WASHINGTON, D.C. – World Bank President Jim Yong Kim envisions reaching the end of poverty through a global social movement where millions of people from across the globe come together to make huge social investments. But is this the most direct way to increase the purchasing power of poor people and ending poverty? Foreign Policy’s Daniel Altmand says no.
Economic growth requires the capacity of the workforce to increase either by expansion in number or through an increase in productivity. Expansion is possible only through demographic increases. An increase in productivity, on the other hand, can be made possible in two ways: increasing worker’s physical capital or giving them better technology.
This can happen through moving workers into cities where advanced production techniques already exist or can be borrowed from other countries. This can also happen through trade, which brings more capital and ideas from other parts of the world into the country. The story of growth in the twentieth and twenty-first centuries goes: urbanization, industrialization, technology adoption, and exports. This undoubtedly brings higher incomes to the country, though it says nothing about distribution of incomes.
Across numerous studies, it is obvious that a person’s purchasing power is much higher in urban areas than in rural areas, no matter which country. The difference lies, however, in the purchasing power between countries. Living in an Eastern-Asian city will provide you with a much higher purchasing power than living in a city in sub-Saharan Africa. Why is this?
It doesn’t take much to pinpoint Africa’s challenges. There are many more land-locked countries in Africa than in many other continents, which makes commerce incredibly difficult. Disease, of course, has also marred Africa’s opportunities to grow, with the HIV/AIDS and Ebola epidemics, among others.
Perhaps most significantly, because its borders were dictated by foreign powers, sub-Saharan Africa has always faced endless strings of civil and regional conflicts. In recent times, global politics have played a major role in inter-state conficts. Countries in Africa were only granted free access to the world’s biggest export market- the United States- in 2000.
The main difference between the track of growth in East Asia and in Africa is the amount of time between today and when they were granted access to the world’s largest markets. Therefore, the difference in growth can be attributed to East Asia’s quarter-century lead in the accrual of new technology.
According to Altmand, this is the key to sub-Saharan Africa’s future. What is needed is the set of tools to better Africa’s chances of moving along the sequence of urbanization, industrialization, technology adoption, and exports. However, most development aid today goes towards things like building roads and improving health and education. While this is undoubtedly important in improving people’s lives and should not be given up, these programs fail to directly address development in terms of industrialization and technology adoption. Therefore, an additional approach is needed.
In terms of urbanization, people require ownership of their land in order to have the right to sell it, as well as freedom of movement inside their countries, and an increase in information about urban opportunities. For industrialization, countries should strengthen property rights, relax capital controls and protect foreigners against expropriation by local partners. To speed technology adoption, an increase in the chance to import foreign goods and learn new ideas through global networks is needed. Additionally, the opportunities to travel, study, and work abroad should be increased.
This approach merely requires more political will, but less resources, than the multi-billion dollar aid programs that exist today. So, yes, Kim is right- the alleviation of global poverty does require a movement. But instead of a global social movement of corporations and NGOs, we need a movement of individual citizens that can mobilize to demand of their government new policies that support growth within their countries