded belief systems which are being questioned, while in other societies, people may even face violent oppositions.
• Some dare not entertain the thought that the work they may be doing could be at the expense and exploitation of someone else. The following summarizes this aspect quite well:
  

  [W]e should be familiar with the sincerity with which people will protect the economic territory that provides them their livelihood and wealth. Besides the necessity of a job or other source of income for survival, people need to feel that they are good and useful to society. Few even admit, even to themselves, that their hard work may not be fully productive. This emotional shield requires most people to say with equal sincerity that those on welfare are lazy, ignorant, and nonfunctional.

  Those above the poverty level vigorously insist that they are honest and productive and fulfill a social need. It is important to their emotional well-being that they believe this. They dare not acknowledge that their segment of the economy may have 30 to 70 percent more workers than necessary or that the displaced should have a relatively equal share of jobs and income. This would expose their redundancy and, under current social rules, undermine their moral claim to their share. Such an admission could lead to the loss of their economic niche in society. They would then have to find another territory within the economy or drop into poverty themselves.

J.W. Smith, quoted above, also points out (and details in his work) how we have moved from plunder by raid to plunder by trade in recent centuries. The complexities of some of today’s economics and trading systems also make it harder to address root causes of poverty:

And when considering how today’s global economic model promotes the liberalization of capital more and more, the effects of rapid flows of capital and other impacts of over-liberalization is borne largely by the poorer members of society:

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The World Bank and Poverty

The World Bank is a major international institution involved in poverty and development. It has the capacity to lend a lot of money and expertise to developing countries and advise on development matters.

The World Bank produces an annual report, called the World Development Report. The Bank regards this as its flagship report. Most mainstream economists use this report in some way or form, and it is one of the few reports on development that the US mainstream media reports on (because it usually shows the US, and its policies that it prescribes to the rest of the world, in a favorable light.)

The way the 2000 report was released highlighted another problem with the World Bank, and how it doesn’t like to accept criticism on the current forms of globalization and neoliberalism. For the 2000 report, Ravi Kanbur, a professor from Cornell University had been asked to lead up the report team.

Kanbur won respect from NGO circles as he tried to be inclusive and take in a wide range of views, something the Bank has been criticized for not doing (which is a problem in itself!). However, as the report was to be published, he resigned because he was unreasonably pressured by the Bank to tone down sections on globalization, which, amongst other things called for developing nations to accept market neoliberalism cautiously.

The World Bank was apparently influenced itself by the US Treasury on this—this is not new though; critics have long pointed out that the Bank is very much influenced by the US, thus affecting the chance of real progress being made on poverty issues around the world.

The following quotes collected from the Bretton Woods Project, reveal some interesting insights:

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Poverty in Industrialized Countries

As mentioned earlier, poverty in industrialized nations is also an important issue. While many poor in wealthy countries may not be in absolute poverty as the many poor people in developing countries, the relative poverty and high inequality in many wealthy nations creates significant issues.

The OECD report noted for example UK’s shrinking gap between rich and poor. Back in 2000, the UK was the worst place in Europe to be growing up if you were poor, as more children were likely to be born in to poverty there, compared to elsewhere in the EU.

Despite a period of boom, in April 2000, the UK National Office of Statistics found that disparities between rich and poor continued to grow in UK.

Andrew Simms, policy director of the New Economics Foundation in an article mentioned further above about inequality notes that

As another example, it may be surprising for some readers to learn that the United States, although the wealthiest nation on Earth, has often had one of the widest gaps between rich and poor of any industrialized nation.

United For a Fair Economy reported that for 1998 almost 70% of the wealth was in the hand of the top 10%. In another report, they mentioned that the gap had widened in recent decades. In 1989, the United States had 66 billionaires and 31.5 million people living below the official poverty line. A decade later, the United States has 268 billionaires and 34.5 million people living below the poverty line-about $13,000 for a three-person family.

As with Britain, even during the booming economy in the late 1990s and early 2000, there was an increasing gap between the rich and poor. Into 2002, fighting poverty did not appear to have been a major election campaign issue (nor was it in previous election campaigns).

Then chairman of the Federal Reserve, Allan Greenspan, revealed concerns in mid-2005 that the increasing and widening income gap might eventually threaten the stability of democratic capitalism itself in the US.

While health and education are key to any economy or nation to grow and be strong, both of these suffer issues of access, equality and pressure to cut back (including elsewhere around the world as discussed in the structural adjustment part of this site). For example,

• As a summary of a report titled Economic Apartheid in America mentions, that the United States is the only industrialised nation that views health care as a privilege, not a basic human right.. (Unfortunately the report itself not available on the Internet, but is produced by United for a Fair Economy where you can see many extracts and similar reports.)
• In addition, as good education is linked to a strong economy, Business Week reports (February 14, 2002) on a study that analyses OECD data from 1994 to 1998, and summarizes that the literacy of American adults ranks 10th out of 17 industrialized countries. In addition, the issue of inequality was highlighted: More troubling, the U.S. has the largest gap between highly and poorly educated adults, with immigrants and minorities making up the largest chunk of those at the bottom. While Business Week concentrates on the U.S. they also point out that Despite the mediocre U.S. ranking, it still beat out most of its major trading partners except Germany, including France, Britain, and Italy. (Japan didn’t participate [in the study].)

And it isn’t in just these two industrialized nations that these problems persist. A Guardian news report, for example, shows that certain types of poverty in various European cities can be regarded as worse than in some other parts of the world which one would not normally think would compare with Europe, such as India.

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Corruption

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