World Savvy Monitor

Why are these countries so poor?  The answer to this all-important question is two-fold.  First, they are poor because they are subject to one or more of the factors described below, many of them in a dynamic where one factor leads to, or compounds, another.  Second, they are poor simply because they are poor; poverty in these extremes is tremendously self-perpetuating – it is a vicious cycle, or trap.  The state has no money because its citizens cannot get above subsistence living to start businesses, earn incomes, save, invest, and pay taxes.  Because the state has no money, it cannot provide its citizens with basic health care, education, housing, and security, which further limits their ability to rise above subsistence living to start businesses, earn incomes, save, invest, and pay taxes.  The cycle then repeats, for generations and generations.  Most of the countries in which the poorest billion citizens live are classified either as failing states or failed states, and they constantly move back and forth along the negative end of this spectrum.  

It is interesting to note there are some well-respected experts who argue that these countries should never have been countries in the first place.  They contend that some nations are just too disadvantaged geographically, incorporating within their borders combustible ethnic configurations and scarce resources, circumstances that even the most adept leadership could not negotiate successfully.  That many of them are ex-colonies of the West helps to explain the illogical combination of elements that composes these nations.  In hindsight, they argue that the better alternative would have been for larger, more economically viable countries formed along more sensible boundaries, where resource scarcity and economic risk could be balanced and would not exacerbate ethnic tensions to the degree that has occurred in Africa and elsewhere.  Instead, among LDCs, multiple factors have coalesced to form perfect storms of extreme and debilitating poverty.

Characteristics of Least Developed Countries (LDCs)

The very factors that cause these countries to be poor are the same as those that have kept their economies from growing (through industrialization, modernization, and export-diversification) and, tragically, the exact same facts that impact their ability to make good use of development assistance in order to achieve that growth.  This is important to remember when examining the effectiveness of tools designed to foster growth among the poorest billion.  It is extraordinarily difficult to say with any certainty what is a cause of poverty, what is a result, and what is a perpetuating, accelerating or complicating factor.  All are interconnected.  

Geography

Geography is frequently a prominent theme of any issue or region examined in the World Savvy Monitor, and there is some truth to the adage that geography is destiny.  LDCs are often severely compromised by their location in a multitude of ways.  Many are located in harsh climates characterized by poor quality soil and inconsistent rainfall (which causes droughts and floods), and susceptibility to tropical diseases and pests.  This means agricultural potential is limited.  Without expansive irrigation, food production is inadequate and people and livestock suffer from malnutrition and famine.  Lack of clean water sickens and kills; communities are destroyed by natural disasters; young and old fall prey to diseases such as malaria; keeping critical economic assets such as goats and cows alive is a challenge.  Subsistence living is extraordinarily difficult, and savings and investment are nearly impossible.  

Beyond climate, geography can take its toll in the form of isolation.  Many LDCs, especially in Africa, are landlocked without access to navigable rivers that lead to the ocean.  They depend on neighboring countries, through which goods and ideas must move, to reach the world outside the continent.  As Paul Collier points out, many LDCs are not only landlocked (some even double-landlocked, having to go through more than one country to reach a seaport), but are also “landlocked in bad neighborhoods.”  He explains that Switzerland is a landlocked country, but that it does not suffer to the extent of, say, Uganda.  Switzerland’s neighbors include Austria, Germany, Italy, and France – high functioning states with whom the Swiss can trade regionally and through whom the Swiss can move their goods to the rest of the world.  By contrast, Uganda is surrounded by Kenya, Rwanda, Sudan, the Democratic Republic of Congo, Tanzania, and Somalia – impoverished neighbors in significant crisis themselves, and often hostile to Uganda’s success or even existence.  

Where a country is located determines not only its level of isolation, but can also determine its level of strategic value to wealthier nations.  Pakistan and Afghanistan’s serious geographic disadvantages (especially harsh mountainous regions creating isolation) are mitigated by the geo-strategic advantages conferred by their location in key corridors and in proximity to neighbors important to the West.  This strategic importance is hardly a panacea, as the situations in these Central Asian nations demonstrate, but it does forces developed nations to take them into consideration, at least to a certain degree.  The Central African Republic or Burundi cannot say the same.

