Reducing Global Poverty and Inequality

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More than a billion people live on less that $1.25 per day and 1 in 10 do not have enough to eat.

By Dr. Dhanpaul Narine

Be poor among the poor. Poverty in the midst of plenty is one of the great anomalies of our time. The rise of pauperism alongside the glint of skyscrapers calls for action. If the world’s one percent would pay heed to the words of Pope Francis then poverty may not be as widespread as it is today.

The revelations in the Panama Papers have led many to pause and take stock about where society is heading. There was the growing feeling, even before the revelations, that the gulf between the rich and poor was widening. It is no secret that the richest 1 percent is close to overtaking the other 99 per cent on the planet. What this means in practical terms is that more than a billion people live on less that $ 1.25 per day and that 1 in 10 do not have enough to eat.

According to a 2015 Report on world poverty, ‘the richest 1 per cent have seen their share of global wealth increase from 44 percent in 2009 to 48 percent in 2014 and by 2016 this is expected to increase to 50 percent. Members of the global elite had an average of $2.7 million per adult in 2014.’ As inequality and poverty continue to grow so do the exhortations of world leaders to redress the imbalances. Pope Francis in his ‘Evangelii Gaudium’ spoke about the evils of unfettered capitalism.

The pontiff has called for reforms of the global financial systems that exclude the poor. He says that, ‘we have created new idols. The worship of the golden calf of old has found a new and heartless image in the cult of money and the dictatorship of an economy which is faceless and lacking any truly humane goal.’ Senator Bernie Sanders has echoed the call of the pontiff for a level playing field when he suggested a ‘moral economy.’

President Obama has urged the world to act to stamp out poverty in keeping with the Millennium Development Goals that were established in 2000. Mr. Obama said that in the ‘ face of corruption that siphons off billions away from schools and hospitals and infrastructure into foreign bank accounts, governments have to embrace transparency and open government and the rule of law.’ Mr. Obama made these remarks in 2015 at the United Nations and alluded to money being stashed away in ‘foreign bank accounts’ only to have the revelations in the Panama Papers six months later.

How are shell companies and the creation of tax havens relevant to the solution of poverty and inequality? In 2013, Prime Minister David Cameron stated at the G8 Summit that the United Kingdom would introduce registers of companies and their owners in an effort to crack down on shell companies. The idea was to get them to pay their taxes. It was stated at the time that runaway inequality could best be tackled if there was an end to tax havens.

According to Oxfam, ‘we need to end the era of tax havens which has allowed rich individuals and multinational companies to avoid their responsibilities to society by hiding ever increasing amounts of money offshore.’ Why is it important for the 1 percent to pay their taxes? This group comprises 62 billionaires and they own more than half of the world. It is estimated that this super-rich elite has more than $8 trillion in offshore accounts. If they paid taxes governments would be able to generate $200 billion a year and this can be used to finance the social sector in many countries.

One study indicates that, ‘as much as 30 percent of all African financial wealth is estimated to be held offshore, costing as estimated $14 billion in lost tax revenues every year.’ It is also suggested that this money can pay for the healthcare costs for mothers and children, employ enough teachers in the classrooms and improve the lives of 4 million African children each year. Measuring global poverty can be complex; economists have used indicators such as Purchasing Power Parity (PPP) and in 2014 the line was set at $1.25 cents per day. However, there are other factors that must be taken into account and they include the physical quality of life which can be non-money indicators. They would normally be access to education, health, water, sanitation, electricity and housing.

What are the causes of global poverty and inequality? The Overseas Development Institute says that, ‘the real causes of inequality stem from public policy choices that governments make and the policies that underpin economic globalization at the international level.’ There is no question that misplaced priorities can lead to poverty. A government that spends more on the military than on the social infrastructure will find its people struggling to meet basic needs.

The government will also find high mortality rates due to a lack of adequate health facilities. Literacy rates too will fall as will access to employment. In other words, the country will be unable to meet the rising expectations of the poor. These can be the basis for a bubbling cauldron of resentment against the government and more will have to be spent on the army and security forces to keep people under control. It is a vicious cycle that is being played out in various places in the world and it does not even take into account the level of corruption that occurs.

The President of the World Bank Group Jim Yong Kim said in 2013 that ‘corruption is public enemy number one’ in developing countries. The World Bank has pledged to fight corruption vigorously and has described its pernicious effects most graphically. According to President Kim, ‘ every dollar that a corrupt official or corrupt business person puts in their pocket is a dollar stolen from a pregnant woman who needs health care; or from a girl or boy who deserves an education; or from communities that need water, roads, and schools. Every dollar is critical if we are to reach our goals to end extreme poverty by 2030 and to boost shared prosperity.’

These are wonderful platitudes from the World Bank but it is yet to outline a strategy as to how it will combat corruption. The academic community has advanced various models to explain corruption. A 2011 Harvard study by Benjamin Olken and Rohini Pande titled ‘Corruption in Developing Countries’ advanced a number of theoretical models to challenge the ideas of perception in corruption. But while academic studies are important the average person may have a better idea as to who is corrupt in the government rather than the cloistered theoretician.

In recent years, a number of reasons have been advanced to explain the causes of poverty and inequality. They range from the impact of colonialism to war and political instability, inability to service the national debt and natural disasters. It is argued that there is no single cause or single solution to the problem of poverty and inequality. How then do we raise the incomes of the bottom 99 per cent? A number of academics and philosophers have lent their weight to the question of redistribution.

Peter Singer, Thomas Pogge, Jeffrey Sachs, Thomas Piketty, and others, have argued that redistribution holds the key in eliminating poverty. The United Nations estimated that in 2015 a sum of $121 billion would have been needed annually to eradicate poverty. Some politicians have capitalized on the idea of taxing the top one percent to reinforce the inequality argument. But long before the Panama Papers, many people knew of the hidden wealth of the rich. The ordinary citizen knows too that despite the flowery prose little will be done to hold the one percent accountable. The Occupy Wall Street protests raised the consciousness of people about inequality and the excesses of Wall Street but were short on policy solutions.

We have reached a point in world politics in which ethical questions abound as far as inequality and poverty are concerned. While we point fingers at the political establishment for its inaction there is the responsibility of the individual that has to be taken into consideration. If we are convinced that the political system is corrupt then we must act. We cannot sit idly by and allow politicians to hold our economies to ransom and to make secret deals that will adversely affect the economy and environment for generations.

These protests are likely to spread to other countries to hold governments accountable. People are fed up and frustrated with the status quo. In the United States, confidence in the Congress is at an all time low. A Rasmussen poll shows that 47 percent of likely voters believe that ‘a group of people randomly selected from a phone book could do a better job addressing the nation’s problem than the current Congress.’ There are other suggestions to reduce global inequality and they include steps to curb the illegal outflows of funds, an open trade policy, a wealth tax on the top earners and more protection and security for workers. The Summits have produced nothing more than fluffy rhetoric. It is time for ordinary people to act!

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Dr. Dhanpaul Narine

The views expressed in this column are solely those of the writer and do not necessarily represent the views of the THE WEST INDIAN.

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