PRINCETON: The economic gloom that shrouded the world in 2008 has led many to ask whether the apparent prosperity that preceded it was real.
We know that in countries as diverse as China, India, Russia, and the United States, the number of billionaires soared. More generally, the top 1 percent of the population prospered. But the gap between the rich and poor widened, and at least in the US, the incomes of the poor and the middle class stagnated.
No wonder that many are now skeptical about taxpayer-funded schemes to bail out banks, insurance companies, and even automakers. Is this just another case of politicians making sure that, even in hard times, the wealthy elite that supports them will once again do better than everyone else?
But, in assessing the benefits achieved by economic growth, it is a mistake to focus on whether the income gap between rich and poor widened or narrowed. If a person’s annual income increased from $300 to $500 that may be enough to lift him out of extreme poverty, and will make a huge difference to his welfare and that of his family. If, at the same time, the income of a person earning a million dollars increased by $100,000, the income gap will have widened. But since $100,000 doesn’t make that much difference to the welfare of a person earning a million dollars, the gap in welfare will have narrowed.
I believe that we shouldn’t really be focusing on inequality anyway. We should give priority to reducing unnecessary suffering. So the right question to ask is this: did the economic growth of recent years make the poor better off?
If we take a worldwide perspective, it clearly did. In 1981, about four in every ten people on the planet was living in the degrading condition that the World Bank terms extreme poverty. Now, it is less than one in four. Even in absolute terms, despite population growth, the number of extremely poor people fell during that period, from 1.9 billion to 1.4 billion. There have been especially dramatic reductions in poverty in countries like China and India.
Does it matter so much that a few Chinese and Indians have become billionaires, if in the process hundreds of millions escaped extreme poverty?
But the prospects for a continuing reduction in world poverty in 2009 are not good. If the recession cuts deep in the developed nations, many workers will lose their jobs. Families that can no longer keep up with their mortgage payments will lose their homes. All of this causes real suffering.
People become accustomed to a level of comfort, and hope to move up to something even better. When those expectations are disappointed, it is hard to accept having less than one had in the past. There may be a sense of shame, and a loss of self-esteem, at being poor, even in hard times.
Nevertheless, the poor in industrialized nations will remain, in most cases, poor only by comparison with those who are better off. In the US, 97 percent of those classified by the Census Bureau as poor own a color TV and a car. When Americans lose their jobs, even if they have no assets, they still have some access to health care and food stamps.
The situation of the 1.4 billion people living in extreme poverty is different. They are poor by an absolute standard based on the most basic human needs. If the recession reduces demand for imports from developing nations, many people living in those countries will lose their jobs.
They will have no social security to fall back on. They will struggle to feed their families. When a poor family’s income drops, one of the few expenses on which it can cut back is the cost of sending the children to school. The most basic health care services will usually be beyond their means. This will be where the recession hits hardest.
Some will see globalization as the cause of this hardship, for if the poor were not linked to the rich through trade, they would not be affected by the recession. True, but they would also have missed out on the growth that helped so many of them to escape poverty. It’s difficult to see self-sufficiency providing an adequate standard of living for the world’s growing population. In this dire situation, what will the rich countries do? They have, on several occasions, pledged to increase their aid to the poor, and some European countries have started to meet their higher targets. But they will be tempted to use the current hard times as a reason for backtracking.
US President-elect Barack Obama said, prior to his election, that he would double America’s foreign aid, and make it more effective in helping the poor. But, as the recession hit, and the cost of the bailout became apparent, he indicated that he might have to postpone implementing this commitment.
It is understandable why, in the midst of an election campaign, a candidate would say that, for, even in the best of times, increasing foreign aid wins few votes in America.
Doubling US foreign aid would, however, still leave it below $50 billion a year – a modest sum compared to the $685 billion that the US spent on defense in 2008. I doubt that any $50 billion in the Pentagon’s budget could do more to make the world safer than doubling aid to the world’s poorest people. It is not a step that should await the return of prosperity.
Peter Singer is professor of bioethics at Princeton University. His next book, The Life You Can Save: Acting Now to End World Poverty will be published in March. this commentary is published by DAILY NEWS EGYPT in collaboration with Project Syndicate (www.project-syndicate.org).