21st-century crusade to reduce world poverty

The Jakarta Post – Headline News, 17 October 2003

by Yanuar Nugroho

In spite of the development of agriculture, scientific knowledge and modern technology, the wealth of the poorest group has actually fallen. The United Nations Development Program (UNDP) this year reports that more than 1.2 billion people across the world — two-thirds of them women — live in crushing poverty, and face difficult access to food, safe water, sanitation, basic education and health services.

The wealth of the 225 richest countries has nearly tripled in the last six years and their assets now equal the entire annual income of half the world’s population.

Every Oct. 17, a day after World Food Day, the world marks the International Day for the Eradication of Poverty, to boost the drive to achieve the key goals adopted by world leaders at the Millennium Summit in 2000: to halve the number of the world’s extremely poor people, provide elementary school education for every child and halt the AIDS epidemic by 2015.

The global record shows that barely half that amount of progress had been achieved; UN Secretary-General Kofi Annan said, “overall, the world is not on track to meet the goals by 2015.”

There is obviously a tremendous overlap between the 800 million people who live in a state of permanent food insecurity and the 1.2 billion people on less than US$1 a day as UNDP reported above.

We are constantly told of the one recipe to reduce poverty: economic growth. Yet the UN Human Poverty Index 1998 for industrial countries showed that Sweden, with one of the lowest rates of economic growth per person, had the best human welfare. Whereas the U.S., with the highest rate of economic growth (and a higher per capita GDP than Sweden), had more people who were “functionally illiterate” (20.7 percent) than that in any other country; the highest proportion of population below the income poverty line (19.1 percent) and the greatest number of people who did not expect to reach 60 years of age (13 percent).

Thus, there has been no magic formulae to eradicate poverty. But there are five structural points to be addressed here: (1) human development and the environment, (2) economic management, (3) democratic institutions, (4) empowering the poor to change their own lives and, (5) a need for global advocacy.

First, investment in education and other essential services. The UN found that there is no lever more significant in reducing poverty than investment in education in addition to basic services. Governments in poor countries need to commit themselves to universal free primary education and affordable/accessible basic services provision.

Second, sound management of the economy. For years the development of poor countries was held back by lots of well intentioned efforts by governments to spend more money; by putting money into inefficient state enterprises that did not work; into funds for defense forces beyond their needs; and taking money away from essential public services.

Sound management would ensure that public spending does not run ahead of the tax base and the revenue available to a country and, second, making sure that the priority for the public spending is education, health care and basic services.

Third, democratic institutions. Sound democratic institutions at the national and village level should reflect people’s priorities and their visions for the country, are critical to successful development. Without that we can still invest in education, we can still manage our economy quite well, but we will also still flounder, as we see in other regimes and countries without a sound democracy.

Fourth, empowerment of the poor, which is much more crucial than charity. Micro credit may be one such tool. The poor are a better credit risk than all of us. They are much more sensible about repaying their loans because they recognize that without the kind of assets against which they can borrow from normal commercial means, they have to protect their new credit status very carefully and not betray themselves or their communities by not repaying.

It is an incredibly powerful tool for bringing wealth to the lowest levels of a country, although modern financial systems (like banking) are not so willing to channel the money to empower the poor. In a poor country like Indonesia, for example, less than 10 percent of credit from banks are given to the poor.

Fifth, global advocacy. Ensuring that the case of the world’s poor is not lost on the international community is easy as we are all on the same leaky ship. The rich will also sink, slowly or quickly unless we end world poverty.

But it will not happen if the global economic system is structured in such a way that it increases the gap between the rich and poor.

According to the World Bank (2001), in 1960 gross domestic product in the richest 20 countries was 18 times that in the poorest countries. By 1995, this gap had widened to 37 times. About 12 economies in Asia and Latin America account for 70 percent of exports from the developing world absorb almost 80 percent of investment flows to the developing world and receive more than 90 percent of portfolio investment flows to the developing world.

However, Sub Saharan Africa, West, Central and South Asia and many economies in Latin America, Asia and the Pacific have been left out of the global economy and not favored by international investors. Clearly, free trade centered distribution of benefits and costs are unequal.

Whether or not we succeed in this ambitious goal of ending world poverty, the answer rests finally with all of us. It is our world, so may we make it a safe, prosperous and peaceful place.

The writer is the Executive Director of the Business Watch Indoneisa, lectures at the Sahid University in Surakarta and is a researcher at Uni Sosial Demokrat, Jakarta.