Causes of poverty:
Most of the under developed countries in the Latin American, Asian and African regions have one thing in common, that is, they were colonies of the European countries like England, France, Spain, Portugal, Germany and so on (Thomas-Slayter, 2003). The forms and substance of colonization were different depending upon the country. Consider, for example, India, which remained a colony of England for over two centuries. Initially, the East India Company came to trade in the local market. In the course of time, merchants started exporting raw materials from India and processed them back home, say in Manchester, and brought back the manufactured products to India to market them. This process of trading with India by English merchants had virtually displaced the traditional village artisans. As the value addition was done in England, India was deprived of industrialization process for a very long time, although the process was gaining momentum in other parts of the world. When India gained Independence in the mid of 20th century, it did not have solid industrial base. Elsewhere, industrialization was considered as vehicle of growth but in India things were totally different. India is also fraught with its unique cultural system that impeded further growth. Though one cannot say that India remained backward due to colonialism, however, it cannot be denied that industrial growth did not receive any discernible impetus under colonial rule. Thus, for the country to move forward, it is indispensable that other countries help it out in ways more than one. There are many such countries around the world, which is replete with similar situations as that of India.
Further, most of the developing countries promoted autarky type of institutions, subsequent to gaining independence. These vested interests had accumulated and provided little for the state to accomplish the sprite of redistributive justice. This can be examined within the context of Marx’s treatment of the distribution and value. For him, capitalists constituted one class which appropriates surplus and working class another class whose surplus values were being appropriated. He went on to note that machinery and other forms of capital embodied past labor and used by present labor. Though the forms of production changed, substance of production did not change. Thus, value of a commodity produced by capital is determined by the amount of past and present labor that has gone into it. However, capitalists distributed only wages to the present labor in order to reenergize their productive power. Surplus created by past labor was taken as a reward to capital. Marx called that portion of value as surplus value, which were appropriated by capitalists, who owned capital.
Marx pointed out that the value distributed to workers is disproportionate to their contribution to it. Labor was not given enough to compensate for their productive labor. As they were not able to get what they were supposed to get, they got exploited in the hands of capitalists. As capitalists produced for market, workers’ survival depended upon capitalists’ intention to produce a product – workers were thus fettered. Moreover, in their serious pursuit of profit, capitalists accumulated as much as possible and amassed wealth without redistributing them back to labor. This pushed workers into conditions of misery, besides working in very inhumane working conditions. In fact, what Marx said about the industrial capitalism holds well in the context of the poor nations, who formulated policies, often with the interest of protecting the national capitalist.
To alleviate world poverty:
More space for poor countries should be provided in world trace and capital flows:
There is a view that the gap between rich countries and poor countries has been widening since the Second World War. For instance, the World Development Report, 1980, presents that the average per captia income of low-income countries was $ 164 (at 1980 US$), whereas that of developed, sometimes referred to as industrialized countries, was $ 3,841. The difference in the income was $3,.677. This difference has widened significantly in 1980. By 1980, low income countries were able to register a modest growth and the average per capital income rose marginally to $245, whereas industrialized countries recorded a sharp increase in per capita income to $ 9,648; thus, yielding the difference of $9,403, which is mind boggling (World Bank, 1980, p. 34).. By 2001, the gap was still wider with low income countries registering per capita income to the tune of $ 430 (in 2001 US$), the high income countries recorded $26,710, with a resultant gap of $26,280 (World Bank, 2003, 234-235).
Moreover, the import and export in the world is nearly USD 16 trillion and the world income is about USD 32 trillion in 2001 (World Bank, 2003). That means, import and export accounts for 50 per cent of world income, that is, a half of income are generated on account of exchange of goods and services. Further, world income grew at about 3.2 per cent in 1980-1990 and 2.5 per cent between 1990 and 1999. The world population grew in the order of 1.7 per cent and 1.0 per cent respectively during these two periods. At the same time, exports and imports together grew about 5.2 per cent in the eighties and 6.9 per cent in the nineties. This shows that world is getting more integrated than its growth of income and population.
However the level of economic size is uneven. For instance, low and middle-income countries constitute about 85 per cent of world population, but their income is about 21 per cent of world income; whereas, advanced economies has about 79 percent of world income with a population share of 15 percent. Moreover trade is dominated by advanced economies whose share in total exports and imports of goods and services amounts to nearly 80 per cent of total world trade. Thus few economies dominate the world economy due to their technology and competitiveness in the world market. The economy interdependence would mean chances of these economies gaining control over less developed ones.
