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Globalization

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Growth Isn't Working: The unbalanced distribution of benefits and costs from economic growth
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The NEF argue the case that global economic growth is an extremely inefficient way of achieving poverty reduction, and is becoming even less effective.  We need to move towards a system in which policies are designed explicitly and directlyto achieve our social and environmental objectives, treating growth as a by-product.


David Woodward and Andrew Simms - New Economics Foundation, 23rd January 2006

Link to the report

NEF press release: World economy giving less to poorest in spite of global poverty campaign says new research

World's poorest see 73 per cent drop in share of benefits from growth in last decade according to new research from nef released as World Economic Forum gathers in Davos

nef's report "Growth isn't working: the uneven distribution of benefits and costs from economic growth", released on Monday 23 January 2006, shows that globalisation is failing the world's poorest as their share of the benefits of growth plummet, and accelerating climate change hurts the poorest most. 

The report reveals that the share of benefits from global economic growth reaching the world's poorest people is actually shrinking, while they continue to bear an unfair share of the costs.  New figures show that growth was less effective at passing on benefits to the poorest in the 1990's than it was even in the 1980's- the so-called 'lost decade for development' - and an age of rising climate chaos will worsen their prospects.

Even if global inequality did not increase, the tiny share of the poor in world income would be reflected in a similarly small share in the benefits of growth. In fact, the share of the poor dropped sharply after 1990, at the same time that global growth slowed.  New calculations in the nef report reveal that:

  • between 1990 and 2001, for every $100 worth of growth in the world's income per person, just $0.60 found its target and contributed to reducing poverty for those living on less than a dollar a day -  73 per cent less than in the 1980's - the so called lost decade for development - when $2.20 in every $100 worth of growth contributed to reducing poverty for those living on less than a dollar a day;
  • and, to achieve a single dollar of poverty reduction in the 1990's, took $166 of extra global production and consumption, with enormous environmental impacts which counter-productively hurt the poorest most, for example in the upheaval from climate change.

The report says that the notion that global economic growth is the only way of reducing poverty for the world's poorest people is the self-serving rhetoric of those who already enjoy the greatest share of world income.  Based on the global distribution of income in 1993, even if the benefits of global growth were distributed evenly, it would benefit someone in the richest 1 per cent of the world's population 120 as much as someone in the poorest 10 per cent. 

"Our obsession with growth and our relentless pursuit of a global system which creates ever greater dependency on it has put us on the road to perdition. This confronts us with an artificial and unnecessary choice between the moral imperative of poverty eradication and the practical necessity of environmental sustainability. We need policies aimed directly at reducing poverty and ensuring environmental sustainability, leaving growth as a by-product. That means a new global economic system which will allow, foster and support such policies at the national level." says David Woodward head of the New Global Economy programme at nef, and the report's lead author

The growth mantra sets the economies of Europe and the United States as aspirational models of economic development for the rest of the world to follow.  But to copy their lifestyles, in an environmental sense, is fundamentally unsustainable.  For everyone on Earth to live at the current European average level of consumption, we would need more than double the biocapacity actually available - the equivalent of 2.1 planet Earths - to sustain us. If everyone consumed at the US rate, we would require nearly five.

"Orthodox economics tells us that a rising tide lifts all boats, or that, rather than sharing the cake more evenly, it is better to bake a larger one. Ironically now, however, sea levels really are rising, as a result of global warming and driven by the pollution from economic growth. And millions of the poor have no boats at all to rise in. Where the cake is concerned, the massed ranks of orthodox economists are yet to find the ingredients, or even a recipe, to bake a spare planet to share among the world's population." says Andrew Simms, nef Policy Director and co-author of the report

Relying on growth to bring the world's poorest people out of poverty is both economically and ecologically inefficient.  And, as nef's analysis reveals, poverty could be reduced without growth by more effectively distributing what we already have: For example:

  • redistributing just one per cent of the income of the richest 20 per cent of the world's population would have the same benefit as world growth of 20 per cent without redistribution. This is over ten times the average per capita growth rate of global GDP since 1981;
  • the rate of poverty reduction achieved between 1981 and 2001 could have been achieved through the redistribution annually of just one tenth of one per cent of the income of the richest 10 per cent of the world's population.

Conventional economists claim that redistribution of income is unsustainable in the long term, yet nef's report shows that this rate of transfer could be sustained for 300 years before the world as a whole reached even the average level of inequality in EU countries.

nef believes that, if we are to reconcile the objectives of poverty reduction and environmental sustainability, we need to challenge this conventional wisdom, and the blind pursuit of economic growth which springs from it.  We cannot afford to continue with a system which sacrifices the environment on which we all depend for our very survival to give yet more to those who already have too much, in the hope that a few more crumbs will fall from the rich man's table. 

To achieve real progress we need to change in the way we think about and discuss economic issues, and break out of the confines of mainstream economic thinking.  We also need a shift in power relations, both globally and nationally, to move power from developed countries, elites and commercial interests to the majority of the world's population, the poor.