Canberra Skeptics

1. Canberra Skeptics World Poverty: Explanations and Proposed Solutions Thomas Pogge Leitner Professor of Philosophy and International Affairs, Yale University with additional affiliations at the Australian Centre for Applied Philosophy and Public Ethics (CAPPE) and the University of Oslo Centre for the Study of Mind in Nature (CSMN)

2. 1 “Eradicating” Poverty

3. MDG-1 Poverty Progress

5. The Grand Promise to Halve Poverty by 2015: First Version 1996 World Food Summit in Rome: the number of extremely poor is to be halved during 1996-2015. This implies an annual reduction by 3.58% (50% over 19 years). “We pledge our political will and our common and national commitment to achieving food security for all and to an on‑going effort to eradicate hunger in all countries, with an immediate [!] view to reducing the number of undernourished people to half their present level no later than 2015.” www.fao.org/docrep/003/w3613e/w3613e00.htm

6. The Grand Promise to Halve Poverty by 2015: Second Version 1996 World Food Summit in Rome: the number of extremely poor is to be halved during 1996-2015. This implies an annual reduction by 3.58%. 2000 Millennium Development Goal (MDG) 1: the proportion of extremely poor among theworld’s people is to be halved 2000-2015. This implies annual reduction by 3.35% (40% 15yrs). “to halve, by the year 2015, the proportion of the world’s people whose income is less than one dollar a day and the proportion of people who suffer from hunger.” www.un.org/millennium/declaration/ares552e.htm

7. The Grand Promise to Halve Poverty by 2015: Third Version 1996 World Food Summit in Rome: the number of extremely poor is to be halved during 1996-2015. This implies an annual reduction by 3.58%. 2000 Millennium Development Goal 1 (MDG-1): the proportion of extremely poor among theworld’s people is to be halved 2000-2015. This implies annual reduction by 3.35% (40% 15 yrs). MDG-1 as subsequently revised by the UN: the proportion of extremely poor among thepopulation of the developing countries is to be halved 1990-2015. This implies an annual reduction by 1.25% (27% over 25 years).

8. Goal 1: Eradicate Extreme Hunger and Poverty • Target 1. Halve, between 1990 and 2015, the proportion of people whose income is less than US$1 a day • Target 2. Halve, between 1990 and 2015, the proportion of people who suffer from hunger UN: The Millennium Development Goals Report 2008, p.6; www.un.org/millenniumgoals

9. www.un.org/millenniumgoals/MDG-Page1.pdf www.un.org/millenniumgoals/sgreport2002.pdf?OpenElement 8

10. A Promise Diluted

11. 2 Quantifying Poverty

12. “Updating” the World Bank’s International Poverty Line The Bank initially fixed its IPL at 1.02 1985-dollars per day, noting that eight poor countries’ 1985 domestic poverty lines were close to this amount. Soon rounded down to 1.00 1985-dollar per day. In 2000 the Bank reset its IPL to 1.08 1993-dollars per day, noting that this was the median of the ten lowest domestic poverty lines in 1993. In mid-2008 the Bank reset its IPL again to 1.25 2005-dollars per day, noting that this was the mean of the 15 poorest countries’ domestic poverty lines. Many of the domestic poverty lines used to “anchor” all these IPLs are themselves fixed by the Bank.

13. “Updating” the World Bank’s International Poverty Line Used from 1990 until 1999: 1.02 1985-dollar per day, today$2.03 in US 1.00 1985-dollar per day, today$1.99 in US Used from 2000 until 2008: 1.08 1993-dollar per day, today$1.60 in US Used since August 2008: 1.25 2005-dollar per day, today$1.37 in US or $9.59 per week or $500 annually www.bls.gov/data/inflation_calculator.htm 12

14. Is $1.25 (2005) a day enough? The US Department of Agriculture has for many decades published data about what it costs to adhere to an elaborately designed low-cost food plan that was variously called “the Restricted Food Plan for Emergency Use,” the “Economy Food Plan . . . developed as a nutritionally adequate diet for short-term or emergency use,” and the “Thrifty Food Plan.” In 2005, the cost of purchasing this minimal diet for a household of two to four people was (depending on household size and children’s ages) between $3.59 and $4.97 per person per day. www.cnpp.usda.gov/USDAFoodCost-Home.htm

15. Is $1.25 (2005) a day enough? The cost of the USDA’s Thrifty Food Plan covers the cost of nutrition only. It includes no money at all for minimal requirements of clothing, shelter, medical care, water and other utilities. But perhaps food and other necessities are cheaper  in the countries in which very poor people live than they are in the United States?

16. Is $1.25 (2005) a day enough? The Bank converts its International Poverty Line (IPL) at purchasing power parities (PPPs) and thus takes cost of living differences into account. (The PPPs of poor countries are calculated to be, typically, between one third and one half of the currency exchange rate.) The Bank’s whole methodology is based on the assumption that its PPPs for “individual consumption expenditure by households” facilitate accurate comparisons of incomes and consumption expenditures by poor households anywhere.