Finally, geography determines what natural resources a country has that may be traded as commodities on world markets – oil, diamonds, copper, rubber, coltan, to name a few.  However, as highlighted in the Sudan issue of the World Savvy Monitor, the existence of natural resources in an otherwise impoverished country often brings more negative than positive effects.  Some of the most resource-rich countries in the world are among its poorest, as economies built on the extraction of commodities are generally not engines of growth.  Resource wealth acts as what economists call external rents, and creates significant wealth for the country while eliminating the need for the government to tax and thus be responsive to its people.  Resource wealth creates conditions conducive to corruption and embezzlement.  In addition, the extraction of these resources is often harmful to the environment and generates opportunities for exploitation by domestic elites as well as those from the developed world.  Economies based on natural resource extraction are extremely vulnerable to volatility in world commodities prices, and high commodity prices can artificially inflate the value of a country’s currency.  Export diversification in these countries, which generally leads to more sustainable and equitable growth, is discouraged.  In addition to these factors, resource wealth substantially increases the risk of conflict, both with neighbors and within a country itself.  Nigeria is a perfect case in point.  Despite being one of the world’s largest oil producers, it is among the world’s poorest nations, with the residents of its oil-rich delta among the world’s most desperate people and its citizens subject to internal conflict and violence.  Sudan and the Democratic Republic of Congo are other resource-rich LDCs in which people live in extreme poverty and are subjected to near perpetual civil war.

Demography

The demography of the poorest billion only exacerbates their geographical challenges.  First and foremost, many LDCs have extraordinarily high population growth rates.  Women with little access to education and/or employment tend to have higher fertility rates.  Families in societies where children are needed to work on subsistence farms tend to have more children, especially in places where infant and child mortality is high.  Like many other factors, population growth is both a symptom and a cause of poverty.  Communities quickly outgrow their arable land as their population density increases.  Parcels of land become smaller with each successive generation, as agricultural productivity becomes diminished by overuse and environmental degradation.  Competition for resources becomes fierce and often erupts into conflict, as in Darfur.  

Another demographic feature of LDCs is uneven population distribution.  Rural communities, where many citizens reside, tend to be isolated from each other, making transportation, communication, and commerce difficult.  Urban populations are disproportionately dense as people migrate to cities in search of often non-existent jobs.  Resource distribution is problematic in both cases, as illustrated by both the slums and remote villages in much of the developing world.  Urbanization, often cited as a positive force for modernization (by producing synergies and agglomerations of talent, capital, and skills), has been beneficial for some but usually not for the poorest citizens.  Richard Florida has written a seminal article to rebut Thomas Friedman’s claim that the world is flat, an analogy used by Friedman to describe how globalization is affected by the increased accessibility brought about by technological innovation.  Florida instead envisions the world as being “spiky.”  In his view, the modern global economy has peaks, hills, and valleys.  The peaks are the cities where innovation and capital combine, the hills are cities where production and capital combine, and the valleys, including rural areas and cities in LDCs are insignificant.  As Florida concludes, “in terms of sheer economic horsepower and cutting edge innovation, surprisingly few regions matter in today’s global economy.”  

Adding to the challenges of urbanization is the prediction from the UN that cities in Africa and Asia are expected to double in size between now and 2030, a result of a massive rural to urban migration.  Young people are expected to spur this growth, settling in developing cities, and many in growing slums and shantytowns.  One billion people currently live in slums, 90% of them in the developing world.  Most experts agree that these cities are ill-equipped to handle the influx, and consequently urban poverty in LDCs is expected to become more concentrated and debilitating.  

These cities are expected to reflect a larger demographic trend that often plagues LDCs: youth bulges.  Developing countries tend to have a disproportionate number of citizens under the age of 30.  This creates a large pool of potentially restless and unemployed youth who live in a society without sufficient employment opportunities and often with many radical groups, militias, and militaries to which young boys in particular are often drawn.  In fact, expert Henrik Urdal has calculated that when the youth population of a country (as a percentage of the adult population) reaches 35%, the risk of armed conflict goes up by 150%.  

