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

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

3. 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 com- patible institutions, available resources, capital markets, and entrepreneurship

4. ... 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

5. II. Growth as Cumulative Causation 1950  1992 Over 5x increase in global output Nearly 12x increase in world trade Income 82.7% 11.7% 2.3% 1.9% 1.4% Population 20% 1950 – Haves 30x over the Have Nots 1989 – Haves 60x over the Have Nots

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

7. III. Examples 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

8. 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. The development industry III. Examples

9. IV. If Not Growth, then What? Many alternatives: Steady-state economy (Daly), an economics as if people mattered (Schumacher), people-centered development (Korten), ecological economics? 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

10. Earth’s Three Socioecological Classes Overconsumers 1.1 billion > US$7,500 per capita Sustainers 3.3 billion US$700-7,500 per capita Excluded 1.1 billion < US$700 per capita Travel by car and airTravel by bicycle and public surface transport Travel by foot or donkey Eat high-fat, high-calorie, meat-based diets Eat healthy diets of grains, veg., &some meat Eat nutritionally inadequate diets Drink bottled water and soft drinks Drink clean water plus some tea and coffee Drink contaminated water Use throwaway prod. & discard substantial wastes Use unpackaged goods and recycled wastes Use local biomass and produce negligible wastes Live in spacious, climate- controlled, 1-fam. homes Live in modest, vented, multiple-family homes Live in rudimentary shelters or in the open Maintain image- conscious wardrobes Wear functional clothingWear secondhand clothing or scraps