The True Extent of Global Poverty and Inequality–and Why Capitalism Is Not the Answer
We hear about global inequality increasing quite often over time. Recently, a new report was released showing that the world’s richest 1% are on course to control as much as two-thirds of the world’s wealth by 2030. This wealth often results from investments, stocks, and other financial assets. I prefer to use the term “ruling class” instead of “1%” because it implies that these people rule the world, which is true.
Anyway, onto inequality. This wealth is not money alone. As mentioned in the article:
The wealthy also invested a large amount of equity in businesses, stocks and other financial assets, which have handed them disproportionate benefits.
They are often just making money from having lots of money. As mentioned in this post:
Let’s start with the most ridiculously conservative version of where Jeff Bezos keeps his money. (Also let’s lose a quick $5b and say he has $100b rather than $105b, for simplicity.) Now, let’s say he keeps $100b in a savings account that earns 1% interest, compounded annually.
So, that means, at the end of the year, he’ll have “earned” a billion dollars just for having this much money in this particular savings account.
I put quote marks around “earned” because he didn’t work for it. He got money for having money. He got a billion dollars for having a hundred billion dollars.
A person with $100 billion could spend $10 million a day, every day, for his whole life, and that person would die with more money than they had when they began spending $10 million a day.
However, it’s worth mentioning that this is not as innocent as it sounds. Economic imperialism under capitalism is the core reason wealth is so concentrated, and that imperialist countries have significantly larger amounts of wealth despite not working any harder. Economic imperialism involves things such as Operation Condor, Banana Republics, installing dictators to defend capitalism, keeping labor cheap, and mass industrial slaughter (these are only a few notable examples). Economic imperialism is responsible for extortion of resources in poor countries by wealthy multinational corporations, unstable political climates, and millions of deaths with no sign of stopping. You may be familiar with the concept through terms such as “protectionism” and “free trade”, neither of which solve the problem in capitalism.
So, you’re probably wondering: How much of the rich rely on such horrific practices? I’ll give you an answer: The majority of products you buy are a result of it.
The garment industry is an example:
The garment industry is one of the oldest and largest export industries. The industry exemplifies the challenges associated with global manufacturing: low wages, “flexible” contracts and sweatshop conditions. Informal garment and textile workers often experience isolation, invisibility and lack of power, especially those who produce from their homes.
In the garment sector, production can be dispersed to many locations across and within countries. In developed countries, this is associated with outsourcing production to developing countries. In developing countries, production moves within and between countries in search of cheaper/faster labour.
Transnational companies can move their capital across borders in search of cheaper labour. Small enterprises and individual workers do not have this mobility, and must compete in an increasingly insecure and competitive environment.
Global production and trade are controlled by relatively few corporations. Large retailers, marketers, and manufacturers set up decentralized production networks through which they order the goods and supply the specifications—often with just a click. Tiered networks of contractors produce the finished products for foreign buyers.
Garment production in poorer countries offers needed investment and employment, but there is a competitive requirement “for poorer countries to offer the cheapest workers and the most flexible (unregulated) conditions” (Delahanty 1999: 4).
Corporations and Terrorism
1) Nearly ½ of the world’s population — more than 3 billion people — live on less than $2.50 a day. More than 1.3 billion live in extreme poverty — less than $1.25 a day.
2) 1 billion children worldwide are living in poverty. According to UNICEF, 22,000 children die each day due to poverty.
3) 805 million people worldwide do not have enough food to eat.
4) More than 750 million people lack adequate access to clean drinking water. Diarrhea caused by inadequate drinking water, sanitation, and hand hygiene kills an estimated 842,000 people every year globally, or approximately 2,300 people per day.
5) In 2011, 165 million children under the age 5 were stunted (reduced rate of growth and development) due to chronic malnutrition.
6) ¼ of all humans live without electricity — approximately 1.6 billion people.
Here’s where capitalists do perhaps one of the most evil things you could do in such a situation–manipulate statistics on global poverty to make it look better than it is.
Full paper by Jason Hickel here.
A poverty line is supposed to reflect the total cost of all of the essential resources that an average human adult needs to survive. The poverty line in the United States is an annual income of ~$22k. The international poverty line (IPL)? A dollar a day. Where did that ridiculously low poverty line come from? It came from Martin Ravallion, an Australian economist at the world bank, who noticed in 1990 that poverty lines of some of the world’s poorest countries clustered around $1 per day. The World Bank now uses the dollar a day statistic to determine absolute poverty around the world.
As a result, the IPL makes poverty seem much less serious than it actually is. So what’s the reality of life under the IPL?
In many countries living just above the IPL means living in destitution. Economist Adam Wagstaﬀ has shown that in India a child living just above the IPL has a 60% risk of being underweight. In Niger babies born to families just above the IPL face an infant mortality risk of 160/1000, more than three times the world average. In such cases $1.25 per day is insuﬃcient to achieve the ‘adequate’ standard of living that is guaranteed by the Universal Declaration of Human Rights, which states in Article 25: ‘Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care’. Even establishment institutions are beginning to recognise this.
In 2014 the Asian Development Bank (ADB) conceded that the $1.25 line was too low to be meaningful, and discussed nudging the line up to $1.50 to more accurately account for basic food needs. Even this minor shift would see the number of people in extreme poverty rise by more than one billion. If the ADB does this, it will inﬂict severe damage on the global poverty reduction narrative, which relies heavily on gains from Asia.
Using this standard, the poverty headcount is 1.5 billion people, which is 50% higher than what the UN claims using the $1.25 IPL (about one billion). Of course, some national poverty lines are actually below the IPL; this is the case in about 25 countries. If for these countries we measure poverty at the IPL instead, we get an additional 188.7 million poor people, and a global poverty headcount of about 1.7 billion people – 70% higher than the UN’s oﬃcial ﬁgures.
As shown here, simple changes to statistics can make global poverty seem significantly better or significantly worse. By shifting the IPL, the World Bank can mislead massively.
Using the IPL, the World Bank announced in its 2000 annual report that global poverty was getting worse: ‘the absolute number of those living on $1 per day or less continues to increase. The worldwide total rose from 1.2 billion in 1987 to 1.5 billion today and, if recent trends persist, will reach 1.9 billion by 2015. This was alarming news and it projected a troubling future trend
In 2004, the World Bank published its new oﬃcial estimates, which stated that poverty reduction was actually twice as successful as Wolfensohn had suggested: a grand total of 400 million people were rescued from extreme poverty between 1981 and 2001. As the statistical story continued to improve, the World Bank’s PR crisis was averted. The World Bank had shifted the IPL from the original $1.02 (at 1985 PPP) to a new IPL of $1.08 (at 1993 PPP), which was introduced in 2000. Suddenly it, appeared that fewer people were poor, even though nothing had changed in the real world.
The UN wants to end world hunger in 2030. We know capitalism cannot do such a thing.