Wednesday, 29 October 2008

Why the World has Poor...

Before I even begin this blog post, I must renege on my offer to explain the current water problems in Gujarat, India. Deepest apologies to those who were expecting a summary of our project's main design problem, but I assure you there is a reason for this delay.

As I was collecting my thoughts and findings from Indira Hirway's essay on the above topic (note: check my last post for more info on this essay), I found that my conclusions quickly spawned dozens of questions to which I knew no answer:

Why are people poor?
What causes poverty?
Have developing nations always been poor?
Why can't the United States just sent money to fix the water crisis in Gujarat, India?
If India had money, wouldn't they just be able to "buy" their way out of these ridiculous water problems?

As you can imagine, one single question quickly led to ten more questions, which grew into an entire grocery list of topics that encompass my complete naivety on the topic of world poverty. Though Indira Hirway nicely outlined the local factors leading up to the water problems in Gujarat, he did not examine the fundamental underlying issue: Why is India poor?

Though I'm sure there are hundreds of theories answering this four-word question, I decided to check out our nation's top economist on world poverty, Jeffrey Sachs. A professor at Columbia University, Sachs is a Special Adviser to Kofi Annan (United Nations Secretary-General) and an author of the UN's Millennium Goals to end world poverty. Sach's book, The End of Poverty, not only explains why some countries are poor, but also outlines a practical and attainable plan to end world poverty.

On the first day of class, Dr. Oerther waved a copy of the book in front of my classmates and I as "suggested reading" for those of us who need a crash course on world economics. Though ignoring his recommendation at first, I eventually bought the book after realizing that I know absolutely nothing on poverty. To summarize my naivety, my main idea of poverty was:

"The poor are poor because they refuse to help themselves."

The scariness of this view, however, is that a large number of people in the upper- and middle-class United States think this statement is fundamentally correct. Unfortunately, this view couldn't be further from the truth. Rather, we should view world poverty as follows:

Some are poor because they are economically unable to rise above poverty. Others are poor because they seek to rise out of poverty in unsustainable ways.

I'd like to start off this discussion by answering the following question: Has the world always had poor?

Surprisingly, no. The concept of poverty is actually a relatively new phenomenon. Prior to 1820, all regions of the world were comparatively poor. The ratio of per capita income between the richest region (United Kingdom) and the poorest (subsaharan Africa) was only 4:1. True, the world had its share of wealthy nobles, but these lucky people were far and few between.

So what happened after 1820? Think back to your high school history classes, and you might recall one tiny earth-shattering era known as the Industrial Revolution. With the invention of the coal-powered steam engine, the United Kingdom single-handedly became the leader of economic growth and prosperity.

Why the U.K.? To be honest, England just had a stroke of pure luck. At this time, the United Kingdom was just coming off the Renaissance Era, which encouraged open thoughts and social reform. Soon before then, the British abolished serfdom, allowed free speech, cultivated new scientific ideas, and revolutionized property rights. Add in factors of climate, natural resources, and geography, and you might begin to realize that England was ripe for rapid economic growth. Luckily for us, the United States was able to piggyback on England's success mainly due to our colonial ties to Britain. In a sense, we were pretty lucky too.

As England's prosperity continued to climb, ideas of the Industrial Revolution began to spread to British colonies (U.S., Canada, Australia, and New Zealand) as well as other parts of Western Europe (Spain, Germany, France, etc.). In addition to technological advancement, these countries also began adopting British views on public policy (e.g. free speech, property rights, abolition of slavery, and so on).

This economic and technological development caused changes in urbanization, social mobility, gender roles, family structure, and division of labor. For example, people prior to the Industrial Revolution were middle-class farmers. Just to break even, these farmers needed to be a "jack-of-all-trades" in that a single person would be somewhat skilled in carpentry, metal-working, agriculture, animal husbandry, business practices, finance, and the list goes on and on. Though admirable, this system can be inefficient in that farmers were often required to work long hours just to complete this diverse array of tasks before dusk.

With the advent of the Industrial Revolution, job specialization began to occur with more people being trained on a single task and relying on others to meet their other needs. This job specialization encouraged more people to move to cities where their services were needed and their other needs could be met. By landing jobs in factories and shops, these "specialists" were now guaranteed hourly pay rather than gambling on a crop surplus. Guaranteed wages allowed for greater social mobility as people were now able to save and spend as desired. At this time, women also began working in factories and sweat shops, thus earning their own paycheck and changing their role in society. As more women sought work, the average family size decreased and women were decreasingly expected to stay at home to rear children.