17. Is $1.25 (2005) a day enough? But actually, the much narrower and more poverty-relevant PPPs for “food and nonalcoholic beverages” are considerably higher ― in each and every one of 88 listed poor countries ― than the broader PPPs used in the Bank’s conversion. They are, on average, 51.6 percent higher. At the Bank’s converted IPL, poor people can buy about as much food as could be bought with US$0.83 in the US in 2005. siteresources.worldbank.org/ICPINT/Resources/icp-final.pdf, pp. 28-37

23. The Impact of the IPL level on the Bank’s Poverty Count It is very obvious that the lower the Bank sets its IPL, the fewer poor people it will count. It is less obvious how the level of the IPL will affect the charted evolution of poverty: a lower poverty line will reduce the poverty count in each year and may therefore have no effect on the assessed poverty trend at all. (The Bank uses 2005 PPPs to convert its IPL into 2005 local currency units (LCUs), then national consumer price indices to convert it further into LCUs of other years.)

24. Poverty Definition and MDG-1 23 econ.worldbank.org/docsearch; Paper 4703, pp. 34-5

25. Another Reality Check • While the Bank reports a stream of good news from the poverty front, the FAO has recently reported that the number of chronically undernourished people (Target 2 of MDG-1) is exceeding 1 billion for the first time ever. In the 1990s and until 2006 this number was reported to be around 800 million. One important cause: food prices doubled 2006-08 (partly on account of rapidly rising biofuel demand). www.fao.org/news/story/en/item/20568/icode/

26. Would a higher IPL be Hopelessly Unrealistic? Using its latest IPL ($1.25 per day or $38 per month, in 2005 int’l dollars), the World Bank counts 1.4 billion poor people living 28% below this line on average. Total deficit: 0.15% of world product (0.33% at PPP). With a less inadequate poverty line of $2 per day or $61 per month (2005 int’l dollars), the Bank counts 2.6 billion poor people living 40% below this line on average. Total deficit: 0.6% of world product (1.3% at PPP). With a more HR-realistic poverty line of $2.50 per day or $76 per month (2005 int’l dollars), the Bank counts 3.14 billion poor living 45% below this line on average. Total deficit: 1.1% of world product (2.2% at PPP). econ.worldbank.org/docsearch; Paper 4703, pp. 23, 34-5 25

27. Primary Cause: Poverty Among ca. 6800 million human beings, about 1020 million are chronically undernourished (FAO 2009) 2000 million lack access to essential drugs (www.fic.nih.gov/about/plan/exec_summary.htm), 884 million lack safe drinking water (WHO/UNICEF 2008, 32), 924 million lack adequate shelter (UN Habitat 2003, p. vi), 1600 million have no electricity (UN Habitat, “Urban Energy”), 2500 million lack adequate sanitation (WHO/UNICEF 2008, p. 7), 774 million adults are illiterate (www.uis.unesco.org), 218 million children (aged 5 to 17) do wage work outside their household — often under slavery-like and hazardous conditions: as soldiers, prostitutes or domestic servants, or in agriculture, construction, textile or carpet production (ILO: The End of Child Labour, Within Reach,2006, pp. 9, 11, 17-18). 26

28. Millions of Deaths 27

29. 3 Intranational and Global Inequality

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31. Global Inequality At current exchange rates, the poorest half of world population, 3,400 million, have less than 3% of global household income ― the same as the most affluent 300,000 (0.1%) in the US. Spreadsheets from Branko Milanovic, World Bank Saez “Tables and Figures Updated”, elsa.berkeley.edu/~saez/ At current exchange rates, the poorest half of the world’s population, some 3,400 million, have ca. 1% of global wealth ― as against 3% had by the world’s 1125 billionaires (2008!). www.iariw.org/papers/2006/davies.pdf, table 10A, p. 47 www.forbes.com/2008/03/05/richest-billionaires-people-billionaires08-cx_lk_0305intro.html

32. Shares of Global Wealth2000; poorest versus richest households Calculated in market exchange rates so as to reflect avoidability of poverty. Decile Ineq. 2837:1. Quintile Ineq. 85:1. Year 2000, $125 trillion total. (www.iariw.org/papers/2006/davies.pdf, table 10A, p. 47) 31

33. Rising Inequality in the US In the last US economic expansion (2002-06), average per capita household income grew 12%. In the top one percent this growth was 51%, in the remainder of the population 4%. The top percentile captured 73% of the real per capita growth of the US economy (45% in the 1993-2000 Clinton expansion). Saez “Updated”, elsa.berkeley.edu/~saez/, Table 1, from IRS Data 32

34. Rising Inequality in the US (1978-2005) The income share of the bottom half declined from 26.4% to 12.8%. Meanwhile, that of the top one percent rose from 8.95% to 22.90% (2.6-fold); that of the top tenth percent from 2.65% to 11.58% (4.4- fold); and that of the top hundredth percent from 0.86% to 5.46% (6.4-fold; Saez Table A3). The top hundredth percent (30,000 people) now have nearly half as much income as the bottom half (150 million) of Americans – and nearly half as much also as the bottom half (3400 million) of world population. 33

