Poverty and Wealth

Lecture given by Duncan Green

Head of Research at Oxfam GB

Notre Dame University, September 2009

Part of a series of From Poverty to Power lectures.

Main messages

Orthodox economics must be expanded to incorporate

environment and unpaid work

Markets, and poor peoples’ involvement in them, are

evolving rapidly, raising new threats and opportunities

Redistributing power in markets is essential to reducing

inequality and overcoming poverty

Redistribution is not the only issue: effective states are

needed to generate growth where it benefits poor

people most, provide infrastructure, and build national

technological capabilities

Economics for the 21st Century

Orthodox economics and its indicators (income GDP etc.) lead to biased policies and blind spots in crucial areas of poverty and inequality

A new economics of human sustainability must address:

– Environmental constraints and sustainability

– Non-monetary economics, e.g. unpaid women’s work

– Weighting policies and outcomes for equity

– Focus on well-being, not just income

Making agriculture pro-poor

Small farmer based agricultural growth has led to take-off in

Viet Nam, India, etc.

Requires both Effective States and Active Citizens

acquiring power in markets

Active Citizens: producer organization, consumers

Effective States: access to credit, investment, pro-poor

technologies

Good news: commodity prices, biofuels (perhaps) and shift

to low carbon production

Challenges: supermarketization; outmigration

Dilemma: food v feed v fuel – can we have all 3?

How Change Happens:How Change Happens:

Winning ‘pond rights’ in India

How Change Happens:

Winning ‘pond rights’ in India

Fish ponds are crucial for 45,000 families in Bundelkhand, a poor region of India

Many fisherfolk are driven from the ponds

After a long process of organization, today over 100 ponds are controlled by the fisherfolk

How did it happen?

Components of Change

Context: Technology (new varieties of fish and

‘seeding’ the ponds) raise profits and lead to

mass expulsions of fisherfolk by landowners

Institutions: Protests win partial support from

the state government for cooperativization –

triggers mass mobilization

Events: Dirty tricks and some violence are break

points

Agents: Local NGOs facilitate contacts with

police and politicians

Tikamgarh: Dynamics and Politics

Slow accumulation of political and social

mobilization, punctuated by moments of

protest and conflict

Violence over a particular pond became a

‘lightbulb moment’

Changes to state laws were key

Astonishing decision by local police chief to

implement the law!

NGO allies contributed advice and links to

‘decision makers’

Decent workDecent work

Decent work

Several trends are driving up inequality

– Flexibilization and rise of the informal economy

– Downward pressure on labour rights

Incorporation of women brings mix of costs and benefits

What needs to change:

– Rebuild and change trade unions

– Reform supply chain management

– Recognize role of unpaid work

Private sector, public interest

Private firms create jobs, buy and sell to the poor, pay taxes

and generate externalities

The human impact of any firm is firstly determined by

sector, but within that different firms can choose to be more

or less pro-poor

TNCs differ from large national firms on linkages,

technology, capital flows and employment

Active Citizens ensure the private sector benefits the poor

(trade unions, consumer organizations)

Effective States need to regulate and refocus attention on

SMEs and national upgrading

Trade and development

Trade is (or was) booming

Trade can be a crucial tool in overcoming poverty (East Asia)

Rigged rules and double standards

Official story on trade liberalization in conflict with evidence:

– In manufacturing, protection and state-led industrialization is the norm

– Liberalization as an outcome not an initial condition

Rise of China could change the script, by overcoming commodity trap and kicking away the ladder from other developing countries

Ulysses S Grant (1869-77) on free trade

For centuries England has relied on protection, has

carried it to extremes and has obtained satisfactory

results from it. There is no doubt that it is to this

system that it owes its present strength. After two

centuries, England has found it convenient to adopt

free trade because it thinks that protection can no

longer offer it anything. Very well then, gentlemen,

my knowledge of our country leads me to believe

that within 200 years, when America has gotten out

of protection and all that it can offer, it too will

adopt free trade.

“

”

A Growth success story: Botswana

Should be a basket case: small, arid, land-locked

and dependent on diamonds

Instead is Africa’s most enduring success story –

GDP per capita is up 100x since 1966

Reasons include traditional inclusive governance

system, leadership, hands-on role for the state,

lucky timing on diamonds and good use of aid and

technical assistance

Should we set limits to growth?

Growth has always been central to development –

redistribution on its own seldom works (let’s see if

we can make the Rosling graph work…..)

But growth is becoming more disequalizing and

less effective at reducing poverty

While continued growth means rising carbon

emissions

So who needs growth and how much of it?

Carbon intensity:

falling too slowly, and has now gone into reverse

0

5,000

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15,000

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30,000

1980

1985

1990

1995

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2005

MtC

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US

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Does growth make people happier?

0

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0 10,000 20,000 30,000 40,000 50,000 60,000 70,000

GDP per capita ($ PPP, 2005)

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Further Reading from the Blog

The backlash against microfinance,

http://www.oxfamblogs.org/fp2p/?p=623

Measuring wellbeing,

http://www.oxfamblogs.org/fp2p/?p=551

Why we need to limit growth,

http://www.oxfamblogs.org/fp2p/?p=253

Why equality matters more than growth,

http://www.oxfamblogs.org/fp2p/?p=250

How do people move out of poverty?

http://www.oxfamblogs.org/fp2p/?p=195

Further Reading

From Poverty to Power, Part 3

Ha-Joon Chang, Bad Samaritans (2007)

Dani Rodrik: One Economics, Many Recipes (2007)

Gapminder website