A different demographic crisis for many LDCs has been brought on by the high incidence of HIV/AIDS.  AIDS tends to disproportionately afflict the working age cohort of the population, who are also those that are most sexually active and those that are most likely to have children.  This results in entire villages that have few young healthy workers to grow the economy and many AIDS orphans.  Youth deficits and bulges are highly destabilizing for countries trying to grow their economies, increasing the pressure on already compromised health care delivery, child care, employment, and public safety.

Finally, demography is a factor when there are large numbers of different ethnic groups within a country.  Diversity itself is not the liability; it is the competition for limited resources that often ensues among ethnic groups that is the problem.  As has been mentioned, many LDCs are former colonies whose boundaries were often drawn without regard for the ethnic, tribal, religious, and cultural identities of their indigenous residents.  When affinity groups were divided by boundaries, destabilizing interstate conflict and secessionist movements become the issue (examples include the Kurds in Turkey and Iraq, and the Pashtuns in Pakistan and Afghanistan).  When too many different affinity groups were combined, civil war and conflict has often ensued.  Paul Collier has made the point that when small countries (note that most LDCs are small countries) contain highly heterogeneous populations, they tend to splinter into factions, and the political process often reflects this in the form of fragmented, contentious, and debilitating patronage and cronyism (as in Kenya and Rwanda).  On the other hand, generalizations about ethnic diversity are hard to make – heterogeneity seems to have largely worked with regard to economic development in the United States, while homogeneity without democracy has largely worked for China.

International Relations

A country’s past and present relations with its regional neighbors and other countries around the world significantly impact its prospects for development.  Most LDCs are in Africa, and their history of interactions with the West is characterized by slavery, colonialism, support for Cold War dictatorships, opportunistic resource extraction, and the Global War on Terror.  Many believe that LDCs are often used as a means to an end for larger Western interests, and that this results in the adoption of policies and agendas that are detrimental to LDCs’ economic, political, and social development.  In fact, most believe that these legacies have had a net negative effect for countries in which the poorest citizens reside.  However, a great deal of debate exists about the extent to which these Western legacies are responsible for the circumstances of the world’s poor, which, in turn, drives much of the debate about the extent to which the West is responsible for fixing these problem today.  White guilt is a term often discussed in this context, but most experts agree that there is more than enough blame to go around, and that a portion of LDC liabilities have been homegrown.

An example of these indigenous liabilities is the significant amount of regional conflict that exists among LDCs in Africa and, to a lesser extent, in Central Asia.  Many argue that the legacy of Western interference on the African continent has often been an underlying factor in many regional conflicts among LDCs, and several interstate wars have essentially been proxy wars between developed countries.  Western machinations alone, however, cannot sufficiently account for the lack of regional cooperation and peace.  In Africa in particular, the presence of so few ports for so many countries means that regional commercial success is dependent on harmonious trade and diplomatic relations among the LDCs in the interior and those on the coasts.  Despite this, many contend that these countries are sabotaging their regional development with onerous customs duties, poor infrastructure, and outright hostility among countries and among rebel groups crossing borders.  Many believe that Africa’s development would be greatly enhanced by some version of regional integration such as one modeled on the European Union, comprising trade and security benefits for all member nations.  It is widely acknowledged that because the EU is made up of developed nations its replication would require significant adaptation.  As of yet, the African Union has not had much success in replicating this model or garnering similar benefits for its members, and other, smaller regional organizations, such as the Economic Community of West African States (ECOWAS), have likewise enjoyed limited success.  

Internal Conflict and Civil War

Of all the factors contributing to world poverty, internal conflict has been enormously damaging to the development prospects of the poorest billion, the damage results from the conflicts themselves, as well as the many ways in which conflict exacerbates other factors.  Again, most experts agree that war is both a cause and a symptom of extreme poverty.  

