Economic growth is not a magic wand for ending poverty | Olivier De Schutter

A new report from the Center for Global Development claims extreme poverty may be eradicated by 2050 thanks to economic growth in low-income countries. However, a cause for celebration, this is not.

Before we start putting our feet up, it’s worth remembering that extreme poverty is measured according to the World Bank’s international poverty line, which is set at $2.15 (£1.80) a day per person using 2017 prices.

This pitiful amount would barely save you from starvation, let alone allow you to pay for essentials such as housing, heating or transport. It leads you to wonder whether the figure was chosen to ensure the international community would be able to boast quick gains in the fight against poverty.

Whatever the political reasons for sticking to this measure of extreme poverty, no one can seriously claim that this amount would allow anyone to lead a decent life.

Economic growth, defined as the increase of GDP (or total economic output measured in monetary value) per capita, is not the panacea it is made out to be. It is quite conceivable that as monetary wealth increases in low-income countries, the situation of specific groups within them will actually get worse.

First, much of the world’s growth has historically been attributed to the commodification of the natural or cultural resources on which poor communities rely, and that in the past they could have accessed for free. For people in poverty, a world in which a large range of things required for a decent life must be paid for, and can be bought by the highest bidder, is much worse than a world in which such things are treated as “commons”, democratically governed and allocated on the basis of need, or provided by the state as part of its duty to guarantee the welfare of its population.

At the same time, the search for growth has led to some pretty disastrous political decisions for people in poverty, such as establishing “investment-friendly business environments” to attract or retain investors. This is simply codeword for lowering taxes on corporate income and removing regulatory requirements, depriving the state of public revenue for financing public services and social protection.

And it is in the pursuit of growth that labour markets have been made more “flexible” – with more casual work, fewer long-term employment contracts, and lower wages and reduced protections for workers. This is all justified to ensure that countries remain attractive to investors – as if the comparative advantage of a country resides in its working population being kept in poverty.

These and other misguided policies may create the conditions for economic growth, and a woeful $2.15 a day in the hands of the very poorest, but they won’t eradicate poverty or the social exclusion that comes with it.

Over the past 40 years, while general affluence has increased, inequalities have grown in most countries. And this persistence of wealth and income inequalities has largely cancelled out the positive impacts on wellbeing that are expected to derive from an increase in GDP. It’s not hard to see how if the situation of a particular individual improves in absolute terms, but remains stagnant (or, even worse, falls) in relation to other members of society, that individual will experience a loss in wellbeing that their increased purchasing power will not compensate for.

Whether an economy grows or not matters less than whether progress is achieved for those at the bottom. Our efforts today, should focus on reducing inequalities, not on growing the economy, as if a large GDP were some sort of magic wand. What is required is to make social protection universal, to strengthen public services, to achieve progressive taxation, and to build an inclusive economy. An increase in GDP is neither a necessary condition to achieve this, nor is it sufficient to fulfil the promise of ending poverty.