3 Poverty - Proutist Economic Development

Poverty is arguably the number one problem in the world today. Poverty causes not only much human suffering. It also contributes greatly to social conflict, war and environmental destruction.

There are levels of poverty in all countries around the world. Interesting points to note are: 
1) New Zealand does have some poverty but its rate is less than 1%. 
2) The USA, the richest country in the world, has somewhat more poverty than China, which was considered until recently an underdeveloped agricultural country. 
3) Venezuela, which has far more wealth and natural resources than Kenya, has almost the same rate of poverty as Kenya.   

Poverty is clearly on the political agenda in Venezuela. President Chavez has an aim, shown through promises made during his election campaign in 1998, to remove poverty.

Standard economics text books give various reasons (except neo-colonialism) as causes of poverty. Some relevant points: 
1) The poor generally do not have enough to consume, let alone to save. So the explanation of low rates of savings and investment is trivially true, but not helpful. 
2) Poverty and low education standards are tightly correlated. The average child in Venezuela has 5 years of schooling. In Australia the average is 10, and in the USA 12 years. Poverty cannot be solved without increasing education but is poor education the cause of poverty? 
3) While many argue that overpopulation causes poverty, there is good evidence to believe that poverty causes overpopulation. And China with a much higher population than the USA has less poverty. 
4) Countries in the equatorial belt tend to have lower per capita GDP, than temperate countries. It is generally agreed that tropical diseases, especially malaria, are a serious obstacle to economic development. But there are obvious exceptions. Singapore and Malaysia have developed remarkably in recent years, despite being tropical countries. Climate is not an insuperable obstacle. 
5) Corruption has to be considered a factor in the poverty of some countries. Consider the billions of dollars stolen by President Marcos of the Philippines and President Suharto of Indonesia. 
6) Some more honest text books of economics give due space to the long term effects of colonialism. India for example, was one of the wealthiest countries in the world until the British arrived to plunder it. 
7) Neo-colonialism is just an extension of colonialism to modern times using different techniques to extract wealth. The WTO and the IMF are the global institutions that administer neo-colonialism. Standard economics text books studied in Western countries do not generally even mention neo-colonialism as a cause of poverty.

From a Prout perspective, we need to be aware of the dynamics of poverty at all levels, global, national and local.

Over the last few centuries the movement of wealth has been from the mostly southern hemisphere countries to the two centres of imperial power in the world today, Europe and the USA. In an analysis of imperialism, the relevant terminology is "the centre" to describe the central seat of power of an empire, and "the periphery" to describe the countries from which wealth is extracted. Neo-colonialism is the modern practice of imperialism and the dominant empire in the world today is the USA. These concepts are required in order to understand the distribution of poverty around the world.

At the national level, the movement of wealth from rural areas into cities is a common problem in all countries, even rich countries such as a Australia. Here the cities may be considered "centres" of power to which wealth is concentrated, and the surrounding rural areas are the "periphery". Rural poverty has become an increasing problem in Australia over recent years, particularly since the introduction of neo-liberal economic policies over the last 20 years.

Even within cities we observe the flight of wealth from poorer suburbs into the elite suburbs - localism. In Sydney, Australia, the elite suburbs enjoy ocean views and fresh sea breezes. The poorer areas of Penrith, Blacktown and Bankstown are known for lower education and health standards, crime and gang warfare. While it is natural that the more desirable inner suburbs will attract richer families, in recent years this concentration of wealth in desirable suburbs has been unnecessarily exacerbated by government policy. For example, increasing resources diverted to wealthy private schools and private hospitals in Australia.  

The common factor at each of the three levels, global, national and local, is the bleeding of wealth. We may define bleeding of wealth as the wastage or removal of wealth from a locality so that it is impossible to maintain the capital base required for further development. Clearly the bleeding of wealth from a locality must be checked if poverty is to be solved. But we must consider the three types of capital, physical, human and social. Another way of thinking about the bleeding of wealth is to consider its flip side – the concentration of wealth. The extreme concentration of wealth and poverty go hand in hand.

The levels of income inequality in countries of the world reflects a huge social and economic disparity, eg South America. Income inequality is a mechanism of wealth concentration within a nation, the flip side of which is poverty. The ratio used to measure income inequality is the aggregate income of the highest 10% of income earners divided by the aggregate income of the lowest 10%. These ratios are a measure of the poverty gap, or the gap between rich and poor. Note that the ratios in South America are very high compared to a wealthy developed country such as Norway. In New Zealand, the income ratio increased markedly after the introduction of neo-liberal economic policies – compare the figures for New Zealand in 1986 and 2000. This increase was sufficiently noticeably that it became an election issue. When the New Zealand figures are compared with the South American countries, it is not hard to understand widespread poverty in South America.

On the global scale it is considered that imperialism is a technique of wealth concentration. The basic methods of imperialism have not changed much over 2000 years – but they have become more subtle and more psychological! The Roman empire simply plundered peripheral countries using military power. It also received tributes and taxes through compliant local administrators selected by Rome. And of course slavery was a significant factor in the building of the Roman empire.
Using India as an example of British imperialism, the initial plundering was done by Lord Clive in India. Once a British administration was set up, the agricultural lands were turned over to the growing of crops such as cotton which was exported to England. Local food crops were relegated to marginal lands - consequently serious famines broke out when the weather was not kind. India was forced to import textiles back from England. Any Indian who attempted to set up a local loom would have his/her hands cut off. Wealth concentration using forced trading and harsh penalties.

Today the USA maintains its imperial status by capturing the democratic institutions of peripheral countries (just as Rome used to install compliant administrators), by establishing global but unelected institutions such as the IMF and WTO and by a system of trade that depends on the US dollar. Under this system, the US imports much physical wealth in exchange for paper wealth, that is dollar notes and US govt bonds. No wonder the USA is the richest nation in the world! The think tanks and strategists behind President Bush (2000 - 2008) see themselves as administering an empire.

The following authors offer interesting insights on imperial practice:
CAIN & HOPKINS: The decline of the British empire was due to resource wars – especially the Boer War and WW1. Also colonialism lead to the loss of manufacturing in the centre (England) due to cheaper labour in the colonies. There was also an excessive rise of the rent-taking service sector. The financial sector became independent and often acted against the interests of the empire. There are interesting parallels with the American empire of today.
DAVIS: The British established the first concentration camp in India late in the 19th century. The daily food ration was less than for Auswitz. The great famines in India that killed 50 million people, were caused by an inability to respond to droughts because the British had destroyed the country's food production capacity. Furthermore, available stores were not released.
KORTEN: Major thesis - the multinational corporation are gradually accumulating more economic and political power than individual nations. MNCs are becoming the new empires.

Any attempt to eliminate poverty must attend to the bleeding of wealth from local communities as the starting point.  Clearly it must attend to the different mechanisms of wealth concentration at the global, national and local levels. But it must also attend to the different types of wealth, physical and financial wealth, intellectual and human wealth and social capital in the form of community solidarity, ethical standards and so on.

Society must move from economic disparity to economic parity.  The wealth of the world is the common patrimony of all.  To achieve parity (as equality will never requires rational distribution and maximum utilization of wealth.  This is a principle of Prout.