TIME OF RECKONING FOR THE BARONS OF DEVELOPMENT

Leaders of the institutions that guide global economic development have set 2015 as a target date for reducing by half the number of human beings who live in extreme poverty. The World Bank seems to have launched this campaign and many institutions have joined, including international NGOS like OXFAM and CARE and national agencies like Britain's Department for International Development. A United Nations conference met recently in Monterrey, Mexico, to rally support for this exercise. Those most influential in setting the global agenda for economic development agree that reducing poverty must be the top priority and that reducing extreme poverty immediately is imperative. 2015 symbolises their seriousness and sense of urgency. If they succeed, life will improve for hundreds of millions of people in the next 13 years.

Some history might be useful for those in the public who would join this campaign or seek to monitor its conduct and progress. 'Poverty' came to the fore in the global development agenda during the 1990s, a decade famous for the rapid pace of globalisation, when markets monopolised the minds that planned our global future. The United States exemplified fulsome freemarket growth promoted by global development institutions, led by the World Bank.

The Economist (26 April, 2001) called the nineties "probably the most exuberant period of wealth creation in human history," and showed how the bulk of new wealth came into the hands of the rich. Millionaires and billionaires multiplied, and by 2001, the richest one percent of the world population came to hold a third of the world's wealth. More than half the world's 425 billionaires live in the US, which exemplifies trends in global inequality. Between 1977 and 1999, the richest 20 percent of American households increased their share of national income from 44 percent to 50 percent, and the richest 1 percent increased their share six times more, from 7 percent to 13 percent. In America and around the world, the economic boom accomplished very little poverty reduction and it actually worsened extreme poverty. The most severe new poverty fell on Africa, where average households now consume 20 percent less than 25 years ago.

The nineties epitomised and aggravated a much longer trend. In a study for the World Bank, aptly entitled, "Divergence, Big Time," Lant Pritchett calculated that between 1870 and 1985, ratios of per capita income between the richest and poorest countries increased more than six-fold, as income levels dispersed over an ever-widening range of variation and the richest and poorest economies clustered on opposite ends of a broader spectrum. The 1992 UN Human Development Report indicated that global inequality accelerated in the 1970s and 1980s (see chart).

The campaign to reduce extreme poverty by half before 2015 thus came into being as the world's public was about to learn that the poorest of the poor have been steadily increasing as a proportion of the world population at the same time as the richest of the rich have been steadily amassing an ever-larger proportion of the world's wealth. Global economic growth has benefited people and places roughly in proportion to the size of their portfolios and attractiveness for investors. In the 1990s, people in the Silicon Valley and Wall Street got hugely rich but people with nothing to invest, in places with nothing to offer investors, made nothing. Inequality grows during periods of economic growth, and poverty persists and deepens, despite growing overall prosperity, in part because investors move assets out of less attractive places into better-endowed places that become more attractive for more investors; and in part because investors reap more than low-wage earners who see the cost of living rise faster than wages. People with low incomes in risky, vulnerable, insecure areas inhospitable to capital investment lose out when economic growth is driven solely by market decisions.

Despite the fact that markets do not eliminate poverty, because they tend to move new wealth away from poor neighbourhoods, most NGOs and governments follow market doctrines. They secure dividends by concentrating investments in relatively favourable environments. The poorest people in the poorest places have thus disappeared in practice — if not in ideology and publicity — from NGO networks and government programmes, almost as surely as they vanished from private marketing surveys and business plans.

Increasing inequality and extreme poverty strain the legitimacy of global development institutions. The leaders of global development live in rich countries. They depend on rich country contributions. They follow rich country policies. They nonetheless strive to benefit everyone in the world, rich and poor alike. They believe that market-led economic growth is the best route to prosperity for all. A boom decade like the nineties is a good test of this belief. If economic success such as registered in the nineties coincides for too long with growing wealth disparity and abject poverty, their reputation must eventually suffer.

2015 is thus a deadline of significance. It represents an effort to valourise the current leadership of global development regime amidst increasing polarisation of rich and poor.

In a world of globalisation, the possibility that world political institutions may someday represent poor people in proportion to their numbers makes this polarisation ominous. Rich country leaders represent a shrinking global elite minority. OECD countries shrank as proportion of world population from 20 percent in 1960 to 15 percent in 1993. A mere ten percent of the world's people live in twelve countries with over USD 20,000 per capita GDP, mostly in the US (45 percent), Japan (21 percent), Germany (14 percent), and France (10 percent). Eighty percent of the world's people live in 36 African and 19 Asian countries with under USD 1000 per capita GDP, large proportions in China (34 percent), India (26 percent), Indonesia (5 percent), Pakistan (4 percent), Bangladesh (3 percent), Nigeria (3 percent), Viet Nam (2 percent), and Philippines (3 percent).

Most of the global public lives in countries where the 2015 campaign will operate. Experience in those countries should enter directly into global debates about economic development. Rich countries now control the lion's share not only of world wealth but also of world knowledge. The best facilities for studying the world are in rich countries. The US has a dozen libraries each holding more books about South Asia than reside in all the major libraries in South Asia combined. Most funding to study the condition of the world is in rich countries, where the most prestigious, well-funded academic paradigms emerge for economic and policy analysis as well as for historical and cultural studies. The assessment and monitoring of the 2015 campaign should move in the opposite direction.

The people of South Asia should not only join in the institutional partnerships that will advance the 2015 campaign, but also hold the leaders of global development regime accountable for the campaign's success. Representatives of international development agencies operating in South Asia should engage the public in open dialogue about the conduct of this campaign and about the features of free-market globalisation that the campaign seeks to ameliorate.