Most internal conflicts among LDCs are classified as resource conflicts – conflicts that arise over the control of natural resources.  They can also be the result of ethnic and historical grievances, many of which are colonial legacies, such as the Hutu-Tutsi conflict in Rwanda.  Colonial powers often employed a divide and rule strategy, turning different indigenous ethnic groups against each other to prevent them from uniting against external rulers.  These rivalries and hatreds outlasted the colonial era, and decades after independence, many LDCs are still reeling from the fragmentation of their societies.  

The World Bank has estimated that LDCs are 15 times more likely to experience internal conflict than developed countries.  According to an analysis by Paul Collier, of the 58 countries that are home to the poorest billion, a full 73% have experienced a civil war; the occurrence of one civil war is seen to double the risk for a subsequent civil war.  For a disadvantaged country that is trying to grow its economy, war is particularly devastating: from the physical destruction of homes, farms, schools, and businesses, to the loss of life and the complete disruption of an already fragile society.  Energies of multiple generations are diverted away from growth and to survival and reconstruction.  Foreign investors are deterred by war and the perpetual risk of its resumption.  Regional factions in neighboring countries often take advantage of vulnerable resources and populations.  Simultaneously, refugees destabilize the region.  Brookings Institution scholar Susan Rice has vividly described this phenomenon as a “doom spiral.”  See Lael Brainard and Derek Chollet’s book, Too Poor for Peace: Global Poverty, Conflict, and Security in the 21st Century, for more detail on what they have called the “poverty-insecurity nexus.”

Infrastructure

Even if not affected by war, poor infrastructure in LDCs figures prominently in their impoverishment.  Infrastructure is analogous to the systems that make up the human body – bones, blood, organs, and connective tissues.  A society’s hard infrastructure is made up of roads, ports, railroads, aviation, bridges, power grids, water systems, telecommunications, schools, and hospitals – everything that makes interaction among and between people and the markets possible.  Soft infrastructure is comprised of civil society, social welfare, public safety, and judicial systems – the teachers in the schools, the political parties that drive the electoral process, the judges that decide cases, the police on the streets, and the doctors in the clinics – everything that contributes to general rule of law and provision of a decent standard of living and sense of community.  Hard and soft infrastructure are intertwined and are key to ensuring access to the goods necessary for human life, whether they be domestically produced or the product of foreign aid.  If food, medicine, and critical goods lack networks and transports for distribution, they lose their value.  

When it is said that LDCs lack infrastructure, it means they lack the very elements that make society function smoothly, and ultimately, their people lack the ability to join together to generate pressure for reform.  In countries with poor infrastructure, people are often compelled to go outside the formal sector to meet their needs.  Alongside extreme poverty, black market economies frequently develop and corruption often flourishes on both a macro and micro level.  Growth becomes nearly impossible because human and financial capital do not have adequate outlets.  Again, this is indicative of the cyclical nature of poverty in which causes and symptoms become confounded.

Governance

Governance and infrastructure are undoubtedly interrelated, and analyzing this relationship invariably leads to questions of leadership.  LDCs generally suffer from both substandard infrastructure and poor governance; this has a serious detrimental effect on the economic growth that is necessary fro development.  As discussed in the Democracy edition of the World Savvy Monitor, poor governance can stem from the state being either too weak or too strong.  States and leaders (autocrats or democrats) that are weak have difficulty controlling ethnic, social, and economic tensions as well as promoting pro-growth, anti-poverty policies.  They are in constant jeopardy of being overthrown by war or coup, and are generally perceived as illegitimate by their people and a bad risk by the international community.  Overly strong leaders pose a different set of problems, but are similarly perceived by their citizens and outsiders: as illegitimate and as an unacceptable risk, respectively.  The key difference is that strong leaders can often keep order by violent and extreme means.  However, this does not mean strong leaders are necessarily more effective at promoting economic growth.  Strongman Robert Mugabe of Zimbabwe is seen as a despot exerting enormous control over his rapidly declining country.  It is not necessarily important whether the country is an electoral democracy or not – poorly governed states are characterized by predation, corruption, cronyism, questionable protection of property rights, violations of human rights, and enormous popular resentment.  Democracy only helps if it is used to further positive outcomes for a country’s citizens. 

