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Will the poor be always with us?

Updated Wednesday, 15th October 2008

Should governments shore up the banking sector while the number of people in poverty rises?

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If the misery of the poor be caused not by the laws of nature, but by our institutions, great is our sin - Charles Darwin

As Governments worldwide commit billions upon billions of currency to save the banks and our national and international financial systems, spare a thought today for the humble poor. Last week Prime Minister Gordon Brown committed £500 billion to save our struggling banking sector from its own greed and avarice. Of course you could argue that if the international financial system collapses, the poor will be poorer, and there will be far more of them, but it is strange how governments - when pushed by uncontrollable forces which threaten their future - are spurred into desperate action.

Our world leaders have shown far greater alacrity in resolving the banking crisis than they did during the Making Poverty History campaign this time last year. Will the poor, as the Bible remarked, "always be with us" (John 12:8)?

In a world where food costs are spiralling their prospects appear bleak. Earlier this year, before the implosion of the world’s financial systems, the OECD reported that many developed countries had already cut back on their foreign aid budgets. When the going gets tough in the West the developing world is often is the victim. In times like these the words of 2006 Nobel Prize winner Muhammad Yunus ring true:

‘poverty has been created by the economic and social system that we have designed for the world. It is the institutions that we have built and feel so proud of, which created poverty for them.’

Two months ago the World Bank warned that the world’s poor were far greater in numbers than they first estimated. The Bank shifted the poverty line from a dollar a day to a dollar twenty five cents. It is amazing what adding a ‘quarter’ does to the projections: a mere 25 cents plunges a further 500,000 million people in the developing world into poverty. Thus it was that the World Bank’s new estimate of its poor rose in August from 985 million people to 1.4 billion people. This new estimate does not take into account the recent increases in food and fuel prices.

Oxfam, commenting on the World Bank figures, warned that a further 100 million people in the developing world could be forced into poverty by the increase in food prices. They also warned, in respect to the lack of progress on African poverty, that the pledges made by world leaders at the Gleneagles summit in 2005 to double aid to the continent by 2010 were unlikely to be met. The new estimates also take no account of the impact of the world financial crisis in the coming months on the vulnerable developing world where debt repayment to the West is a huge concern.

In early October, when Dick Fuld the chief executive of Lehman Brothers - the investment bank whose collapse did so much to trigger the crisis in world financial systems - was quizzed by Congressional leaders, he did not spare a thought for those billion people living in the world today on around a dollar a day. No. He talked about his compensation package. Defending accusations of a $500 million dollar pay off he contested its size: "The $500m number is not accurate, although it is still a large number," he told an angry Congress hearing. Wait a minute, 500 million dollars! That is one dollar for every human being in the developing world who have now been added to the poverty index.

The World Bank’s grim forecast revealed world poverty to be more persistent than at first thought. There is, however, some positive news.

Given the increase in world population, the rate of world poverty has fallen substantially from 50% to 25% over the past 25 years. But the number of people in poverty has increased. In Africa, between 1981 and 2005, the number of people in poverty rose from 200 million to 380 million, with the average poor person living on around 70 cents a day.

Unlike other regions of the world, the rate of African poverty has remained the same, around 50% of the continent’s population remained in poverty in 2005, compared to 1981. In Asia, however, the rate of poverty has fallen since 1981, from 60% to 40%. Asia is home to 595 million people living in poverty; 455 million of its poor live in India.

In China, poverty has fallen dramatically, from 835 million in 1981 to 207 million people in 2005. Its rate of poverty fell massively from 85%to 15%. The World Bank estimate that China alone almost accounted for all the reduction in world poverty since 1981.

A Seattle man uses a novel approach to ask passers-by for change Creative commons image Icon romulusnr under CC-BY-NC licence under Creative-Commons license
A man in Seattle takes an inventive approach to asking for help from passers-by

World poverty, excluding China, dropped from 4 out of 10 people to 3 out of 10 people during the same period. According to the World Bank the world is still on track to halve the 1990 poverty rate by 2015. But at the current rate of progress, about a billion people will still live below $1.25 a day in 2015, and some areas, such as Sub Saharan Africa, will be acutely affected. [The World Bank's new poverty line of $1.25 per day in 2005 is equivalent to its $1 per day poverty line introduced in 1981 after adjustment for inflation.]

Elsewhere, especially in those middle income countries where the World Bank uses a poverty line of $2 a day the poverty rate has indeed fallen. Latin America, the Middle East and North Africa have improved but not enough to bring down their total number of poor. The $2 a day poverty rate has increased in Eastern Europe and Central Asia though these areas showed some small signs of progress since the late 1990s.

We live in a world in which ten children die every minute from malnutrition, where 10.7 million children never live to see their fifth birthday, and where 4 out of 10 human beings have no access to basic sanitation. These are all avoidable statistics.

Meeting the United Nations’ millennium goal to halve the proportion of people in the world without access to clean water would cost $4 billion dollars a year for the next decade. Four billion dollars is roughly what Europe’s population spends each month on bottled water.

As the world struggles to understand why the financial systems have failed so abjectly, it is worth remembering the words of Dean Hirsch. On September 28, 2008, the President of World Vision International reminded the West that there was a possibility of them failing to fulfil the Millennium goals set in 2000 to help the world’s poorest people. He declared:

‘Our collective challenge – governments, the private sector, humanitarian organizations, civil society groups and others – is to remedy a gross violation of the most basic rights – to clean water, adequate food, basic health care – that currently leads to millions of children and women dying annually from easily preventable causes. This is a moral imperative. Every child who dies in extreme poverty represents an unacceptable loss of human potential.’

Some may, of course, choose to write to Dick Fuld, to advise him what he could do with his compensation package.

This blog is part of Blog Action Day 2008: Poverty





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