Saturday, October 17, 2015

Globally, extreme poverty closer to becoming history:  World Bank

Don't believe the hype:  the poor are not getting poorer, either in Australia or globally.

There has long been a sense of gloom regarding living conditions experienced by those in outright destitution, and others struggling to make ends meet on a regular basis.

Arguably the most forceful voice in the world today concerning these issues is that raised by the head of the Catholic Church, Pope Francis, who has gone on a mission to focus upon the plight of the impoverished.

In his much debated encyclical letter, Laudato si:  On care for our common home, he urges people to be "particularly indignant at the enormous inequalities in our midst" because, in some respects, "we fail to see that some are mired in desperate and degrading poverty, with no way out".

Although Francis is particularly concerned about the relationships between poverty and environmental degradation, which is partly affected by what he sees as immodest consumption in rich countries, his key writings do tap into a chord of greater worry expressed in recent years.

Of course, there is a certain intersection between material poverty and the observation that inequalities within income and wealth distributions have been widening lately, with the words of Francis and others, such as Thomas Piketty and Joseph Stiglitz, tapping into the veins of concern in this regard.

I would humbly submit it is obvious there is poverty in this world, which needs to be countered, but by the same token let us not harbour fears out of all proportion that the poor, as a whole, are necessarily getting poorer.

The key point here is the rich are getting richer and the poor are getting richer, too, or at least certainly less discomforting.

Just last week the World Bank released a report examining global trends in extreme poverty rates, and came up with a stunning finding that countries around the world are getting closer to the threshold of making extreme poverty history.

According to the report, the number of people living in extreme poverty (defined at an international poverty line of $US1.90 a day, or $US668.80 per annum) is likely to fall at below 10 per cent of the global population by the end of this year.

The World Bank has projected that the extent of global poverty has fallen from 1.96 billion people, or 37.1 per cent of the global population, to 702 million people (9.6 per cent of global population) this year.

It should be obvious even to the casual observer of global trends that a precipitous decline in poverty in East Asia and the Pacific region, including China, is helping to make the worldwide anti-poverty drive a reality, reducing the numbers of extremely impoverished people from 999 million people to 83 million from 1990 to 2015.

Now, it is true that not every region has experienced an absolute decline in poverty, with 63 million more people in sub-Saharan Africa earning below $US1.90 a day since 1990, but the declining representation of poverty in population shares is a general global and regional observation.

Turning now to Australia, there is virtually nobody in this country earning below the international standard poverty line set by the World Bank, certainly if 2011 research by the American Pew Research Centre is of any guidance.

Australia is a developed country by international standards, by and large, thanks to its market-based economy, even if fettered by taxes and regulations and, also in part, because of large-scale public sector redistribution running over the top.

But even in these circumstances, one is also prone to hear the argument there is still widespread poverty in Australia, even if what we conceive of as being poverty is nothing like what is experienced in many other locations around the world.

Importantly, the claims of an extensive Australian poverty remains the key rationale for ever more demands for fiscal, and to a lesser extent regulatory, measures to shift resources from the rich to the poor.

Regardless of whether we believe extra redistribution is prone to help or hinder (and I find myself in the latter category), the truth is that across several dimensions those disadvantaged Australians are sharing in the improved living standards most of the rest of us enjoy.

My research shows average income by the bottom 20 per cent have risen, average life expectancies for people living in disadvantaged areas is increasing whilst mortality rates are falling, and educational attainment is also on the improve in low socioeconomic locations.

Comparing the affordability of goods, proxied by the amount of time it takes for a labourer on a low income to buy a good outright, also bears the hallmarks of dramatic improvement we often overlook in the poverty debates.

That those in poverty are being lifted up along with the rest of us is even more starkly illustrated when comparing the conditions of life between now and a century ago.

As an example, diseases that wreaked havoc in poorer communities in places such as Sydney and Melbourne 100 years ago, such as diphtheria, polio, tetanus and tuberculosis, are thankfully pretty much long forgotten today, even in less advantaged communities.

The general lot of people has improved, even for those at the lower rungs of the distribution of financial resources, but we still want to ensure that poverty, indeed, becomes history.

The most effective formula for anti-poverty success here in Australia is fairly much the same as it is anywhere else in the world, and that is forging and maintaining good institutions giving everyone a shot at prospering.

It is no coincidence that as poverty has abated, economic freedom has increased in degree, both here and abroad, during the past 20-odd years.

As a number of empirical studies about the relationship between economic freedom and poverty reduction have shown, more freedom has added in new rungs on the economic ladder of opportunities for all to climb up, once some of the worst forms of central planning and political interference have collapsed.

We shouldn't fall for the hype that the poor are strictly getting poorer, and future discussion during Anti Poverty Week could be greatly enhanced if we can start talking about how economic freedom helps dissolve poverty out of sight.


ADVERTISEMENT

No comments: