Writing in Dissent Magazine, Thomas Pogge takes on the complex issue of international economic growth and inequality. His main aim is to take issue with the idea that 'first we've got to grow the cake before we share it out' and the assumption that the best way to reduce poverty is through all-out economic growth that will benefit all through trickle-down processes. Instead he suggests that more equitable economic growth may be of much greater benefit to the poorest, even if it's a little slower, at a very small opportunity cost to the richest.
Pogge's starting point is one of nifty dynamic graphs of international GDP per capita (at purchasing power parity) along the lines of those developed by and displayed on the
Gapminder website. This one was displayed in the March 2004 issue of the Economist as a piece of one-upmanship on market globalisation critics. Charted at country level, poorer countries have grown more slowly over the last twenty years than rich countries. However, when you account for each country's population (changing the size of the dots on the graph) , the slope of the trend is reversed, thanks to the success of China and India.
All very well, says Pogge. But this considers only one of the dimensions of inequality -- between countries. Also relevant is inequality within countries. Little can be inferred about the poverty-reducing effect of a country's growth in average wealth if all the extra income is going to the richest. For example, survey data indicates that the income of the bottom decile in the United States is not much more than that of the bottom decile in Hungary, and only half that of the bottom decile of Japan or Norway.
Pogge makes what I agree is the important point that the relative income share is also important to consider, because "many things money can buy are positional or competitive: political influence, for instance, and access to education and even health care depend not merely on how much money one has to spend but also on how much others are willing and able to spend on those same goods".
That is a point that can be disputed at an ideological level, and then we get into complicated debates about rewards and incentives. But even if we just stick to differences in absolute income levels, the situation is a lot more extreme when developing countries are considered. For example, the income of the poorest decile in Turkey is nearly three times that of Colombia's poorest (although the two countries have a similar GDP per capita at PPP), and the lowest decile in Colombia earns only 7.4% of the average national income. Even more strikingly, in Vietnam, which is only half as rich as Colombia, the poorest decile has an income more than twice as high as the poorest decile in Colombia.
Pogge goes on to consider China, the great poster child for development through maket globaisation. While he acknowledges that there have been large gains for Chinese, including the poorest, he wonders whether even greater reductions in poverty could have been possible with more equitable growth. Between 1990 and 2005, the national per capita Chinese income grew by 236 percent, but that of the bottom decile just 77 percent, while their relative share declined from 30 to 16 percent of the average. Had the relativities been retained, suggests Pogge, even at the expense of a couple of percentage points of growth per annum, the poorest 40 percent of Chinese would all be better off in absolute terms than they are today.
Finally, he considers inequality between human beings world wide. Here he suggests that China's success may have been at the expense of the global poor elsewhere. With only a limited amount of access possible to the still-protected markets of the rich and powerful nations, could China have crowded out the gains of other developing nations by winning the race to the bottom in terms of labor and environmental standards? It's a provocative thesis, but if valid, would be a caution against supposing that other nations can simply follow China's path.
Overall, comparing humans to other humans paints the most dramatic picture of all. Sticking to PPP terms, the poorest quintile of humanity controls just 0.4 percent of the world's wealth, while the richest 1 percent controls 31.6 percent. Doubling the wealth of the bottom two quintiles (40 percent) of the world's population would take just 1.5 percent of the wealth of the top 1 percent. Pogge concludes:
Most of the massive severe poverty persisting in the world today is avoidable through more equitable institutions that would entail minuscule opportunity costs for the affluent. It is for the sake of trivial economic gains that national and global elites are keeping billions of human beings in life-threatening poverty with all its attendant evils such as hunger and communicable diseases, child labor and prostitution, trafficking, and premature death. Considering this situation from a moral standpoint, we must now assess growth—both globally and within most countries—in terms of its effect on the economic position of the poor.
It's a good argument that helps cut through some of the ideological fog in all the contradictory statistics. But it still leaves the massive question of just how you do engineer economic growth with less inequality. If it requires 'more equitable institutions', what are these equitable institutions, and how should they work?