Poverty Statistics Half of the world lives on $2/day GDP of poorest 48 countries< wealth of world’s 3 richest people combined Top 1/5 of richest benefit from 82% of export trade; bottom 1/5 benefit from 1% Of all human rights failures, economic and social ones affect largest number of people

UN Millennium Development Goals Eradicate extreme hunger and poverty Universal primary education Gender equality Reduce child mortality Improve maternal health Combat HIV/AIDS, malaria, other diseases Environmental sustainability Global partnership for development

Causes of Poverty Difficult physical environments Colonial exploitation Inequitable land distribution Weak unstable regimes Corruption Globalization?

Distributional Effects of Free Trade Benefits of free trade do not extend to all Within countries, trade effects uneven –across industries/sectors –across classes/regions Between countries, trade effects uneven –between industrialized and developing states Result: widening income disparities at national and global levels

Comparative Productivity

Dilemmas of Developing States Primary goods producers –declining terms of trade –volatility of commodity process Structural adjustment policies of IMF and World Bank –trade liberalization, deregulate capital markets, fiscal austerity, cuts in social spending, reduce government intervention in economy

Reducing Poverty and Inequality Aid – financial transfers not enough Trade liberalization – must address distributional issues Cartels - product must meet certain criteria Industrialization - high tariffs on entry level industries (textiles) Agriculture - high tariffs

Development Strategies Import substitution industrialization (ISI) –inward-oriented –industrialization geared toward domestic market Export-oriented industrialization (EOI) –outward-oriented –industrialization geared toward exports for global market

East Asian Miracle Non-economic theories of success –US hegemony, local institutions, culture Economic policies –protectionism –picking “winners” –savings over consumption –authoritarian political regimes –foreign capital, but regulated

Washington vs. Asian Model Free-market capitalism Deregulate capital markets Lower tariffs on imports Shrink state bureaucracy Remove restrictions on foreign investment Government out of the economy Democracy State-administered capitalism Regulate capital flows Protect infant industries Strong “developmental” state Foreign investment cannot be “absentee” Government picks “winners” in strategic industries Strong centralized state

Summary Global economy characterized by development and under-development –Polarization in distribution of wealth at global level –Intra-country inequality –Growth of poverty in world at large –Selective integration into global informational economy Changes needed at national and international levels

Readings

Poverty and Terrorism Did poverty cause 9/11? Did it play a role? Does al-Qaeda recruit poor people? Did poverty in Afghanistan play a role? Are poor people more likely to be terrorists? Does poverty cause terrorism generally? Does terrorism breed only in poor countries?