Persistent poverty – growing inequality

In this chapter we will look at the other important set of boundaries humanity is confronted with: the boundaries between the poor and the rich, the illiterate and the well-educated, the hungry and the well-fed, the oppressed and exploited and those enjoying all of their human rights. We will review and reject the false dichotomy of ‘sustainability versus poverty eradication’ and introduce Oxfam’s proposal of how to bring together the environmental and social boundaries humanity is confronted with.

Digging through my archives I found an article27 I wrote in 1989. Based on my experience as a Field Director for the German Development Service in Papua-New Guinea I explained that in traditional societies like the Papua-New Guinean ones the concept of poverty was often lacking and there was no need for such a concept as the differences between the richest and the poorest member of a community were barely visible. I referred to the fascinating ‘big man’ system, which prevented the accumulation of goods in individual hands, thus limiting inequality. This is how it works: In principle every man has the chance to become a big man. Being strong, a good hunter and a fierce warrior are crucial requirements and being popular with the ladies can help. Being a big man usually manifests itself in the number of pigs you own.

Where is the egalitarian aspect in all of this? It is in giving the pigs away: holding on to all your pigs doesn’t make you a big man; giving them away does. So, the typical big man has given two pigs to a distant relative who was finding it difficult to feed his family and is now breeding pigs and improving his lot. He has given another three pigs to one of the villagers who couldn’t afford to pay the bride price for the lady he adores. And five pigs are with the head of a big family whose services the big man would like to secure. All these people are morally (and materially) indebted to the big man: they will come and help if the big man wants to build a new house, they will be on the big man’s side in any dispute in the village and they will follow the big man if he goes to war. The more people are obliged to you the stronger your status as a big man. Now, if the big man would ask for all the pigs he has given away to be returned to him he would become a rich man under our ‘developed’ perspective but he would lose his big man status. A rather bad deal under the traditional perspective where inequality only existed in terms of status but was very limited in terms of material possessions.

So when the first gold diggers, missionaries and researchers coming from the outside world arrived in the Papua-New Guinean highlands in the 1930s they ‘discovered’ Stone Age communities which by their standards were desperately poor. And Papua-New Guineans wondering about the factory produced shoes and cloths of the intruders, their film cameras and their gramophones got a first glimpse of what it meant to be rich. During the World War II both the Japanese and the Allied Forces brought vast amounts of supplies for their troops to Papua-New Guinea which spread the concept of (materially) rich and poor across the country. And, obviously, Papua-New Guineans wanted to be rich as well. Cargo cults became popular which, through magic practices, tried to divert the cargo of ships and planes away from the foreigners and into the hands of the locals.

More successful than the cargo cults in bringing wealth to Papua-New Guineans was the development of a ‘modern’ administration and economy. Living and working in small towns, employed by the government, business or civil society organisations, an increasing number of Papua-New Guineans receive a monthly salary, which was transferred to their bank account. This discrete transaction – and the fact that they were no longer living under the social control of the village – is the end of the traditional redistribution system: ‘modern’ Papua-New Guineans can accumulate wealth and are being admired as rich by their relatives in the village whom they in turn perceive as poor. After this snapshot of the birth of material inequality and the emergence of the concept of poverty at the point when a Stone Age society enters modern development let’s move to the other end of development: where are we today?

“Gini out of the bottle”, is how The Economist28 titled a comparison between inequalities in different countries based on the Gini coefficient. In 1912, an Italian, Corrado Gini, created the concept which is often used to measure inequality in the distribution of income. In simple terms: Gini defines total equality (everybody has exactly the same income) as ‘0’ and total inequality (one person has all the income and all others have nothing) as ‘1’. While the traditional Papua-New Guinean societies were very close to ‘Gini 0’ one of the most unequal countries, South Africa, is over ‘Gini 0.6’. It is sad to note that in South Africa inequality today is even higher than it was during the Apartheid system29 which had inequality at its core. Another negative surprise is China, a country run by a communist party where inequality is higher than in the USA and still growing fast. In a recent study the Organisation for Economic Co-operation and Development (OECD) compares household incomes of the mid 1980s with those of the late 2000s and comes to the conclusion that “in a large majority (of industrialised countries) (…) the household incomes of the richest 10% grew faster than those of the poorest 10%, so widening inequality.”30 In a special report, The Economist shows that – with the exception of Latin America, the most unequal continent where inequality has been declining in many countries – inequality is on the increase worldwide.31

