Graph: The U.S. Leads the Way in Low-Wage Work and Pay

As has sadly been the case all too often these days, one of the latest reports from the Economic Policy Institute, an American think-tank, is grim: low-wage workers (the 10th percentile of wage earners) have seen their real pay decline by five percent over the 1979-2013 period, despite concurrent productivity gains of 64.9 percent.

Consequently, American low-wage workers fare the worst in the developed world: according to the OECD, as of 2012, they earned just 46.7 percent of what a median worker worker does, far below the OECD average of 59.9 percent; to catch up to that average, U.S. low wage workers would need a 28 percent raise in their wages.

The graph below highlights this issue rather starkly:

Note that over a quarter of America’s labor force — 25.3 percent to be exact — is low wage, which is defined as earning less than two-thirds of the median wage. On this metric, too, the United States ranks the highest among the 26 countries surveyed, and far higher than the OECD average of 16.3 percent.

Thus, the U.S. has the largest number of low-paid workers in the developed world, and they in turn are the lowest paid in the developed world. And while several countries, such as the U.K., Ireland, and Canada, come close, most of them at the very least have more developed social safety nets to offset the shortfall among low-wage workers (universal healthcare alone is a major mitigating factor, given that medical bills account for many cases of bankruptcies among the American poor).

Setting aside the considerable amount of misery that comes with low paying and often menial labor, the broader impact on the long-term prosperity of the nation cannot be understated: with one out of four workers (and their dependents) having so little income, consumer demand — the lifeblood of the economy — stagnates. Fewer people are able to afford an education or vocational training, leading to a lot of untapped and desperately needed potential.

All this despite the nation’s economic elites — its executives, shareholders, and investors — broadly doing better than ever. Is it really so untenable for companies to spare some of their record, post-recession profits to improve the plight of their beleaguered workers — i.e. the consumers and patrons they all so badly need?

 

In any case, this is a point I have made too many times before, so instead of retreading it once more, I will leave you with this illuminating report by  Elise Gould (also from EPI) on Why America’s Workers Need Faster Wage Growth—And What We Can Do About It. As always, feel free to share your thoughts and feedback.

A Quick Guide to the Guaranteed Basic Income

Although not a new idea, the concept of a guaranteed basic income — also known as a guaranteed minimum income or universal basic income — seems to be gaining a lot more traction lately. Amid concerns about rising poverty and inequality, as well as greater scrutiny on the failings and inefficiencies of current welfare programs, the allure of a more streamlined and equitable income for all seems obvious; hence why thinkers and activists across the political spectrum — from Martin Luther King, Jr. to Milton Friedman — have advocated one form of it or another.

If you would like a great breakdown on what this idea entails and how it would be implemented, check out this article on Vox.com. It does a pretty good job of introducing the subject in a balanced and holistic way, including analyzing the various arguments for and against a basic income by conservatives, liberals, and libertarians. What do you think?

 

 

Chart: Poverty in Asia

Much has been made of the rise of Asia and the subsequent arrival of an “Asian Century“, whereby the continent will become the dominant economic, cultural, and political force in the 21st century world. Setting aside the sheer diversity of this massive landmass — in terms of both culture and fortune — most Asian nations still face tremendous challenges, namely in the area of poverty reduction. Consider the following chart:

Courtesy of The Economist.

As The Economist goes on to note:

Asia’s rapid economic growth has put it on track to eradicate “extreme” poverty, defined by the World Bank as daily consumption of less than $1.25 per person, by 2030. However, the Asian Development Bank reckons this is too low given that nowadays, things like mobile phones are seen as necessities; so it has calculated a more suitable daily minimum of $1.51.

This lifts Asia’s 2010 poverty rate to nearly one-third of the population, adding 343m people to the ranks of the poor. The ADB believes food insecurity, and the risks of natural disasters, global economic shocks and the like, should also be taken into account when measuring poverty. This would further raise Asia’s 2010 poverty rate, to nearly 50 percent.

As with so many other parts of the world, Asia holds tremendous promise but faces daunting challenges. As the continent grows richer and more powerful, despite millions being left behind in squalor, it may be wracked by the same strife and instability that historically bedevils most unequal societies.