As far as flow of factors is concerned, the developed countries dominate it. For instance, the advanced economies accounted for about 86 per cent of total capital flows in the world economy in 2001. Bulk of this flows into other developed nations; but a good proportion also flows to developing countries. Anything could happen to the capital in the destination countries. To safeguard their interest, these advanced countries government would have to intervene in the domestic policy making process of destination countries.
These differences have to be ironed out in order to alleviate poverty across the world. Given the weak income base, the size of domestic market is very poor that would discourage industrialization. Once the poor countries gain more space in world trade, they will find new market for their produce and this will enable the countries to intensify their production. In this process, more income would be generated and so the domestic market base would also widen, providing further fillip to domestic production. Thus, to get these economies out of the lower equilibrium, developed countries need to provide better market access.
Adopt neo liberal policies:
An important feature of economic growth recorded by developed countries is that they followed what is popularly known as neo liberal economic policy. Under this, the role of market forces was given an overwhelming emphasis in all economic decisions covering production, distribution and consumption. Such that the market forces, driven by private property regime, played a major role in deciding what to produce, how to produce, what to consume and so on. Even the scarce resources were allocated as per the dictates of market forces. Given the standpoint, private motives have a overriding interest in economic policy formulation process.
Whereas under economic nationalism, the belief was that world economy did not offer an even level playing field. To overcome economic backwardness, the country has to follow its own course of economic policy governed by internal conditions rather than external conditions. This lead to the interventionists ideology marked by state intervening in every arena of economic policy and deciding as to what to product, how to produce, how much to consume and so on. The intervention was also marked by state gaining control over resource allocation. Since the policies aimed to isolate a national state from the rest of the world, there was restraint on imports, popularly known as import substitution strategy. This had culminated is economic isolation to a significant extent.
In fact, most of the present day developing countries gained their independence from the imperial power soon after the Second World War. Sooner they followed an inward looking strategy, which camouflaged economic nationalism ideology. Has it been successful? Looking at the stylized facts, the answer is a big ‘NO’, for had that been successful, these countries would have closed the gap over the time. Since the gap is found to have widened, there are reasons to believe that neo liberal ideology succeeded on the whole that gave absolute advantage to developed countries over their counterparts.
The interventionists’ regime is marked by state’s gaining control over every sphere of economic decision-making. The pervasiveness of interest group even in the government negates intention of state intervention. Because the economic nationalism could not help these economies in gaining momentum of economic growth, the alternate path to development as advocated by neo liberal thinkers could be seen as a panacea. Though market forces is also subject to certain inherent limitations of interventionists regime like presence of interest group, the private property regime is so strong that they are potent to overcome these limitations (Maddision, 1995). Thus, these economies needs to adapt new neo-liberal policies that would help them to gain access to new market as well as ensure better resource allocation.
Stepping up foreign aid:
Foreign aid can come in different ways. As for government transfers, they generally come under official development assistance and there is a global consensus to help poor countries. Mr. Koffi Annan, the General Secretary of United Nations, in his millennium development goal, called upon the developed countries to set aside 0.7 percent of their national income towards helping poor countries. Though development assistance as a proportion of national income has increased since 2000, it is far lower than what has been called for by the UN. For example, official assistance extended by rich countries account for 0.22 percent of their national income; European countries, on an average, extent about 0.33 percent of their income, more than the average. The US has a paltry proportion of 0.1 percent of national income set aside for helping the poor (“The Monterry Consensus”). The US is the largest economy and so more of its commitment becomes a perquisite. As these economies are committed to improving world prosperity, their foreign aid does not commensurate with their commitment. And so, the rich countries need to step up their foreign aid in order to progress towards achieving world prosperity.
To address poverty related issues in the poor countries, non-official routes, such as Action Aid, church groups, should be devised to disburse the aid. These global agencies should mobilize resources from developed countries and provide them to local NGOs, who work closely with the downtrodden in their respective countries. Similar commendable efforts such as Fair Trade should be encouraged.
Works Cited
Maddison, A. Monitoring the World Economy 1820-1992, Paris: OECD, 1995.
Orum, A.M. Introduction to Political Sociology: The Social Anatomy of the Body Politic, Englewood Cliffs N.J: Prentice-Hall, 1988.
Snarr, M., and Snarr, N., Introducing Global Issues, Boulder: Lynne Rienner, 2005.
Thomas-Slayter, BP., Southern Exposure: International Development and the Global South in the Twenty-First Century, Bloomfield: Kumarian Press, 2003.
“The Monterry Consensus” at the
United Nations, The Millennium Development Goals Report 2005, New York: United Nations, 2005.
World Bank, World Development Report 1980, New York: Oxford University Press, 1980.
World Bank, World Development Report 2003, New York: Oxford University Press, 2003.
World Bank, World Development Report 2005, New York: Oxford University Press, 2005.