What is so bad about inequality? Here are a few simple answers: for millions of people in poorer countries inequality means that they are struggling daily for their own and their families’ survival, while others, often nearby, live in comfort and luxury. For instance: as a student I lived with very little money in Rio de Janeiro for a year. I could still afford to share a flat in a modern apartment building looking down on a slum, a favela, very close by. Every day I travelled on the same buses as many of the inhabitants of the favela. What must a 50 year old father of five children have thought when he saw me, this 20 something year old European leaving the bus just one stop before he had to get out and disappearing into a modern and clean building? At times, a gang of boys or young men from the very same favela would hi-jack our bus. One of them would force the driver not to stop the bus while his accomplices would go through the bus and collect at gun- or knifepoint the passengers’ money and valuables. In these scary situations inequality became very tangible.

But inequality also matters in rich countries: the Washington Post recently published an article citing research on inequality in the USA which shows that people living in two neighbouring communities, a rich one and a poor one, have considerably different life expectancies. Women in the rich community live on average five years longer than their poorer neighbours only a few miles away while the gap of seven years for men is even bigger.32 While the men in the rich community have an average life span comparable to Germany and the UK, the men in the poor community can expect to live only as long as men in Morocco or Paraguay.

Nowadays, even liberal economists are becoming worried about inequality: The Economist reports about growing concerns in the ‘economics establishment’ and mentions that “the IMF suggests that income inequality slows growth, causes financial crises and weakens demand”. The article also refers to the Asian Development Bank’s finding “that if emerging Asia’s income distribution had not worsened over the past 20 years, the region’s rapid growth would have lifted an extra 240m people out of extreme poverty.”33

This takes us back to the issue of poverty. The question of how to define poverty has generated a nearly infinite number of answers. Until the strange ‘waitman’ arrived, Papua-New Guineans did not even know they were poor. Today their grandchildren have a clear concept of what it means to be poor: living in the village, working in agriculture, drinking water and walking on foot – and what to be rich: living in a town, working in an office, drinking Coca-Cola or beer and driving a car. But what is poverty in scientific terms? Anybody who wants to measure poverty finds it impossible to determine an objective threshold for being poor. For decades a dollar a day was the World Bank’s definition of poverty. Now the Bank has moved up to US$ 1.25 per day without improving the logic behind their figure. In fact, a definition of poverty in such simple terms creates the impression that poverty is a simple issue of lack of money: make sure each poor person receives US$ 1.25 per day and poverty has been overcome.

In his book, ‘The End of Poverty’ Jeffrey Sachs points to a list of about 150 services which are essential to secure the fulfilment of basic needs. Started by the World Health Organisation and complemented by the UN Millennium Project the list covers sectors such as health, education, food production, nutrition and public infrastructure. To deliver the basic services to the world’s 1.1 billion people living in extreme poverty would cost between 72 and 80 billion US$ annually.34 This is not a very substantial amount compared to the sums of money rich countries recently put into saving their banks. Against this background, the proposal to eradicate extreme poverty by 2030 recently tabled by World Bank President Jim Yong Kim seems fundamentally doable.35 However, Irene Khan, the former head of Amnesty International is right when she defines poverty “as a human rights problem that can be addressed most effectively through respect for human rights.”36 While there is no question that substantial financial resources are required to end poverty, the political basis of poverty eradication is even more important. Guaranteeing human rights to all citizens globally will do much more for ending poverty than any financial transfer, no matter how large it may be. Empowering people to claim and enjoy all of their rights is the final answer to poverty, not offering charity to the needy.