The Plight of Restaurants Workers

Throughout the recession and subsequent recovery, one of the few job opportunities that have remained largely unaffected, if not growing, has been food service. From eateries to fast-food chains, this broad industry has gained an impressive 30 percent in employment since 1990, accounting for nearly one out of ten private-sector jobs in the U.S.

Unfortunately, a recent report by the Economic Policy Institute exposes some very disquieting things about one of America’s fastest-growing employers. Here are some of the highlights courtesy of Mother Jones:

The industry’s wages have stagnated at an extremely low level. Restaurant workers’ median wage stands at $10 per hour, tips included—and hasn’t budged, in inflation-adjusted terms, since 2000. For nonrestaurant US workers, the median hourly wage is $18. That means the median restaurant worker makes 44 percent less than other workers. Benefits are also rare—just 14.4 percent of restaurant workers have employer-sponsored health insurance and 8.4 percent have pensions, vs. 48.7 percent and 41.8 percent, respectively, for other workers.

 

Unionization rates are minuscule. Presumably, it would be more difficult to keep wages throttled at such a low level if restaurant workers could bargain collectively. But just 1.8 percent of restaurant workers belong to unions, about one-seventh of the rate for nonrestaurant workers. Restaurant workers who do belong to unions are much more likely to have benefits than their nonunion peers.

 

As a result, the people who prepare and serve you food are pretty likely to live in poverty. The overall poverty rate stands at 6.3 percent. For restaurant workers, the rate is 16.7 percent. For families, researchers often look at twice the poverty threshold as proxy for what it takes to make ends meet, EPI reports. More than 40 percent of restaurant workers live below twice the poverty line—that’s double the rate of non-restaurant workers.

 

Opportunity for advancement is pretty limited. I was surprised to learn that for every single occupation with restaurants—from dishwashers to chefs to managers—the median hourly wage is much less than the national average of $18. The highest paid occupation is manager, with a median hourly wage of $15.42. The lowest is “cashiers and counter attendants” (median wage: $8.23), while the most prevalent of restaurant workers, waiters and waitresses, who make up nearly a quarter of the industry’s workforce, make a median wage of just $10.15. The one that has gained the most glory in recent years, “chefs and head cooks,” offers a median wage of just $12.34.

 

Industry occupations are highly skewed along gender and race lines. Higher-paid occupations are more likely to be held by men—chefs, cooks, and managers, for example, are 86 percent, 73 percent, and 53 percent male, respectively. Lower-paid positions tend to be dominated by women: for example, host and hostess (84.9 percent female), cashiers and counter attendants (75.1 percent), and waiters and waitresses (70.8 percent). I took up this topic in a piece on the vexed gender politics of culinary prestige last year. Meanwhile, “blacks are disproportionately likely to be cashiers/counter attendants, the lowest-paid occupation in the industry,” while “Hispanics are disproportionately likely to be dishwashers, dining room attendants, or cooks, also relatively low-paid occupations,” the report found.

 

Restaurants lean heavily on the most disempowered workers of all—undocumented immigrants. Overall, 15.7 percent of US restaurant workers are undocumented, nearly twice the rate for non-restaurant sectors. Fully a third of dishwashers, nearly 30 percent of non-chef cooks, and more than a quarter of bussers are undocumented, the report found. So a huge swath of the people who feed you pay payroll taxes and sales taxes yet don’t receive the rights of citizenship.

All of this reflects a rather disturbing overall trend in the U.S. economy: the loss of stable, well-paying jobs to less secure, low-wage ones. Not only has job growth not kept pace with the needs of the labor force, but the relatively few options that remain share largely the same characteristics: meager pay, little to no benefits, no paid sick leave, poor upward mobility, and so on. And since this has become standard across the industry — baring only a few examples — most companies have little incentive to offer anything better to their workers — in essence, it is a race to the bottom, one that desperate workers of all ages have no choice but to take up.

Needless to say, this is not a sustainable model for prosperity. Not only do individual employees suffer, but so do their families and communities (the poorest of which often have few options beyond food service and equally low-paying retail). The national economy as a whole cannot thrive when such a large chunk of its consumer base is too poor to afford goods and services, or too unhealthy and demoralized to work at optimal productivity. These highly profitable employers have as much an interest in investing more in their labor force as the workers themselves.

