Why the global fight against extreme poverty must start with the rich and powerful

Kevin Rafferty says bold words and brave ambitions will have no impact unless leaders challenge elite vested interests to ensure the poorest have a stake in their national future

PUBLISHED : Monday, 24 October, 2016, 1:49pm
UPDATED : Monday, 24 October, 2016, 7:01pm

The World Bank headquarters in Washington was festooned with a massive banner showing the cheerful faces of 10 people, Africans, Asians, Latin Americans and Pacific Islanders, with the large boast, “Together we can defeat poverty”.

Jim Yong Kim, the bank’s newly re-elected president, pledged to step up efforts to defeat extreme poverty. He joined hands with Christine Lagarde, managing director of the International Monetary Fund, and other world financial leaders this month to promise more energy and resources to combat increasing inequality, causing social and economic misery worldwide.

“Growth has been too low for too long, benefiting too few,” said Lagarde. France’s finance minister, Michel Sapin, urged: “We must fight against this immorality of globalisation, this inequality, to again give our people the taste for openness and multilateralism.”

These are bold words and brave ambitions. Unfortunately, the leaders making the promises are the ones standing in the way of real change to improve people’s lives.

We have reached a turning point. The old rich countries are tired and yet behave as if the rest of the world still owes them a living. The newly emerging giants, especially China and India, are still in their nationalistic cocoons and cannot see the opportunities of playing a global role.

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Many millions of desperately poor people have little chance because they don’t have an education or a job, which would offer a toehold on the road to a good life. Often, their struggle is made worse by the perniciously corrupt politics in their country, where the elite greedily control power and resources.

The old rich countries are tired and yet behave as if the rest of the world still owes them a living

The portraits on the World Bank’s glass palace show people from Guatemala, Tunisia, Cambodia, the West Bank/Gaza, Tonga, Ghana, Pakistan, Sierra Leone and Nigeria. What chance do ordinary people from these countries have of going to university or starting a company that will make headlines outside their hometown?

Today’s global geopolitics is in some ways worse than during the dark days of the cold war – partly because there are more players in an increasingly complicated world. There are doubts about the ability, and even willingness, of the US to accept superpower responsibilities. Meanwhile, President Vladimir Putin is determined to punch far above Russia’s sickly economic weight and does not seem worried about who may get in the way of his military might, whereas China is preoccupied with its opportunities of righting historic wrongs across large swathes of territory.

The “old world” of Europe is reeling from the UK’s vote to leave the European Union, causing recriminations and widespread uncertainty that may shake the region’s already faltering growth and unity. Global growth is falling, and free trade and globalisation, which have driven rapid economic progress, especially in emerging countries, have become dirty words, as IMF leaders admit.

The success of Brexit and the rise of Donald Trump, along with right wing anti-immigrant movements across Europe, are creating dangerous tensions.

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Does it matter, especially if you believe Europe is part of the past, and the US soon will be?

It matters because the US and Europe set the rules of the global system and still have greater power, especially in the IMF and World Bank, than their current economic strength deserves. Lest we forget, the immediate post-war leadership of the US, with contributions from the UK and other Europeans, was in starkly generous contrast to the insular ungenerous spirit those countries display today.

So there is a vacuum, in terms of organisation, imagination and money, to lift the world out of its economic, social and political gloom. China is doing its bit to contribute funds – which falls short by US$1.5 trillion a year for infrastructure alone, the World Bank estimates – but has not yet shown a matching global understanding.

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The more serious worry for the billions in poor countries is a poisonous mix of bad governance, distortions of modern capitalism giving undue advantages to the privileged, and the distance of the poor from opportunities.

Take India, which has seen great economic growth, has a democratically elected government and media that challenge those in power. In the Uttar Pradesh village I have studied for 40 years, mud huts have given way to houses of brick, electricity has finally arrived, mobile phones are common, there are bicycles and tractors, travelling shops and a very elementary school. But the jobs are all outside the village, in Agra, Delhi, Mumbai, further and further away.

In sub-Saharan Africa, governance and education are worse. Growth rates have fallen to 1.6 per cent, below the 3 per cent population growth. Africa has millions of talented people, whose opportunities are being suppressed by the collusion of corrupt political leaders and their business cronies.

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China has steadfastly refused to interfere in or sanction governments with dictatorial or oppressive policies, preferring dialogue, expanded business, trade and aid. Washington traditionally preferred a more active role, but its mixed record of promoting dictators, think Saddam Hussein, and intervening to topple them has led to misery, deaths and mass flight from the carnage in the Middle East.

For all that, governance increasingly matters, especially in bringing opportunities to the poorest in a rapidly changing economic world, increasingly biased in favour of the “haves”.

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Western media have reported widely on how the rich are increasingly enriching themselves at the expense of the poor. But the same is happening in developing countries, where the Gini coefficient, a measure of inequality, is rising. Zero on the Gini is perfect equality; 1, perfect inequality. Traditionally, rich countries score between 0.27 and 0.37, but the Gini for China has reached 0.5 and Hong Kong scores even higher.

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Besides the corruption of too many rulers and oligopolistic tendencies of companies squeezing local entrepreneurs, the threat from automation looms large. Kim cited World Bank research that suggests automation threatens 69 per cent of jobs in India, 77 per cent in China and an incredible 85 per cent in Ethiopia. Such job losses would be unsustainable.

Kim and his staff should widen their efforts not just to defeat poverty, but to see that the poorest 5 per cent of the poorest populations have a stake in their countries. That means challenging the rich and powerful and politically connected.

Kevin Rafferty is a journalist, former World Bank official and professor at Osaka University