3, population is still increasing rapidly in both regions of the world so there are now more people living in these regions and thus more people at the bottom economic rung. Further, the weight of poverty in the less developed nations falls heaviest on women, children, and minority ethnic groups. We will take a closer look at the repercussions of poverty for marginalized peoples in Chapter 3.
Figure 2.6 People living on less than International Poverty Line ($1.90 USD): Sub‐Saharan Africa
Source: The World Bank. http://povertydata.worldbank.org/poverty/region/EAS
Figure 2.7 People living on less than International Poverty Line ($1.90 USD): South Asia
Source: The World Bank. http://povertydata.worldbank.org/poverty/region/EAS
Fighting poverty – can an individual do it?
Is there any way an individual can aid the efforts to reduce poverty in our world? Yes, there are ways. If you can’t personally work with the poor, you can give some funds to an organization that is working to improve the lives of the poor. Here are a few of those we donate to annually: Doctors Without Borders, Grameen Foundation, International Rescue Committee, and Oxfam (where author Hite has worked).
But you might ask: How can I be sure the organizations I give my money to will not waste my money? Several reputable organizations evaluate other organizations for this very characteristic. One of the best is the American Institute of Philanthropy, called by the New York Times “the pit bull of watchdogs.”
Note: If you are one of those rare individuals who wants to personally aid those who are poverty‐stricken, read the following article to learn how others are doing this: Nicholas D. Kristof, “The D.I.Y. [Do It Yourself] Foreign Aid Revolution,” New York Times Magazine, October 24, 2010, pp. 49–53.
How much are the richer nations doing at present to help the poorest nations? Over the past several decades, there have been some agreements to reduce the debt of poorer nations, but other economic challenges (like trade barriers) remain. Nontariff trade measures, such as quotas, subsidies, and restrictions on exports, are increasingly prevalent and may be enacted for policy reasons having nothing to do with trade. However, they have a discriminatory effect on exports from countries that lack the resources to comply with requirements of nontariff measures imposed by rich nations.34 For example, the huge subsidies that wealthy nations give to their farmers make it very difficult for farmers in the rest of the world to compete with them. Another example would be domestic health or safety regulations, which, though not specifically targeting imports, could impose significant costs on foreign manufacturers seeking to conform to the importer’s market. Industries in developing markets may have more difficulty absorbing these additional costs.35 See below for further discussion on trade.
Systematic Approaches
Now that we have made a brief examination of poverty and international efforts to help alleviate it, let’s focus on another question: why are some countries rich and some poor? There is no agreement on the answer to that question, but various views have been presented over the years. Although vast differences among the nations of the world make generalizations hazardous, it can be useful to consider some of the most widely accepted approaches or views of economic development: the first is a relatively purely market‐driven approach, in which the primary function of the state (if any) is to enable and govern the physical, infrastructural, social, and political conditions which allow free market transactions to occur. These conditions may range from transportation networks (though there are some who argue that even these should be privatized) to legal systems enabling enforcement by the state of private property contract rights that facilitate commercial transactions between relative strangers. The second approach envisions a more active role for the state, which has historically ranged from direct central control of production and labor by the state as described by Karl Marx and his intellectual descendants, to more indirect means of guiding or influencing market forces through direct government purchase and expenditure, regulation, subsidies, and/or incentives, as described in part by John Maynard Keynes and implemented in the US in the form of an economic stimulus package in response to the “Great Recession” in the first decade of the twenty‐first century.36 In both cases, it is important to consider inclusive governance in order to help address inequality and enable civil society to meaningfully participate in economic activities and benefit from development.37 The third approach we describe is a blended approach.
A Market Approach
A decentralized, market‐driven approach holds that nations can acquire wealth by following four basic rules: (1) the means of production – those things required to produce goods and services such as labor, natural resources, technology, and capital (buildings, machinery, and money that can be used to purchase these) – must be owned and controlled by private individuals or firms; (2) markets must exist in which the means of production and the goods and services produced are freely bought and sold; (3) trade at the local, national, and international levels must be unrestricted; and (4) a state‐enforced system of law must exist to guarantee business contracts so as to ensure safe commercial relations between unrelated individuals.
Adam Smith, the eighteenth‐century Scottish political economist sometimes credited as founder of the market approach, believed that the operations of labor are the key to increasing production. He argued that it is much more efficient for workers to specialize in their work, focusing on one product rather than making many different products. If workers do this, and if they are brought together in one location so their labor can be supervised, increased production will result. Smith also presented the idea that, if the owners of the means of production are allowed to freely sell their services or goods at the most advantageous price they can obtain, the largest amount of products and services will be produced and everyone will benefit. It is the prices in the markets that suggest to the businessman or businesswoman new profitable investment opportunities and more efficient production processes. (For example, when oil prices rose dramatically in the 1970s, new investments occurred in alternative energy sources and some industries came up with ways to reduce the amount of oil they needed to buy. Some business people saw the alternative energy investments as a way for them to make money in the energy field, and some industries cut their costs, thus increasing their profits, by becoming more efficient in their use of energy.)
Plate 2.3 The market approach is followed on the streets