For its part, the EPI report suggests legislative solutions, including a  higher minimum wage, mandated paid sick leave, and a path to legal status for undocumented workers. I would add unionization or some sort of labor collective as a big step, too. For its part, MoJo recommends that those wishing to learn more about the working conditions in America’s food industry read the 2013 book Behind the Kitchen Door by Saru Jayaraman.

As fast-food, retail, and other service work continues to take the place of increasingly obsolete but better-paying positions, we need to start adjusting the way we value such labor; otherwise, unpleasant, beggaring jobs will be the new normal, and that cannot last.

 
 

The Economic Sensibility of Housing the Homeless

It goes without saying that addressing the problem of homeless on all levels is a moral imperative. The ethical merit of keeping people off the streets, and helping uplift those already there, requires no argument (at least I should hope).

But unfortunately, in our world, morality is apparently not a good enough incentive. Even with all the capital that is available — whether it is wasted on the military industrial complex, sitting in offshore banks, or poured into pork-barrel projects — policies and solutions need to be cost-effective to gain any sort of political currency and public support.

Thankfully, there is a solution to alleviating homelessness that can bring together both moralists and cynics, providing the cost-efficiency that is so imperative to policymakers while legitimately helping those in need. 

Vox.com reported on a study by the Central Florida Commission that compared several approaches to addressing homeless in that region of the state (Florida has one of the highest rates of homeleness, not to mention poverty, in the country). 

[The study indicated] that the region spends $31,000 a year per homeless person on “the salaries of law-enforcement officers to arrest and transport homeless individuals — largely for nonviolent offenses such as trespassing, public intoxication or sleeping in parks — as well as the cost of jail stays, emergency-room visits and hospitalization for medical and psychiatric issues.”

Unsurprisingly, just dealing with the problem ad hoc or in a superficial sense is both costly and ineffective. But by contrast…

[Getting] each homeless person a house and a caseworker to supervise their needs would cost about $10,000 per person.

This particular study looked at the situations in Orange, Seminole, and Osceola Counties in Florida and of course conditions vary from place to place. But as Scott Keyes points out, there are similar studies showing large financial savings in Charlotte and Southeastern Colorado from focusing on simply housing the homeless.

The general line of thinking behind these programs is one of the happier legacies of the George W Bush administration. His homelessness czar Philip Mangano was a major proponent of a “housing first” approach to homelessness. And by and large it’s worked. Between 2005 and 2012, the rate of homelessness in America declined 17 percent. Figures released this month from the National Alliance to End Homeless showed another 3.7 percent decline. That’s a remarkable amount of progress to make during a period when the overall economic situation has been generally dire.

Here is a visual picture of the state of homelessness in the U.S.

Screen_shot_2014-05-30_at_9.26.15_am

Source: National Alliance to End Homelessness / Vox.com.

Keep in mind that this statistical success has taken place during some of the toughest economic times in our country’s history (and Florida’s economy was especially hard hit). As the article notes, there is a good reason why housing the homeless is more tenable than many would think:

When it comes to the chronically homeless, you don’t need to fix everything to improve their lives. You don’t even really need new public money. What you need to do is target those resources at the core of the problem — a lack of housing — and deliver the housing, rather than spending twice as much on sporadic legal and medical interventions. And the striking thing is that despite the success of housing first initiatives, there are still lots of jurisdictions that haven’t yet switched to this approach. If Central Florida and other lagging regions get on board, we could take a big bite out of the remaining homelessness problem and free up lots of resources for other public services.

There you go: a win-win for everyone, especially (and most importantly) he hundreds of thousands of homeless people across the country whose plight needn’t be ignored for either ethical or practical reasons. 

Your thoughts?

New Report Finds Global Poverty Worse Than Previously Thought

That global poverty is a serious and pervasive problem is without doubt. But it appears the scale and scope of it — despite being already staggering — may have been underestimated all this time. That’s the conclusion of a recent report by the Oxford Poverty & Human Development Initiative (OPHI) called the Global Multidimensional Poverty Index 2014 (MPI), which is considered the most accurate measure of world poverty to date.

