by Jason Hickel
A second problem with this good-news narrative about inequality is that the Gini index is a relative measure, and this can be quite misleading. Instead of measuring the gap between the rich and poor, it measures the relative rate at which different incomes are growing. So if the incomes of poor countries increase at a rate slightly faster than the incomes of rich ones, the Gini index shows declining inequality even if the absolute gap between them has grown. Here is an example. If a poor country’s income goes up from $5,000 to $5,500 (a 10 per cent increase), and a rich country’s income goes up from $50,000 to $54,500 (a 9 per cent increase), the Gini index will show decreasing inequality because the income of the poor country is growing faster than that of the rich country, even though the gap between them has grown by $4,000. In light of this, many economists reject the Gini index as an overly conservative measure. It is possible to correct for this bias by calculating the absolute Gini index. Sudhir Anand and Paul Segal have done exactly that and estimate that global inequality rose from a Gini index of 57 in 1988 to 72 in 2005 – a dramatic increase.
*
There is a third and even more important problem. The World Bank’s approach expresses inequality between the world’s countries as if they were all anonymous individual units. But if we take a different angle and look at the gap between specific regions of the world, a very different story emerges. There are a few ways one can look at this. The best approach is to measure the gap in real terms between the GDP per capita of the United States (as the world’s dominant power and a proxy for the rich world) and that of the various ‘developing’ regions of the global South. Since 1960 the gap between the US and the Middle East/North Africa has grown by 154 per cent, between the US and South Asia by 196 per cent, between the US and Latin America by 206 per cent, and between the US and sub-Saharan Africa by 207 per cent. We can get a sense of what this looks like in the graph on the next page.
Source: World Development Indicators
The graph above focuses on the United States, but if we plotted a line for Western Europe, or even for ‘the West’ as a broader category, including Australia and Canada and so on, it would rise more or less parallel to that of the United States. From this perspective, the global inequality gap hasn’t diminished at all. On the contrary, the gap between poor and rich countries has roughly tripled. Over the past few decades inequality has become so bad that in 2000, Americans earned nine times more than Latin Americans, twenty-one times more than those in the Middle East/North Africa, fifty-two times more than sub-Saharan Africans and a mind-popping seventy-three times more than South Asians. These numbers give us a sense of how unfairly the global economy distributes our planet’s wealth.
A Model Made to Fail
This leaves us with some very important questions. Why are the world’s governments – and the FAO and the World Bank – so eager to claim victories they have not achieved? Why would they want to make it seem as though poverty and hunger and inequality are being reduced when in fact they are not? It is possible, of course, that some of this has to do with internal pressures. No organisation wants to appear to have failed. But scholars have been questioning the methods used to measure poverty and hunger for many years and suggesting more accurate methods. In light of these calls, why doesn’t the UN re-evaluate the data? One likely reason is that if they were to use more accurate measures, then it would become clear that to fix these problems we would need to do much more than just tinker around the edges with a bit of aid here and there. It would require changing the rules of the global economy to make it fundamentally fairer for the world’s majority.
But the development industry will not be able to ignore the problem for much longer. In 2015, the economist David Woodward published some rather sobering – even terrifying – analysis of future poverty-reduction scenarios in the World Economic Review. His findings are troubling. He shows that given our existing economic model, poverty eradication can’t happen. Not that it probably won’t happen, but that it physically can’t. It is a structural impossibility.
Right now, the main strategy for eliminating poverty is to increase global GDP growth. The idea is that the yields of growth will gradually trickle down to improve the lives of the world’s poorest people. But all the data we have shows quite clearly that GDP growth doesn’t really benefit the poor. While global GDP per capita has grown by 45 per cent since 1990, the number of people living on less than $5 a day has increased by more than 370 million. Why does growth not help reduce poverty? Because the yields of growth are very unevenly distributed. The poorest 60 per cent of humanity receive only 5 per cent of all new income generated by global growth. The other 95 per cent of the new income goes to the richest 40 per cent of people. And that’s under best-case-scenario conditions. Given this distribution ratio, Woodward calculates that it will take more than 100 years to eradicate absolute poverty at $1.25 a day. At the more accurate level of $5 a day, eradicating poverty will take 207 years. This is the best we can expect from the business-as-usual trajectory of the development industry. And keep in mind that Woodward’s methodology is not able to capture the poorest 1 per cent of the world’s population, who will still remain in poverty even at the end of this period. That’s 90 million people who will remain in poverty for ever.
This is an extremely optimistic, best-case scenario. It does not account for the slowdown in income growth since the financial crash. It doesn’t factor in the spikes in food prices that have effectively wiped out the incomes of the poor over the past few years, or the fact that climate change is already unravelling development gains across the global South. It imagines all of this away, and assumes that no further economic or ecological crises will happen in the next century or two – which is a very big assumption indeed.
