WORLDVIEW: Poverty enigma-wellbeing vs GDP

poverty in China has been slashed

1,128Views 1Comments Posted 11/02/2020

By Jonathan Power

Do we know how to end poverty in the Third World? Do we know why some economies expand and others don’t? Not really. There is no clear formula for growth. The two Nobel economics prize winners of last year, the husband and wife team of Abhijit Banerjee and Esther Duflo, write in the current issue of Foreign Affairs, “The uncomfortable truth is that the economics profession still doesn’t have a good sense of why some economies expand and others don’t”.

 Despite our ignorance, we have seen poverty in the developing countries cut by half over the last ten years- from around 2 billion people to around 700,000. China alone has taken hundreds of millions out of poverty. India has done well too. Between 1980 and 2016 the average income of the bottom 50% of earners in the world nearly doubled.

Direct interventions like building more schools, clinics and hospitals, countering child mortality and deadly diseases, feeding the hungry when famine or floods decimate vast areas, spreading the use of vaccinations and contraception, and preventing malaria have had the most impact.

Over the long-term economic growth is important if development is to proceed without foreign aid. Growth does produce more of the wherewithal for government social and development programs- if a government so decides.

But we cannot rely just on growth to improve peoples’ lives. China and India have both had periods of high growth, but now are slowing. Is this inevitable or is it, as in China, just a maturing of the economy?

This export-led economy can’t grow its exports faster than the world economy is growing. In India, after a 30 year period of fast growth, it is the bad economic management of the government headed by Nandra Modi which refuses to emulate the methods of the success of its rival predecessor, the government of Manmohan Singh and Sonia Gandhi, that has led to a sharp fall in the growth rate.

But in both China and India this shouldn’t mean that the government should slow down its social development and life-enhancing programs. Much can be done to improve society and its well being with reduced growth.

Trying to work out what makes high growth possible makes little sense, argue Banerjee and Duflo: “Almost every variable for a given country is partly the product of something else. Take education, one factor that is positively correlated with growth.

Education is partly a function of the government’s effectiveness at running and funding schools. A government that is good at doing that is probably good at other things as well, say, building roads. If growth is higher in countries with better educational systems, should the schools that educate the workforce to get credit or the roads that make trade easier? Or is something else responsible? Further muddying the picture, it is likely that people feel more committed to educating their children when the economy is doing well- so perhaps growth causes education, not just the other way round. Trying to tease out single factors that lead to growth is a fool’s errand. So, by extension, is coming up with corresponding policy recommendations”.

Even though we know that there are myriad factors that when combined have made fast growth possible there simply is no accepted recipe for how to make poor countries achieve permanently high growth. The World Bank’s commission on economic growth recognized this.

So how should we think? National income (GDP) growth is a means to an end, not an end in itself. Of course, it creates jobs, raises wages and increases budgets so that the government, if it wants- this depends on its ideology- can redistribute more.

The ultimate goal should be improving the quality of life. The good news is that even in the absence of fast growth there are ways to improve other indicators of progress. As I said at the beginning, this can be best achieved by direct intervention in health and education and the like, as well as improving the performance of banks and courts and getting teachers to turn up for work.

Many poor countries have better indicators of improved life quality than countries with a higher level of income per head- for example, Sri Lanka, Bhutan, Cambodia, Kerala, and West Bengal in India, Barbados, Uruguay, and Costa Rica. Here, and in like countries, the infant mortality rate, to take one example, has fallen sharply, sometimes as fast, sometimes even faster than better off middle-income countries.

The goal must be to raise living standards with the resources the country already has. Well-being, not growth, is first and foremost what it’s all about. Growth is important but well-being, independent of growth, is more important.


Comments 1

George Klk

Panama | Foreign Economic Growth Factors. World economic fair and reciprocal trade is the main factor. Two super-power nations not balancing trade with equal tariffs creates a myriads of problems. One super-power nation with ALL the technology and another nation takes...ALL the technology. Takes it ALL and says... "You cannot sell your invention in the market, as long as you do business with us," "We have total control and we will determine your share of the profits." "We will make you...millionaires and help your political campaign. "We will build our war machines using a large share of your marketable inventions." "We will determine where we will spend our surplus and keep out the competition. Eventually, the right political party leader will wake up and questions those... U.S.A. corporate executives allowing their country of birth to diminish disgracefully. U.S.A. $10's Trillions granted to China for decades and the U.S.A. could not get fair trade. U.S.A. $20 - $30 Trillion national debt toward a massive bankruptcy with global ripple effects. U.S.A. depleted militarily from Socialist democratic party taxing vehemently U.S. corporations. U.S.A. corporate executives forced to leave for China with little to no choice to make a profit. What is poverty and how does one nation rise beyond poverty while others do not? The United States made the wealth of many, many, many nations through so called... [U.S. DEMOCRATIC APPEASEMENTS FOR YEARS FOR THE CAUSE OF SOCIALISM]. Socialism stifle anyone individual from striking out on his/her own for their wealth and dreams. Socialism vehemently attempts to destroy...Capitalism! U.S. Democratic party attempts to destroy the Republican party with impeachments. This involves two major super powers and it is the root of how the world operates. China's appeasements from very early prior U.S. government administration simply took advantage of the U.S. appeasements because of four factors. 1. U.S. democrats self enrichment. 2. U.S. democrats Socialist agendas. 3. U.S. democrats lack of negotiation skills. 4. U.S. democrats unwillingness to understand the trading principles and effects on the -- U.S. economy. Factories provides human traffic through the surrounding businesses and profits are made. China decided to work with other foreign nations with their surplus and work closely as a clique leaving the U.S. out of any fair benefits for years. The U.S. depended on China to...borrow money to pay off the interest on its $trillions of debt! That...ALL CHANGED!!! The U.S. Republican business leaders negotiated with reciprocal tariffs and demanded protection of their...Intellectual Property! China resisted a fair trade deal with the U.S.A. and made it more difficult for themselves. China's economy took a drastic nose dive and U.S. corporations and companies decided to go where the action was and that is the United States. The U.S.A. made many government changes including reducing regulations for U.S. companies. China's downward economy may have forced foraging for wild meats in Hunan causing a serious Corona virus among their population increasing a number of deaths, currently over a thousand! Corona virus has had a compounding effect of further economic decline in China. China economic leverage it once had is now, a thing of the past relegated to history. The United States wants to make China part of their...Clique and negotiate fairly with mutual respect! China now has a choice of accepting continuing fair negotiations with the U.S. or contrive with their U.S.A. technologies some way of using it for their political objectives. Political objectives aligned with another super power such as...Russia! Russia objectives is mainly oil dominance and military might which may very well... compliment the objectives of China's ambitious market dominance. Panama appears to have their main interests with China as one of their main canal customers. Panama has many canal workers with the container management facility. Panama now has an agreement recognizing the...'One China Principle'...iron clad agreement. China has lost its World Bank loan privileges with the U.S. and now is working with Master Card. Global world trade is what determines poverty. China extraordinary global surplus...$trillion annually...lifted their poverty for...[their people]…$$$!!! What is extraordinary from watching YouTube on the Corona Virus is the fact that the people of China could be standing their one minute and the next minute they...[DROP DEAD]!!! China an extraordinary wealth nation and the people...[DROP DEAD]!!! Poverty and the human living conditions...OR...Fair, Reciprocal Trade with the United States. The United States Republicans or Not the United States Republicans...that is the question!

7 months ago
The comments are the responsibility of each author who freely expresses his opinion and not that of Newsroom Panama.
Please enter a valid email.
Please enter username.
Please, enter a valid message.
Please validate that it is not a robot.