As The Atlantic reports, the MPI takes into account certain factors that are overlooked by the United Nations Development Programme‘s Human Poverty Index (HPI), which is the leading source for such data.  While it defines the poor as those making it less than $1.25 a day, it lacks in two key areas:

First, it counted countries as one whole mass, unable to differentiate degrees of poverty within a country and locate the worst pockets. And second, it placed all of its scrutiny on income, without considering other indicators such as health and education.

Sure, making a certain amount a day is one way to measure the physical comforts a person might be lacking: home, food, clothing. But what about limited (or a total lack of) access to medical care? Or barriers to getting an education? And just because someone has a roof over his or head doesn’t mean it’s a sanitary, safe place to live—impoverished people in cities are often concentrated in slums where open sewage, crowding, and rickety housing make for dangerous living conditions. Consequently, many didn’t consider HPI’s income index to be particularly accurate.

OPHI addressed this issue by going beyond just basic income and including what it calls “deprivations”, other needs such as nutrition and child mortality; years of schooling and school attendance; and things like sanitation, water, and electricity. If a person is deprived of a third or more of the indicators, he or she would be considered poor. Degrees of poverty were also factored in; for example, whether someone had a shack for a home versus no home at all.

The MPI’s other great advantage is its ability to pinpoint poverty down to a local, rather than national, level. So not only can one find which countries or regions are the poorest, but which particular areas within those borders are worse off — an invaluable asset for aid workers and policy makers seeking to better target their work.

So what did this multidimensional approach yield? How much worse is global poverty?

Sadly, the world is more impoverished than we previously thought. The HPI has put this figure at 1.2 billion people. But under the MPI’s measurements, it’s 1.6 billion people. More than half of the impoverished population in developing countries lives in South Asia, and another 29 percent in Sub-Saharan Africa. Seventy-one percent of MPI’s poor live in what is considered middle income countries—countries where development and modernization in the face of globalization is in full swing, but some are left behind. Niger is home to the highest concentration of multidimensionally poor, with nearly 90 percent of its population lacking in MPI’s socioeconomic indicators. Most of the poor live in rural areas.

So there are 400 million more people living in poverty than previously believed. For a point of  reference, that’s more than the entire population of the United States and then some — hardly a minor oversight. Needless to say, this is vital information, bringing to light the dire circumstances of hundreds of millions of people.

Granted, I wonder whether this will make any difference in stirring up public and political action: if an already eye-watering 1.2 billion people living in poverty isn’t enough to rouse humanitarian interest, will an extra 400 million make the difference? Will the numbness and inaction be any less prevalent? If anything, I fear the sheer scale of the problem will only lead to more cynicism and subsequent apathy.

In any case, I’d like to end this sobering revelation on a more optimistic note. As intractable as the problem seems to be, especially in light of widening global inequality, there has been progress:

Nepal is improving its situation the fastest among developing countries—and it’s in South Asia, the poorest region. In five years, Nepal reduced its MPI numbers from 65 percent of its population to 44 percent. Other classically poor countries, like Rwanda, Ghana, Bangladesh, and Cambodia are also improving, not just getting richer but also seeing some narrowing of the gap between rich and poor.

While these improvements are just a drop in the bucket compared to how many people are left suffering — including the hundreds of millions who are not technically poor but remain precariously close — every human life that is lifted up from misery is worth it. That’s why we can’t afford to ignore a single impoverished person.

If you would like to read the full report, including its methodologies and sources, click here. As always, feel free to share your own thoughts and reactions.

Quote

New polling out from NBC and the Wall Street Journal shows a huge shift in attitudes towards poverty and the poor over the last 20 years. According to the survey, 46 percent Americans believe that poverty is caused by circumstances beyond people’s control, versus 44 percent who think it’s caused by impoverished people not doing enough to improve their station in life. The last time the survey asked that question, in 1995, a full 60 percent of Americans felt that the poor weren’t doing enough to lift themselves out of poverty, compared to just 30 percent who blamed extraneous factors. Hard times, it would seem, have made us more sympathetic to the plight of the poor. There’s nothing like a massive economic downturn to foster a little empathy.