As if the epochal timelines here aren’t disappointing enough, it gets worse. To eradicate poverty at $5 a day, global GDP would have to increase to 175 times its present size. In other words, we need to extract, produce and consume 175 times more commodities than we presently do. It is worth pausing for a second to think about what this means. Even if such outlandish growth were possible, the consequences would be disastrous. We would quickly chew through our planet’s ecosystems, destroying the forests, the soils and, most importantly, the climate. As Woodward puts it: ‘There is simply no way this can be achieved without triggering truly catastrophic climate change – which, apart from anything else, would obliterate any potential gains from poverty reduction.’ It’s a farcical proposition – a cruel joke played at the expense of the poor. And, as if to add insult to injury, achieving this level of growth would mean driving global per capita income up to $1.3 million. In other words, the average income would have to be $1.3 million per year simply so that the poorest two-thirds of humanity could earn $5 per day. This gives us a sense of just how deeply inequality is baked into our economic system.
All of this boils down to a simple truth: if we want to have any hope of eradicating poverty without destroying our ability to inhabit this planet, we will need to adopt a completely different economic model – one that provides for a much fairer and more rational distribution of our wealth. Our future depends on it.
Into the Future
When the Millennium Development Goals drew to a close in 2015, they were replaced with another major international commitment – the Sustainable Development Goals. The SDGs have much to recommend them. With seventeen goals in total, they are broader than the MDGs and pay attention not only to human needs but to ecological ones as well. And they improve on the MDGs by taking a more aggressive stance on global poverty and hunger: Goals 1 and 2 – the headline goals – call for the total eradication of extreme poverty and hunger by 2030. This is a welcome commitment, to be sure. But the plan for reducing poverty relies, once again, primarily on increasing global GDP growth, with little attention to distribution or to the ecological consequences of endlessly increasing economic activity. What is more, the SDGs are set to continue measuring poverty at the discredited low-
end poverty line, despite widespread objections. And there are no monitoring mechanisms in place to prevent the kind of statistical manipulation that so blighted the MDGs.
The cycle of perception management is simply beginning again. Shortly after the SDGs were launched, the World Bank announced a brand-new poverty line of $1.90 per day. At first glance, it might seem that the Bank has finally admitted that the old line was just too low and has raised it to a more meaningful standard; indeed, many commentators assumed precisely that. But the opposite is true. The Bank didn’t raise the poverty line at all – it simply rebased it to the newest purchasing power parity (PPP) calculations, to compensate for depreciation in the purchasing power of the dollar. And once again, the new line is significantly lower than the old one, in real terms. It makes it seem as though there are fewer poor people than before. After rolling out the new poverty line, the Bank suddenly announced that the global poverty headcount had decreased by 100 million people overnight, and that the poverty reduction trend has been declining more rapidly than we used to believe. According to the Bank’s new line, the poverty rate dipped below 10 per cent in 2015, crossing a big threshold. Once again, the media repeated the story without bothering to ask questions.
The problem is that PPP revisions are well known for discriminating against poor people. PPP moves relative to the price of consumer goods across whole economies. But people living at national poverty lines do not consume such a broad range of goods; on the contrary, they spend around 70 per cent of their income on food. And it just so happens that the price of food has gone up dramatically since PPP was last revised in 2005, relative to the prices of everything else, which means that while most people are able to buy more with their dollars, poor people are actually able to buy less. Therefore, if anything, the World Bank should actually be adjusting the real poverty line much higher than the new PPP figures suggest, just to keep at the same level in real terms. But if they do, it would make it much harder for the SDGs to succeed.
In all likelihood, the Bank will continue to revise the poverty line downwards in real terms over the next fifteen years until it shows that poverty has been more or less eradicated. And when 2030 arrives, they will declare that they have succeeded. There will be much media fanfare, and politicians and development leaders will congratulate each other, pleased with a good-news story that will keep the public satisfied and silence any questions about the legitimacy of the global economic order. But meanwhile, back on Earth, some 4.3 billion people will know for a fact that it is a lie.
If the UN is going to declare the end of poverty in 2030, this kind of statistical trickery is exactly what they’re going to need. Just before the launch of the SDGs, the World Bank published fresh projections for poverty reduction towards 2030. They are vaguely humorous, albeit in a tragic kind of way. The Bank’s indicators show that, assuming sub-Saharan Africa follows all of the Bank’s advice and adheres closely to structural adjustment programmes, it will achieve a reduction in poverty from 407 million people in 2008 to 335 million by 2030. That is a long way from zero. Particularly when you consider the fact that in 1990 there were 287 million poor people in sub-Saharan Africa. Take a minute to let this sink in. After forty years of anti-poverty efforts in sub-Saharan Africa, the World Bank projects, bizarrely, that poverty numbers will have been ‘reduced’ from 287 million to 335 million people. In other words, according to the Bank’s own extremely low poverty line, the best that Africans can hope for is that more people will be poor in 2030 than in 1990. That’s how well the present system works.
