In the debate about inequality over the last couple of weeks, one of the recurring responses from neoliberal circles is that inequality is unavoidable, and nothing to get wound up about. As long as the global economy is growing, then the poorest are being lifted out of poverty. The rich may be getting richer faster than the poor are getting less poor, but it has to be that way, and tinkering with the system will make everyone worse off.
By way of reply, consider this graph from UNCTAD, from one of their discussion papers on what the post-MDG goals might be.
It shows who gets what when the global economy grows. Most of it goes to the richest, as we know. The poorest 60% get the slice represented here. We can then divide that slice up further.
The poorest 10% – those who need it most, for whom a tiny bit more is a matter of life and death – get that little red sliver there on the right.
To put some figures on it, for every $100 of growth in the global economy, the poorest 20% get 70 cents.
So yes, technically you could carry on making the rich richer and eventually you would end extreme poverty. UNCTAD estimate that the target for Millennium Goal number 1 would be met in Sub-Saharan Africa around 2049.
And we’re only talking about the most extreme poverty. If we take a more realistic figure of $5 a day as a poverty line, there will still be 3 billion people below that in 2030.
But yes, you could still argue that growth would be lifting people out of poverty.
Until you factor in climate change. This is where it comes unstuck, and as I’ve been arguing for the last seven years, why it’s so important to keep putting the environmental and developmental perspectives together.
- In the global economy as currently configured, growth for the poor depends on lots and lots of growth for the rich.
- But nobody has yet uncoupled economic growth from energy consumption fast enough to bring emissions down.
- If we pursue growth in developed countries, we will have tipped over into runaway climate change long before poverty is eradicated.
- At that point, the ongoing losses from climate change may erode the gains from growth, effectively bringing development to a grinding halt.
The upshot is that the question of whether or not free market capitalism lifts people out of poverty is a red herring. The issue is whether it can do it fast enough, given that we don’t have forever.
This isn’t contrarian or anti-capitalist. It’s just maths and joined up thinking. Putting aside any potential solutions for a moment, is the logic faulty? It’s not a comfortable conclusion, and I’d be delighted to find I was wrong.