And that makes sense. When the economy so rapidly and viciously turns on so many people, it’s hard to maintain the sense of idealism that leads one to believe that hard work and ambition are all that’s required to secure a comfortable, reasonably prosperous existenc

Simon Maloy, Salon

New polling out…

Ten Myths About Poverty

Misconceptions about the origins of poverty are a dime-a-dozen, especially if they place the blame on the poor themselves. But thankfully Mother Jones clears up ten of the most popular and persistent myths bedeviling efforts to address poverty in the U.S.

1. Single moms are the problem. Only 9 percent of low-income, urban moms have been single throughout their child’s first five years. Thirty-five percent were married to, or in a relationship with, the child’s father for that entire time.*

2. Absent dads are the problem. Sixty percent of low-income dads see at least one of their children daily. Another 16 percent see their children weekly.*

3. Black dads are the problem. Among men who don’t live with their children, black fathers are more likely than white or Hispanic dads to have a daily presence in their kids’ lives.

4. Poor people are lazy. In 2004, there was at least one adult with a job in 60 percent of families on food stamps that had both kids and a nondisabled, working-age adult.

5. If you’re not officially poor, you’re doing okay. The federal poverty line for a family of two parents and two children in 2012 was $23,283. Basic needs cost at least twice that in 615 of America’s cities and regions.

6. Go to college, get out of poverty. In 2012, about 1.1 million people who made less than $25,000 a year, worked full time, and were heads of household had a bachelor’s degree.**

7. We’re winning the war on poverty. The number of households with children living on less than $2 a day per person has grown 160 percent since 1996, to 1.65 million families in 2011.

8. The days of old ladies eating cat food are over. The share of elderly single women living in extreme poverty jumped 31 percent from 2011 to 2012.

9. The homeless are drunk street people. One in 45 kids in the United States experiences homelessness each year. In New York City alone, 22,000 children are homeless.

10. Handouts are bankrupting us. In 2012, total welfare funding was 0.47 percent of the federal budget.

The sooner we discard this inaccurate and damaging misconceptions, the sooner can address the root causes of poverty and end the suffering of millions.

Forty-Five Sobering Facts About Global Poverty

Although many readers have no doubt heard this before, it bears reaffirmation: around one billion people — one out of every seven human beings on Earth — live on a daily budget equivalent to just $1.25. That unconscionably meager amount is intended to cover food, healthcare, and shelter, much less any of the pleasantries in life that we take for granted.

While the percentage of people living in such abject poverty was halved by 2010 — and is set to decline by half again in the next two decades — extreme poverty remains a persistent problem in most parts of the world. Although we have greater means and resources than ever to resolve the problem, we still have a long way to go, as indicated by the following 45 facts about poverty in today’s world (courtesy of PolicyMic).

[Apologies for the bad formatting, WordPress seems to be acting up a bit.]