35. Kuznets curve is the graphical representation of Simon Kuznets's theory ('Kuznets hypothesis') that economic inequality increases over time while a country is developing, then after a critical average income is attained, begins to decrease. One theory as to why this happens states that in early stages of development, when investment in physical capital is the main mechanism of economic growth, inequality encourages growth by allocating resources towards those who save and invest the most. Whereas in mature economies human capital accrual, or an estimate of cost that has been incurred but not yet paid, takes the place of physical capital accrual as the main source of growth, and inequality slows growth by lowering education standards because poor people lack finance for their education in imperfect credit markets. Kuznets curve diagrams show an inverted U curve, although variables along the axes are often mixed and matched, with inequality or the Ginicoefficent on the Y axis and economic development, time or per capita incomes on the X axis. Wikipedia

36. What’s Happening in China? In China, 1990-2004, the income share of the bottom half declined from 27% to 18% ― while that of the top tenth rose from 25% to 35%. papers.ssrn.com/sol3/papers.cfm?abstract_id=799844 Note new inequality figures at WB: World Development Indicators 35

37. China

38. What is Happening Globally? Growth in international inequality has stalled except with respect to the poorest countries (the “bottom billion”). Global inequality continues to increase, mainly because of what’s happening within countries. Many more are trapped in severe poverty than just those “bottom billion”; and, with international income inequality rising over the last 25 years, the shares of global top fractiles must have increased similar to within-US. Best source: Branko Milanovic, World Bank 37

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40. 4 Hypothesis about Competitive/ Adversarial Systems

41. Competitive/Adversarial Systems ― e.g.: real economy, financial markets, politics and international relations, courts, academic research, media ― can be highly efficient when they are properly framed. Proper framing is achieved when the rewards players seek from the system are highly correlated with the creation of social value. Proper framing requires that the rules of the game are appropriately designed and that these rules are administered in a transparent and impartial way. 40

42. Competitive/Adversarial Systems … contain seeds of their own demise / deterioration insofar as they provide incentives to various reward-focused players to try to get ahead by affecting, in their own favor, either the rules or their impartial application. With such efforts, the rules and personnel organizing and constraining the competition become objects of the competition: “turf”. 41

43. Competitive/Adversarial Systems … can lose much of their effectiveness when such efforts to corrupt are lucrative: resources invested in corruption are lost to the system; and, insofar as such efforts succeed, they diminish the degree to which the functioning of the system tracks its social purpose. 42

44. Competitive/Adversarial Systems … can include rules forbidding and penalizing efforts to modify the rules or their application. But these protective rules and their application are themselves vulnerable to modification efforts. Example soccer: hidden and pretended fouls. 43

45. Competitive/Adversarial Systems can, so long as countervailing temptations are not too strong, help stabilize their own proper framing by – only by? – sustaining a moral attitude toward certain rules and penalties (which then become punishments). To be effective, this moral attitude must be ingrained in the culture and internalized by many of the players and esp. by most of those who play a role in formulating or applying central system rules. 44

46. Such Moralization has Limited Potential The moral character of certain rules and penalties is a matter of degree (how many disapprove, and how severely?), and is itself vulnerable to corruption as players have self-interested incentives to seek demoralization or moralization of some prescriptions. The success of such efforts depends on how morality is understood and lived in the wider culture. 45

47. Long-term Tendency Money is becoming the pre-eminent universal reward, penetrating also the academic world (through grants, endowments), media (advertising), politics and international negotiations (campaign contributions), public administration (revolving door), and religion. The judicial system is the best hold-out but dependent for its rules on legislatures. 46

48. Systemic Problem: Regulatory Capture with Inequality Spiral Often in concert, the richest players influence the rules and their application, thereby expanding their own advantage. Such run-away inequality strengthens, in each round, both the incentives and the opportunities for influence. Public facilities come under the influence of players with special and often near-term interests, who buy support from media and academics for this purpose (venality esp. of economists who live up to their homo oeconomicus paradigm). Special interests have been especially effective in influencing international agreements (WTO Treaty) and organizations (WIPO, World Bank). 47

49. * Digression: Financial Crisis

50. Systemic Problem: Instability Insofar as system rules and their application are privately purchased, the externalities for other players and the future are disregarded. Moreover, there is growing incoherence of the whole scheme of rules because its various components are shaped by different sets of players with diverse special interests. Both phenomena exemplify the structure of “collective action problems” (PD): The strongest players are impelled, by their self-regarding interests, to seek influence in ways that are detrimental and dangerous even to themselves collectively (and even more so, of course, to weaker players). Even the strongest are worse off in the long run than they would be if they abandoned their competitive efforts to manipulate in their own favor the rules and their application (but how can they?). 49