With poor governance, both the public and private sectors fail to thrive, as public funds go missing, services are compromised, individuals do not feel secure in starting businesses, and outside investors stay away.  Reformers are ineffective, silenced, and/or do not receive the necessary external support to challenge the status quo.  Others are thought to pose as reformers in order to gain control in the future.  In this vein, Robert Rotberg has written that often both the leadership and the opposition in extremely poor nations generally lack a commitment to public service, or “reverence and responsibility for the public domain.”

In surveying the work of development experts, the overall consensus is that bad governance is an enormous contributor to poverty and economic stagnation.  As Robert Calderisi has said, “The simplest way to explain Africa’s problems is that it has never known good governance.”  Yet, Paul Collier, while acknowledging that bad governments can destroy economies with “alarming speed,” believes that there is a limit to what good governance can do to stimulate growth among the most disadvantaged nations.  He writes that good leaders and policies “cannot defy gravity” or “generate opportunities where none exist.”  However, all experts do agree that the quality of governance is extremely important in determining how aid and other forms of development assistance are used.  

Human and Capital Migration

Impoverished countries have negative resource flows, meaning that assets tend to flee the country rather than be drawn to it.  Human migration often takes the form of a “brain drain,” in which those who are most likely to reform the country and grow the economy relocate to countries where they will enjoy a higher standard of living.  This has been described by many experts as a double whammy – not only does the LDC lose valuable human capital, but it also loses return on its investment in educating and training these future migrants.  Developed countries exacerbate this trend, recruiting talented individuals with attractive jobs and work visas (for doctors, engineers, nurses), while denying entry to aspiring migrants with lesser skills.  The LDCs are left without the very people who could contribute to its growth and mentor others to do the same.  

Capital flight is another problem.  Wealth, when it exists in LDCs, is often held offshore.  The reasons for this are complicated, and involve culpability both among the resident elite of LDCs and the international banking institutions that facilitate these capital flows.  As James Henry points out in his book, The Blood Bankers: Tales from the Global Underground Economy, elites in LDCs often accumulated vast fortunes simultaneous with their countries taking on enormous amounts of debt in the form of loans from the IMF and World Bank.  In addition to the embezzlement and corruption that often followed these loans, loan stipulations often required economic policy reforms, such as the privatization of state assets.  These privatization schemes were often exploited by resident elites to further consolidate their wealth.  Moreover, the loans were often accompanied by money for special “development projects,” many of which were wasteful and manipulated by these elites for their own economic gain.

These wealthy few not only benefited disproportionately from loans intended for development, but also often took advantage of tax havens provided by offshore banking to move this wealth out of the country and into developed nations’ private banks.  In his book, Henry relates the results of research conducted by the Sag Harbor Group showing that “at least half of the funds borrowed by the largest debtor countries flowed right out the back door, usually the same year or even the same month that the loans arrived.  For the developing world, this amounted to a huge Marshall Plan in reverse.”  Henry estimates that by the late 1990s, the market value of private wealth held offshore by a small group of resident elites in LDCs neared $1.5 trillion.  

Not only was this wealth earning investment income that flowed in part to banks in the developed world, but it was also being carried as a liability for LDCs – these were loans that, theoretically, needed to be serviced and repaid to the developed nations that initially loaned them.  All this was occurring as extreme poverty devastated the majority of the population in these LDCs.  The legacy of this “global bleed-out,” as Henry describes it, accounts for a significant portion of the dire economic conditions in which LDCs find themselves today.  Furthermore, this capital flight continues to occur today, both legally and illegally.  Often, resident elites seek better returns on legitimately gained wealth by placing it in the markets of more economically prosperous and stable countries.  In other instances, corruption and embezzlement continue to account for capital outflows.  Many experts believe that the developed world remains somewhat complicit with its lack of banking regulations regarding offshore accounts. 