  1. The number of people living on less than $1.25 per day has dramatically decreased in the last three decades, from 52% of the citizens in the developing world in 1981 to 21% in 2010. But, there are still there are still more than 1.2 billion people living in extreme poverty.
  2. The top five poorest countries in the world are India (with 33% of the world’s poor), China (13%), Nigeria (7%), Bangladesh (6%) and the Democratic Republic of Congo (5%).
  3. Adding another five countries — Indonesia, Pakistan, Tanzania, Ethiopia and Kenya — would include almost 80% of the world’s extreme poor.
  4. Sub-Saharan Africa accounts for more than one-third of the world’s extreme poor.
  5. Combining results from 27 Sub-Saharan African countries, 54% of residents are living in extreme poverty — the highest proportion among global regions worldwide.
  6. About 75% of the world’s poor people live in rural areas, depending on agriculture for their livelihood.
  7. About 22,000 children die each day due to conditions of poverty.
  8. In 2010, the average income of the extremely poor in the developing world was 87 cents per capita per day, up from 74 cents in 1981.
  9. Approximately 1.2 billion people — nearly as many as the entire population of India — still live without access to electricity.
  10. If the developing world outside of China returns to its slower pace of growth and poverty reduction of the 1980s and 1990s, it would take 50 years or more to lift 1 billion people out of poverty.
  11. India has a greater share of the world’s poor than it did 30 years ago. Then, India was home about one-fifth of the world’s poorest people. Today, close to one-third of the world’s extreme poor are concentrated in India.
  12. But poverty is not just an issue in the developing world. There are 16.4 million children living in poverty in the United States. That’s about 21%, compared to less than 10% in the U.K. and in France. The percentage of poor children in America has also climbed by 4.6% since the start of the Great Recession in 2007.
  13. In 2012, a North Carolina legislator claimed there was no such thing as extreme poverty in the state. However, three of the top 10 poorest areas in America are located in the North Carolina.
  14. Israel has the highest poverty rate in the developed world, about 20.9%, according to a study by the Organization for Economic Cooperation and Development.
  15. The “extreme poverty rate” among women in the United States climbed to 6.3 percent in 2010 from 5.9 percent in 2009, according to census data.
  16. One out of every six Americans are enrolled in at least one government anti-poverty program. One in four children in America participated in the Supplemental Nutrition Assistance Program (SNAP), also known as food stamps, in 2011.
  17. One in 3 American women — about 42 million — either live in poverty or on the brink of it. And, 1 of every 6 elderly people in America live in poverty.
  18. More than 7.5 million women fell into the “extreme poverty category” in 2010.
  19. Taking food stamps, housing subsidies and refundable tax credits into account, the number of American households in extreme poverty is 613,000, which is about 1.6% of non-elderly households with children.
  20. Poverty is the main cause of hunger because the poor lack the resources to grow or purchase the food they need.
  21. Even though there is enough food produced worldwide to provide everyone with an adequate diet, nearly 854 million people, or 1 in 7, still go hungry.
  22. Around 1 in 8 people in the world, about 842 million people, were estimated to be suffering from chronic hunger between 2011-13.
  23. About 2.8 billion people still rely on wood, crop waste, dung and other biomass to cook and to heat their homes.
  24. Despite the fact that China has achieved more than any other nation in energy efficiency, the country still faces some of the world’s greatest energy poverty challenges. Almost 612.8 million people, nearly twice the population of the United States, lack clean fuel for cooking and heating in China.
  25. More than 6.9 million children died under the age of five in 2011 — that’s about 800 every hour — most of whom could have survived threats and thrived with access to simple, affordable interventions.
  26. The 500 richest people in the world have an income of more than $100 billion — more than the combined incomes of the poorest 416 million. Put differently, the richest 85 people in the world control as much wealth as the poorest half of the world.
  27. A child born in the world’s poorest nations has a 1 in 6 chance of dying before their fifth birthday. In high-income countries, the odds are about 1 in 165.
  28. The world’s 100 richest people earned enough money in 2012 to end world extreme poverty four times over, according to a report by Oxfam.
  29. Rich people who live in neighborhoods with other wealthy people usually give a smaller share of their income to charity than rich people who live in economically diverse communities, according to this study of tax records in the United States.
  30. About 47% of those surveyed believe that if poor people received more assistance, they would take advantage of it.
  31. According to a survey titled “Perceptions of Poverty: The Salvation Army’s Report to America,” almost half of those surveyed agreed that “a good work ethic is all you need to escape poverty.”
  32. Almost 43% agreed that if poor people want a job, they could always find a job, while 27% said that people are often poor because they are lazy. Another 29% even said they have lower moral values.
  33. The median income for people in the developing world is $3 or less. That’s less than the cost of a frappuccino at Starbucks.
  34. The “global middle class” income bottoms out at about $10 a day.
  35. The Pew Research Center’s Project for Excellence in Journalism found that out of 52 mainstream media outlets analyzed, coverage of poverty issues amounted to less than 1% of available news space from 2007 to 2012, a period that covered the historic recession.
  36. The report also concluded that media organizations chose not to cover poverty because “it was potentially uncomfortable to advertisers seeking to reach a wealthy consumer audience.”
  37. An online game titled “Survive125,” was launched by Live58, an NGO devoted to ending extreme poverty and challenges gamers to survive one month on $1.25 a day by facing a series of daunting questions that millions of people face every day just to survive.
  38. However, campaigns like one have been criticized for being “patronizing”: “The idea that you can simply dip your toe into human suffering for a week is spurious and patronising to those who actually live in poverty,” wrote Maya Oppenheim for Ceasefire Magazine.
  39. Given the number of occasions that world leaders and influencers have promised to eradicate poverty, the world should be much further along than it is. In April 2013, Jim Kim, president of the World Bank, said “For the first time ever, we have a real opportunity to end extreme poverty within a generation.” Eight years before that, Nelson Mandela said “in this new century, millions of people in the world’s poorest countries remain imprisoned, enslaved, and in chains. They are trapped in the prison of poverty. It is time to set them free.” Before that, President Lyndon B. Johnson launched his war on poverty by saying “for the first time in our history, it is possible to conquer poverty.” That was back in 1964.
  40. In order for the world to effectively reduce poverty, countries need to focus not only on achieving growth as an end in itself but implement policies that allocate resources to the poor including raising income growth among the bottom 40% of earners.
  41. One report warns of poverty’s “revolving door,” alluding to the fact that climbing out of extreme poverty and staying there can be very difficult unless more is done by 2030 to support the world’s poorest populations in hard times.
  42. The world achieved Millennium Goal Development 1 — to halve the poverty rate among developing countries — five years ahead of schedule in 2010.
  43. If we maintain the same rate of progress toward eradicating poverty that we’ve had since 2000 (or hopefully, accelerate it), we would reach the target around 2025-2030.
  44. The world’s richest man, Bill Gates has even gone so far as to say there will be “almost no poor countries by 2035.
  45. Despite financial crises and surging food prices, the share of people living in extreme poverty across the globe has continued to decline in recent years.

