We can't solve poverty by growing

WE CAN’T SOLVE POVERTY BY GROWING

For more than 50 years, economists have said the only good way to end poverty and improve lives is to grow. But now the ecology of the planet is breaking down, these ideas are coming to an end. Jason Hickel reports

Illustration by Pete Reynolds

Everything will soon change in international development.

In 2018, everyone was talking about the IPCC (UN’s Intergovernmental Panel on Climate Change) report. It said that if we want to stop the climate breakdown, we need to cut global emissions in half by 2030 and reach zero by 2050. This is a very big change of direction.

We know it’s possible to cut emissions quickly if governments act together, stop producing and using fossil fuels and develop renewable energy. But there’s a problem. IPCC scientists said it’s impossible to change quickly enough if the world economy continues to grow as it is growing now.

If we grow more, we need more energy. If we need more energy, it is more difficult to create enough renewable energy.

If we continue as now, the world economy will become 3 times bigger by 2050 – 3 times more energy to produce and use. It will be almost impossible to decarbonize the world economy we have now; and impossible to do it three times more in the short time we have.

If we want to have a chance of meeting our climate goals, we cannot continue to grow. Many people agree. In 2018, 238 scientists said this in an open letter to the European Commission.

In 2019, another 11,000 scientists said this again in the journal BioScience.

DIFFICULT QUESTIONS

So there are difficult questions about if it is possible to end poverty in the 21st century. Because this is such a big problem – much bigger than most people have said. Usually we think about poverty as the $1.90 per day poverty line (used by the World Bank and the United Nations). About 897 million people live on less than this; about 13 per cent of the world’s population.

But this $1.90 per day is not related to research to how much people really need. Many times, studies have found that $1.90 is not enough even for minimum food, and definitely not enough for housing, healthcare and transportation.

Even the World Bank warns that we shouldn’t use this measure for policy decisions.

Researchers who study poverty say that people need at least $7.40 per day to get good nutrition and live for the normal human life expectancy. This changes the story. World Bank information shows that more than 4.2 billion people live on less than this. That’s nearly 55 per cent of the human population.

This is such a big problem. So many people eg. economists say we need to grow more to solve it.

But this is so bad for the planet’s ecology. Economist David Woodward in the journal World Economic Review said that it will take 200 years to bring everyone in the world above this poverty line. And to do this, we will need to grow the global GDP to 175 times more than it is now.

That is 175 times more production and use than now. It is a really terrible idea. Woodward says that we cannot do this without total climate change catastrophe, and this would stop any benefits in reducing poverty.

WE HAVE OPTIONS

How can we help global poverty if we cannot grow? Do we need to sacrifice the poor for the planet as many eco-fascists want?

Fortunately, there is another way. We can end poverty, right now, without any more economic growth. The key here is to see that we don’t live in a poor world. We live in a very rich world. Global poverty is not because of real lack of food and resources, but because the systems create artificial lack.

We can see this when we look at the problem of poverty by looking at inequality. The poorest 60 per cent of people in the world do most of the work and produce most of the resources in the world economy. But they only get about five per cent of total global income. The richest one per cent of people get about $19 trillion every year, nearly a quarter of global GDP.

The income of the richest one per cent (from World Bank GDP data) is more than the GDP of the ‘poorest’ 169 countries together. On this list are: Norway, Sweden, Switzerland, Argentina, all of the Middle East and the whole continent of Africa.

It would need about $6 trillion to get everyone in the world above the poverty line of $7.40 per day (from World Bank’s PovcalNet database calculations). A lot of money. But this is only one third of the annual income of the richest one per cent of people. We could end poverty immediately if we move this percentage of income from the richest one per cent to the poorest 4.2 billion people. And the richest people would still have average annual incomes of nearly $180,000 per year. This is more than anyone could need.

Poverty isn’t natural and we shouldn’t expect to have it. The policies that give most money to the rich produce poverty. It is basically a a problem of distribution.

One easy way to fix this would be to give money directly – like a basic income for the global poor – from money from a tax on the incomes of the world’s richest people, or on people’s wealth that has built up over many years, or money people send, or on extracting resources, or carbon emissions. These taxes would not be difficult to start, and there are some good ideas on how to do it.

But this would not solve the basic inequality that the global economy causes. For that we would need to change the rules of the economy to make it fairer for most people in the world, so they can get a bigger share of what they produce.

How? The idea with the biggest effect would be to have a minimum world wage. Workers in the Global South lose between $2 trillion and $4 trillion each year because they don’t get paid the real value of what they contribute to international trade. A global minimum wage, related to each country’s median income so it doesn’t affect comparisons, would really help balance incomes.

We could do something about illegal money too. About $1 trillion is stolen from Global South countries each year and stored in secret offshore banks, mostly by big transnational businesses trying to pay less tax. A few simple laws could end this system very quickly. If that money went back to the countries it came from, this would really help with global poverty.

Maybe the most important thing would be to make the World Bank, the International Monetary Fund and the World Trade Organization more democratic. We could give poor countries more power in the decisions that affect them, and more control over their own economic policy. The UN estimates that fairer trade rules could allow poor countries to earn more than $1 trillion each year from more money from exports.

There are many other ideas. We could cancel the terrible debts that force so many Global South countries to pay so much money to big international banks; we could put an end to ‘land grabs’ - businesses taking land; we could relax the patent laws on essential medicines and technologies; we could change the pattern of subsidies that give rich countries an unfair advantage in agricultural trade.

All of these changes would mean the South would get a greater share of global GDP. Money would move from the very richest people to the world’s majority.

CHANGE

Henry Wallich (formerly on the US Federal Reserve Board) once said: ‘Growth is a substitute for equality of income.’ And it’s true: it’s easier in politics to increase the GDP and hope some of it gets to the poor than it is to make the share of the money more equal.

But look at the opposite of Wallich’s logic: if growth is a substitute for equality, then equality can be a substitute for growth. We live on a rich planet and our economy produces more than enough for all of us. If we can find ways to share what we already have more fairly, we won’t need to destroy the Earth for more. Justice is what we need to stop the ecological madness of needing to grow.

Of course, none of this will be easy. It will be a big fight against the people who benefit from the situation now. But that’s a good thing. People who care about global poverty have given up their political imagination and activism and agreed with the lazy idea of growth.

So the battle against global poverty is not now political. This is why – for so many decades - it has not been able to get good results. The climate emergency changes this. It forces us for the first time to face the terrible inequalities of the global economy. It forces us to think about this politically.

NOW READ THE ORIGINAL: https://newint.org/features/2020/02/10/we-cannot-grow-our-way-out-poverty