Another way that wealthy countries are held responsible for this capital flight is in the lack of enforcement of anti-bribery statutes in regard to awarding contracts in LDCs.  Payouts to resident elites in LDCs by multinational corporations and government contractors sometimes never even make it into the LDC, instead flowing directly into offshore accounts in the developed world.  For example, as recently as several years ago, Pulitzer Prize winning Nigerian journalist Dele Olojede reported, “Congressional investigators found that ExxonMobil secretly deposited more than $700 million in the personal accounts of the president of Equatorial Guinea.  These deposits, which could not adequately be explained as anything other than corruption, never led to any ExxonMobil executives being tried for contravening US law.”  

Structural Inequality Within the Country

LDCs generally exhibit high levels of domestic, economic, and political inequality.  A recent report by the Political Science Association notes that inequality, per se, is not always debilitating.  At low levels, it can be associated with growth as it increases incentives for productivity, and investment by elites can produce an expansion that could theoretically be the rising tide that lifts all boats.  However, at high levels such as those seen in most poor countries, the report notes that extreme inequality actually reduces “incentives for those at the bottom of the social hierarchy, eroding social solidarity, magnifying social tensions, making property rights more insecure, and impeding the efficient operation of labor, capital, and property markets.”    

Huge gaps between the rich and poor in developing countries are also seen as huge impediments to macroeconomic growth because these countries lack a crucial middle class.  Economists and political scientists have long recognized the value of the middle class as an engine of growth and stability.  Peter Marber’s seminal article “Globalization and its Contents” summarizes numerous World Bank studies that show that a strong middle class “is associated with increased national income and growth, improved health, better infrastructure, sounder economic policies, less instability and civil war, and more social modernization and democracy,” as well as with “gender equality, greater voter participation, income equality, greater concern for the environment, and more transparency in the business and political arenas.”  These things are precisely what most LDCs lack.  Again, it is a cycle or trap – LDCs tend to have greater income inequality and thus a smaller middle class; the smaller the middle class, the less developed the country.

World Bank researcher Vijayendra Rao raises an interesting point in distinguishing the inequality trap from the larger poverty trap, writing, “if a poverty trap describes a situation where ‘the poor are poor because the poor are poor,’ an inequality trap would say that ‘the poor are poor because the rich are rich.’”  The power and social status conferred upon the wealthy protects them from downward mobility and prevents the poor from gaining access.  Addressing inequality traps is about more than providing more money; it speaks to the need to reform the larger infrastructure and norms of a society.

Summary: Failing and Failed States

All of the factors described above are both causes and symptoms of extreme poverty: all mutually reinforce and/or exacerbate the others.  They all directly contribute to poverty, prevent growth, and diminish the effectiveness of outside development assistance.  Most of the poorest are caught in at least one, and usually many, of these cycles or traps, and are said to reside in what are called failing or failed states.  Foreign Policy annually ranks the world’s countries according to a Failed State Index based on 12 measures of political, economic, military, and social insecurity.  These factors are:

• Demographic pressures;

• Refugees and internally displaced persons;

• Group grievance;

• Human flight;

• Uneven economic development;

• Economic decline;

• Delegitimization of the state;

• Public services;

• Human rights;

• Security apparatus;

• Factionalized elites; and

• External intervention.

A list of the top 20 countires provides a further sense of where many of the poorest live:  Somalia, Sudan, Zimbabwe, Chad, Iraq, Democratic Republic of the Congo, Afghanistan, Ivory Coast, Pakistan, Central African Republic, Guinea, Bangladesh, Burma, Haiti, North Korea, Uganda, Ethiopia, Lebanon, Nigeria, and Sri Lanka (See the July/August 2008 edition for the latest rankings).  In research conducted using World Bank data, Paul Collier and Lisa Chauvet were able to conclude that a full three-quarters of the world’s poor live in failing or failed states, and that the probability of any such country sustaining a turnaround in any given year is only 1.6%.  From this, they predicted that the average length of time it takes to rise from the status of failing state is 59 years.  