Needless to say, it helps to have a bigger picture about this complex and often poorly understood issue. While there has definitely been progress, the human toll of slow, inefficient, and half-hearted efforts to address the problem remains disturbingly high — especially when compared to our potential to do more.

What Makes Countries Rich or Poor?

Jared Diamond, best known for the Pulitzer Prize-winning book Guns, Germs, and Steel, recently reviewed Why Nations Fail by Daron Acemoglu and James Robinson, a book I’m deeply interested in that explores the question in the title: why are some countries prosperous and developed, while others seem chronically poor and unstable?

As you’d imagine, the answer is complex and debatable, and Diamond offers his own interesting two cents while reviewing the book’s central thesis that effective economic and political institutions play the most central role in determining a nation’s fate. It’s quite a long read, but I definitely recommend it. While there are many interesting points made — for example, that soil quality or climate are major factors in determining national wealth — here’s an excerpt that stood out to me:

But it’s obvious that good institutions, and the wealth and power that they spawned, did not crop up randomly. For instance, all Western European countries ended up richer and with better institutions than any tropical African country. Big underlying differences led to this divergence of outcomes. Europe has had a long history (of up to nine thousand years) of agriculture based on the world’s most productive crops and domestic animals, both of which were domesticated in and introduced to Europe from the Fertile Crescent, the crescent-shaped region running from the Persian Gulf through southeastern Turkey to Upper Egypt. Agriculture in tropical Africa is only between 1,800 and 5,000 years old and based on less productive domesticated crops and imported animals.

As a result, Europe has had up to four thousand years’ experience of government, complex institutions, and growing national identities, compared to a few centuries or less for all of sub-Saharan Africa. Europe has glaciated fertile soils, reliable summer rainfall, and few tropical diseases; tropical Africa has un-glaciated and extensively infertile soils, less reliable rainfall, and many tropical diseases. Within Europe, Britain had the further advantages of being an island rarely at risk from foreign armies, and of fronting on the Atlantic Ocean, which became open after 1492 to overseas trade.

It should be no surprise that countries with those advantages ended up rich and with good institutions, while countries with those disadvantages didn’t. The chain of causation leading slowly from productive agriculture to government, state formation, complex institutions, and wealth involved agriculturally driven population explosions and accumulations of food surpluses, leading in turn to the need for centralized decision-making in societies much too populous for decision-making by face-to-face discussions involving all citizens, and the possibility of using the food surpluses to support kings and their bureaucrats. This process unfolded independently, beginning around 3400 BC, in many different parts of the ancient world with productive agriculture, including the Fertile Crescent, Egypt, China, the Indus Valley, Crete, the Valley of Mexico, the Andes, and Polynesian Hawaii.

Pretty interesting stuff. As always, feel free to weigh in.