Unfortunately, these drastic cultural changes caused upheavals and resistance in several areas of Asia and Africa. Asian culture has always viewed tradition as "vital" to society. Observing the changing gender roles and family structure, nations such as China, Japan, and India (to name a few) resisted economic development in order to maintain the delicate balance of their traditional culture. By contrast, most areas of Africa sought to blot out the "white man's influence" that had exploited them into slavery and adopting the typical European way of life. Viewing the recent economic development as another way that Europeans could continue to control and exploit their tribes, most Africans chose to close themselves off from any outside influence.

Thus, world poverty was born. From this point onward, Africa's historic choice to close itself off from the world (albeit encouraged by poor European and American exploitation) led to the gap between rich (USA) and poor (Africa). Today, this gap has widened to a 20:1 ratio of per capital income between the US and subsaharan Africa.

Continuing on with this historic timeline...

Cultural and economic upheaval eventually led to the outbreak of World War I, which essentially ended the era of European-led globalization. Also at this time, Russia chose to end centuries of monarchy and gravitate towards a Lenin & Stalin dictatorship.

After World War I, economic instability led to the Great Depression of the 1930s, which contributed to the rise of Hitler and consequent outbreak of World War II. Three main economic consequences arose as a result of World War II:

(1) National currencies became virtually non-convertible.
(2) European imperialism finally ends (i.e. basically, no more colonies).
(3) Russia officially distances itself from the world during the Cold War.

To fix the above problems created by World War II, the United States, Western Europe, and Japan reconstructed an international trading system, which lead to eventual conversion among currencies. However, other parts of the world chose not to join this trading scheme until decades later, thus widening the poverty gap once again. The USSR (i.e. Russia) and 3rd-world countries (Asia minus Japan; Africa) distrusted the global market and sought to be self-sufficient.

By resisting global influence, unfortunately, this isolating scheme ultimately failed because it limited the flow of ideas and technology into these countries. In addition, the high-cost local industries in the these countries could not compete internationally and the lack of competition in isolated industry fostered corruption.

In a nutshell... whether we like it or not, we are all CONNECTED.

By the early 1990s, the USSR, most of Asia, and Africa desired to enter the global economy. By this time, the poverty gap was vast and very evident.

So where do we stand now?

Compared to pre-Industrial Revolution, we have a much higher standard of living (except in Africa where the standard of living has stagnated). However, huge gaps between the world's richest and poorest now exist. The richest nations have enjoyed ~200 years of steady economic growth while developing countries are behind the curve due to colonization, polices, resources, location, and several other factors.

The good news is that there are practical solutions to end poverty despite no one "magic" way of doing it. If you want to know more about some of these economic solutions, I encourage you to check out Sach's book, The End of Poverty (Penguin Books, 2005). Quite frankly, it would take me dozens of additional blog posts to summarize every piece of useful knowledge in this book... even though it is quite a good read.

How does India fit into this whole model of economic development?

Currently, India is grouped into a category known as the "BRIC" nations (acronym for Brazil, Russia, India, and China). These nations are presently on the climb to economic prosperity. Rather than the entire nation being poor, some cities have flourished while other areas are still trying to jump above the poverty line. The area in which we will be traveling, Gujarat, is one of the less affluent areas of India.

The BRIC nations desire to develop and catch up with the US, but they are unsure of how to do it. While the US has had two centuries of trial & error with respect to economic development, India has had mere decades of growth without the same learning process. Therefore, many areas of India build and develop unsustainably to rapidly increase their wealth and gross national product. This unrestrained growth depletes natural resources (i.e. ground water) and causes rural areas to experience severe poverty while some regions are moving upward. Rather than learning from past development mistakes in the US during the Industrialization Era, Indians are creating more problems by implementing unsuitable technology to encourage uncontrolled growth.

Since we can't simply wait around for a growth period of 200 years while India kills its citizens with unsustainable technology, it is our social responsibility to share current knowledge of appropriate, sustainable technology in order to halt the spread of disease, poverty, and social injustice.

Bold words? Perhaps, but the big picture is that we can't allow people to die simply because they don't have technology that keeps us alive.

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