*
I began this chapter by pointing out that the good-news narrative is so important to the world’s most powerful governments because it justifies the present economic order and maintains people’s consent for it. It would be difficult for them to admit that poverty has actually increased dramatically over the past thirty-five years, for that would call the whole game into question – the single moral justification for the status quo would collapse. But in order to maintain the good-news narrative, they have to limit themselves to a remarkably narrow slice of human history. The Millennium Development Goals, for example, have trained us to forget everything that happened before 1990. That’s a convenient date, because the poverty headcount increased steadily during the decade before that, even according to the World Bank’s own $1.25 line. The 1980s were a decade of severe suffering in the global South, no matter how much you doctor the numbers. Even James Wolfensohn, the president of the World Bank quoted on pages 40–41, admitted that the 1960s and 1970s were better days for developing countries – before the World Bank and the IMF intervened. So what worked so well? And why have we been told to forget about it?
These are questions we need to answer. But in order to really get the full story of global poverty and inequality we have to go back even earlier than the 1960s. Recall that Wolfensohn himself pointed out that poverty had been increasing steadily over the past 200 years, during the rise of industrialisation and the consolidation of Western economic power. Why? What was going on? And why is this not part of the story we have been told?
PART TWO
Concerning Violence
Three
Where Did Poverty Come From? A Creation Story
No one colonises innocently.
Aimé Césaire
The development industry has trained us to think on short timescales. Today, the dominant narrative about poverty goes back only as far as 1990, the baseline used by the Millennium Development Goals, or 1981 at the earliest, when the World Bank published the first global poverty statistics. As a result, most people know nothing about what happened before then. This lack of historical perspective has been a feature of the development story since its inception. Even Truman’s 1949 speech was strangely ahistorical. ‘More than half the people of the world are living in conditions approaching misery,’ he said, but he offered no suggestions about how this terrible tragedy might have come to pass. A casual listener might have inferred that the US government, and the rest of the Western world, had suddenly discovered poor countries for the first time, as if by accident, having stumbled upon them in some remote corner of the world. If we accept the dominant narrative, we might be forgiven for believing that poor countries have always been poor, and that the gap between rich and poor countries has always existed.
But if we rewind to about 1500, a very different story emerges. At that time, there was little difference between Europe and the rest of the world when it came to the living standards of ordinary people. In fact, people living in South America, India and Asia were in many ways better off than Europeans. Even as late as 1800, life expectancy in England was between thirty-two and thirty-four years – and a dismal fifteen for children born into working-class families. In France, it was between twenty-eight and thirty, and in Germany between twenty-five and thirty-one.
Citizens of the Aztec, Inca and Mayan civilisations were not much better off than Europeans in terms of life expectancy. Like Europeans at the time, they lived in settled communities that were crowded, highly unequal and rife with disease – and they relied exclusively on agriculture for food, which required back-breaking labour and yielded very little nutritional value. But archaeological records show that people in the forager-farmer communities that lived outside these early states were a good deal better off, with life expectancies around 50 per cent longer. They were healthier, stronger, taller and better nourished than their more ‘civilised’ counterparts in South America – and, indeed, in Europe. They were less likely to die of famine for they had a much more diverse food system: they grew some of their food and foraged for the rest. They worked far fewer hours and the work was lighter. There were no powerful aristocrats or landlords around to force them to work, or to skim their yields for profit. And they were less exposed to the diseases that plagued densely populated societies. In the Americas of the 15th century, such communities were the norm, at an incidence of probably around 80 per cent, while settled agricultural states were the
exception.
Evidence from China, Japan and other parts of Asia suggests that people in these regions also lived longer, healthier lives than Europeans did. Indeed, Asia’s advantage over Europe in this department lasted until at least 1800. Japan enjoyed a life expectancy of forty-one to fifty-five, China between thirty-five and forty, and parts of South-East Asia around forty-two. In other words, Asians could expect to live as much as ten years longer than Europeans. Asia exceeded Europe in many other key development indicators as well, including superior transport technology, larger cities and better sanitation, public health systems and nutritional standards. And in terms of the balance of global power, Europe in 1500 – just emerging from the Dark Ages – was little more than a backwater, accounting for only 15 per cent of global GDP. By contrast, China and India together controlled 65 per cent of the world economy.