The Economics of Poverty Elimination Jon D Erickson

The Economics of Poverty Elimination Jon D. Erickson Department of Economics Rensselaer Polytechnic Institute Troy, New York, USA

The Economics of Poverty Elimination I. III. IV. World Development as Growth Policy Growth as Cumulative Causation Examples If Not Growth, then What?

I. World Development as Growth Policy Rationale: the world economy can grow its way out of poverty and environmental degradation Dominant Strategy: unbalanced, industrial, directly productive, export-led growth. Recipe: technological progress, market compatible institutions, available resources, capital markets, and entrepreneurship

. . . World development as market expansion. . . “In a market economy, the price system ensures that no one can consume resources without first creating some of equal or greater value. ” ~ N. Gregory Mankiw

II. Growth as Cumulative Causation Population 20% Income 82. 7% 1950 1992 20% 11. 7% Over 5 x increase in global output Nearly 12 x increase in world trade 2. 3% 1950 – Haves 30 x over the Have Nots 20% 1. 9% 1989 – Haves 60 x over the Have Nots 1. 4%

Cumulative Causation A self-reinforcing process whereby the disproportionate rewards of economic development attract further disproportionate development. Progressive Modernization of Poverty

III. Examples n 20 buyers and 160+ sellers To attract companies like yours. . . We have felled mountains, razed jungles, moved rivers, relocated towns. . . all to make it easier for you to do business here. ~ Philippine government ad in Fortune, 1975

III. Examples n n n Redistribution of pollution Pharmaceutical markets Creating demand for debt and technology “. . . most of these systems were installed not because there was a local consumer demand for them but because a Northern entrepreneur was able to find a Northern aid agency to support their establishment as ‘demonstration’ projects. ” ~ Anil Agarwal et al. n The development industry

IV. If Not Growth, then What? n Many alternatives: Steady-state economy (Daly), an economics as if people mattered (Schumacher), people-centered development (Korten), ecological economics? n n n Sense of stability Sense of limits Need for local voice Align agency interests with the poor’s interests Compatible community development Think in terms of socio-ecological classes

Earth’s Three Socioecological Classes Overconsumers 1. 1 billion > US$7, 500 per capita Travel by car and air Sustainers 3. 3 billion US$700 -7, 500 per capita Travel by bicycle and public surface transport Excluded 1. 1 billion < US$700 per capita Travel by foot or donkey Eat high-fat, high-calorie, Eat healthy diets of Eat nutritionally meat-based diets grains, veg. , &some meat inadequate diets Drink bottled water and soft drinks Drink clean water plus some tea and coffee Drink contaminated water Use throwaway prod. & Use unpackaged goods discard substantial wastes and recycled wastes Use local biomass and produce negligible wastes Live in spacious, climate- Live in modest, vented, controlled, 1 -fam. homes multiple-family homes Live in rudimentary shelters or in the open Maintain imageconscious wardrobes Wear secondhand clothing or scraps Wear functional clothing