The Guardian recently ran a nice article summarizing a new report from the Center for Global Development, one of my favorite Washington DC think tanks. The report, authored by Charles Kenny, points out the enormous progress that has been made, in recent decades, in the fight against extreme world poverty. It also forecasts that poverty would further come down in the coming decades, with the share of the world population living with less than $2.15 a day falling from 8% currently to about 2% in 2050 (the fall in extreme poverty should not obscure the tremendous growth that has occurred above this very low threshold, in particular with a dramatic increase in the size of the global middle class). The near eradication of extreme poverty in recent decades and its likely continued decline in the years ahead surely must count as one of mankind’s greatest ever achievements, bar none.
This decline is attributable to one and only one cause: growth. The countries that have experienced the greatest decline in poverty in terms of raw numbers are China and India. As we discuss repeatedly in Global Trends, these countries have experienced a surge in aggregate GDP growth since they started their reform process in the late 1970s (China) and early 1990s (India). No other cause comes close to growth as a quantitative explanation for the fall in poverty. Not aid, not micro-interventions, not pure redistribution. Growth - and in particular growth due to better economic management of complex societies, based on a degree of openness (globalization) and the injection of market mechanisms - is the root cause. When growth slows, the fall in poverty stalls. When growth picks up, the decline in poverty accelerates. This is a somewhat inconvenient fact for those, among the bien-pensant class, that believe that aid and redistribution can cure all ills. Aid and redistribution vastly predate the massive fall in poverty experienced in recent decades, and yet this fall only occurred when poor countries started to catch up with rich ones in terms of per capita income. That is, when they started on paths of sustained growth.
The unfortunate reality is that many are blind to this fact. On the contrary, a dangerous school of thought is becoming prevalent among development elites. I would call it the «zero growth» school. These individuals argue that growth is associated with environmental degradation and not necessarily with a fall in inequality. They advocate policies that would stop aggregate GDP growth and instead focus on redistributing existing resources. But the needed transition from carbon and the generalization of transfer schemes is only possible if more resources can be mobilized to achieve these goals. These resources can only come from continued growth. It is both a fallacy and wishful thinking to think that redistribution and de-carbonization can happen without growth. In fact, The Guardian also recently featured the «thinking» of one of the leading proponents of this school of thought: Olivier De Schutter, the UN special rapporteur on extreme poverty and human rights. Yes, you read that right, the UN’s special rapporteur on extreme poverty wants to end growth!
To me, zero-growthers are akin to arsonists. If their policy prescriptions to end growth were to come to fruition, untold misery would result. The slowdown in growth, and concurrent reversal in the downward poverty trend that we experienced during the COVID years, would pale in comparison to the hundred of millions who would fall back into utter misery if growth stopped in countries like India, Bangladesh or Indonesia. In my view, advocates of zero growth policies are grossly irresponsible to the point of criminality.
Thankfully, most elected leaders and enlightened policymakers show no intention of pursuing a zero growth objective. If they did, they would be thrown out of office in a hurry. And if you think that the surge in populism was a concern in the wake of the global financial crisis, wait until we have zero global growth.