Ahead of the high-level meeting on MDG, scheduled in September 2010, the United Nations has highlighted some unnerving ramifications of economic liberalisation policies which have always evoked mixed responses from people and organizations across the world.
The UN Report on the World Social Situation-2010 with the theme – ‘Rethinking Poverty’ – released by the UN Assistant Secretary-General, Jomo Kwame Sundaram, states that economic liberalisation has added much to the problems across the world. While it slowed the growth and poverty reduction, the divide between the poor and the rich has widened due to the economic liberalisation policies since 1980.
The biennial UN Report emphasizes on the need for rethinking poverty-measurement and poverty-reduction efforts. On the issue of poverty measurement, the UN report says that if US inflation is considered, the poverty line should be US$ 1.45 a day.
Mentioning that poverty and hunger did not decrease in Sub-Saharan Africa and parts of Asia; Mr Sundaram emphasized that poverty eradication would not be possible without equitable and sustainable economic development and deregulated markets can not help us achieve that.
In his commentary on the report, Mr Sundaram, who is a renowned expert on the political economy of development, noted that the mixed record of poverty reduction raised doubts on the effectiveness of conventional approaches.
“Countries were advised to abandon their national development strategies in favor of globalization, market liberalization, and privatization. Instead of producing sustained rapid growth and economic stability, such policies made countries more vulnerable to the power of the rich and the vagaries of international finance and global instability, which has become more frequent and severe due to deregulation,” he observed.
Further, the insistence on minimal government and increased reliance on the market led to decline in public infrastructure investment, particularly in agriculture. This not only impaired long-term growth, but also increased food insecurity, informed the UN official.
Questioning the World Bank’s claim that global poverty declined from 1.9 billion in 1981 to 1.4 billion in 2005, the UN official said: “if this is so then why the UN Food and Agriculture Organisation (FAO) has estimated an increase of 142 million hungry people in the world since 1990-92. This shows there is a contradiction in the estimate of poverty. Also, as China has accounted for most of this decline, there were at least 100 million more people living in poverty outsideChina in 2005 than in 1981”.
“International agencies estimate that more than 100 million people fell into poverty as a result of higher food prices during 2007-2008, and that the global financial and economic crisis of 2008-2009 accounted for an increase of another 200 million,” said the UN official.
“Inequality appears to have been on the rise in recent decades at the international level and in most countries. More than 80% of the world’s population lives in countries where income differentials are widening. The poorest 40% of the world’s population account for only 5% of world income, while the richest 20% accountfor 75%,” informed the UN Assistant Secretary-General for Economic Development.
The UN report noted inconsistent correction for rural-urban price differences for India and China, mainly for urban prices introducing urban bias. Hence the World Bank estimates for India and China are not comparable to rest of the developing world as it grossly underestimates poverty in these two large countries or overestimate poverty elsewhere. If China is removed from the World Bank’s estimate, the number of poor people living worldwide has increased from 1.1 billion to 1.2 billion, said Mr Sundaram.
Countering the argument that liberalization policies led to the success of the East Asian countries, the Malaysian economist said that none of these economies had pursued wholesale economic liberalization. Instead, he said, governments played a developmental role by supporting industrialization, higher value-added agriculture and services, and improvement of technological and human capabilities.
The UN report also observed that donor-favored poverty-reduction programs, such as micro-credit, land-titling, and ‘bottom of the pyramid’ marketing had failed in significantly reducing poverty. However, universal social programs improved human welfare and conditional cash-transfer programs improved various human-development indicators, reveals the UN report.