Urgency Posed by Globalization

Put simply, these countries do not have 59 years to tunraround their failing conditions.  The crux of the development challenge in today’s era of globalization is that economic evolutionary time has been compressed.  At the risk of oversimplification, it may be said that what it took the West nearly 300 years to do, China did in a mere 30 years.  Rapid industrialization, modernization, and the diversification of exports are all prominent factors, and the LDCs are so far behind, many worry they have lost the chance to catch up.  Ironically, the success of their former brethren in the developing community, the BRICs (Brazil, Russia, India, China, and others), has worsened prospects that they will be able to make similar progress.  

Experts theorize that the first step on the ladder of economic growth is the export of simple processed goods – agricultural and industrial, usually textiles.  This bottom rung is now almost completely locked up by China and India.  Even if they could escape the traps listed above, and even in the absence of Western protectionist trade policies (see International Trade Policy section), the nascent economies of the poorest countries are generally not seen as able to compete with the prices and productivity of China and India.  Most believe this gap will only widen as Asian economies continue to expand and attract further foreign direct investment.  As Collier poignantly notes when he writes that the bottom billion “have missed the boat,” it will be decades before the BRICs’ prices will reach the point where it will make sense to outsource labor-intensive production to places like Africa.  

By this point, it may be too late for the populations of the LDCs.  Furthermore, the fact that globalization facilitates not only the transport of goods, money, and ideas, but also weapons, disease, radical ideologies, climate degradation, and terrorism, poses a significant threat to the rest of the world.  The developed and truly developing countries of the world are becoming increasingly cognizant of the fact that leaving behind countries that are failing to develop, or are even regressing, is not only immoral, but dangerous to the global community and to global security.  Moreover, globalization makes it more possible than ever for the poorest billion to see how the other 5 billion live, through media and the internet.  Resentment builds in pace with the ever-widening gap, and dangerous polarization is accelerated.  Demoralization and pessimism are reinforced.

The Playing Field

There are many who take issue with Thomas Friedman’s proclamation that the world is flat.  Economist Joseph Stiglitz is among others who believe that the playing field is far from leveled today.  In fact, they believe it is currently heavily tilted in favor of developed countries in the way in which the globalized marketplace functions (see International Trade Policy section), and that this figures heavily in the dismal prospects for the ability of the poorest to catch up.  Interestingly, the National Bureau of Research recently conducted a study that shows the playing field has never been level.  Researchers Digeo Comin, William Easterly, and Erik Gong found that the technological sophistication of ancient societies is strongly correlated with their current levels of economic success today.  Technology in its rudimentary forms from 1000BC to 1500AD took the form of writing, use of draft animals, metalwork, ships, printing, and the compass.  The research shows that the regions that had adopted all of these innovations by 1500AD now have a per capita income 18 times greater than those that had not begun to modernize by in the 16th Century.  Even controlling for confounding factors such as colonialism, the team posits that 75% of Africa’s income lag relative to Europe today is related statistically to the technology lag that existed in 1500.

What is being done to bring the world’s poorest and most desperate populations into the functioning world economy and help provide for their most basic needs?  The sections that follow describe and evaluate the various tools in the toolbox of the developed world to do just this.  The overall theme is that poverty is about more than impoverishment (all societies were poor at one time in history, even the United States) – it is about failure to grow.  It is generally agreed that the “solutions” must address the concept of development, not just humanitarian relief, although providing a minimum standard of living while working on long-term, macro growth strategies is necessary.  

Development is about building capacity in all sectors of society in the LDCs; at the same time, development is about managing the incentives and interests of all the world’s 6 billion inhabitants.  The debates within the development community are intense – for every instrument there is disagreement about magnitude, effectiveness, efficiency, unintended consequences, level of local input and involvement, and transformative potential.  Yet, it is important to remember the concept of the cycles and traps discussed above – it is generally agreed that no one type of development assistance can provide the “solution” the world seeks; rather multiple arsenals must be brought together address the intractability of global poverty.

Next:  Millennium Development Goals