Aug 1 - 7, 2011

In 1981, approximately 1900 million people in the world survive with an average income of dollar a day or less. As of 2008, according to the World Bank's statistics, there were 1345 million poor people living on $1.25 a day or less.

According to another estimate, there are now around 3250 million people living on $2 a day or less. Any claims to reduction in the level of world poverty cannot be verified in view of a number of economic variables - inflation, unemployment, and hunger being the most relevant ones.

According to the most recent figures released in October 2010 by the United Nations Food and Agriculture Organization (FAO), around 925 million people of the world suffer from hunger with the following regional breakup: Asia and the Pacific 578 million; Sub Saharan Africa 239 million; Latin America and the Caribbean 53 million; Near East and North Africa 37 million; and developed countries 19 million.

The incidence of hunger and poverty is extremely high in Asia and Sub Saharan Africa. The developed economies and the world organizations under their influence often show concern for the high incidence of poverty in the less-developed part of this world but unfortunately, they are the ones who are responsible for creating and supporting economic systems that guarantee unfair distribution of resources and inequality of income.

They would often show their pious resolve to root out hunger and poverty and would commit a few hundred millions or sometimes billions for this noble cause but real poverty alleviation never was, and would never be, their aim.

Defending the free-market economy and, as usual, criticizing the centrally-planned economic systems, Alan Greenspan, the US central banker and ex-Fed chairman writes in his book The Age of Turbulence: "Those who imagined that the solution lay in an economy organized and run by an intellectual elite of central planners rather than competitive markets failed time and again during the past century...If material wellbeing is our goal I see no alternative to global market capitalism. Its Achilles' heel is the widespread perception that its rewards are not justly distributed. That issue, as I have agreed in chapter 21, surely needs to be addressed. But the abandonment of this remarkable global economy, which some critics increasingly advocate, would reverse a paradigm that has elevated hundreds of millions of people from grinding poverty and has enabled a significant segment of the world's population to enjoy a standard of living that was once the exclusive province of elites in the developed world."

Alan Greenspan's claim to the risen standards of living may be true for the US, but certainly not so for the entire world which carries the burden of almost half of its population living on less than $2 a day. He has also failed to take into account the rise of Chinese economy, which is operated under prudent centrally planned economic policies.

He must now be feeling a bit uneasy in the wake of a looming US default in case the debt cap is not removed within a few days' time. It is the free market capitalism that has led US to the current unenviable position the US economic managers would have hated to even think of a few years ago.

And it is the prudent economic policies of China that have elevated it to the present status of the world number two economy - maybe the number one after a few years, who knows.

There is no reason to believe that the US will default, but there is every reason to think that the debt cap will be removed only when the US government comes up with certain economic measures that are far away from the much-touted free market ideology and close to the prudent mix of free market and centrally planned systems.


World 47 (Living on less than $2/day) Non-industrialized countries: 30 Developed countries: 4 to 12
Pakistan 40 (2010); 24 (2005-06) 15.2 2009
Australia NA 4.9 (2011)
Bangladesh 30 5.1 (2010)
China 2.8 4.3 (2009)
Hong Kong NA 3.4 (2011)
India 37 9.4 (2009-10)
Iran 3.1 14.6 (2011)
Japan NA 4.7 (2011)
Nepal 24.7 NA
New Zealand NA 6.6 (2011)
Saudi Arabia NA 11.6 (2009)
Singapore NA 3 (2009)
South Africa 50 (2000) 24 (2009)
South Korea 2 3.3 (2010)
Thailand NA 1.2 (2010)
UAE NA 12.7 (2008)
UK 14 7.6 (2011)
US 14.3 9.8 (2011)
Vietnam 10.6 2.0 (2010)

Niall Ferguson has identified the absence of financial institutions and lack of financial knowledge as the main causes of poverty. He writes in his book The Ascent of Money: "It (poverty) has much more to do with the lack of financial institutions, with the absence of banks not their presence.

Only when borrowers have access to efficient credit networks, can they escape from the clutches of loan sharks, and only when savers can deposit their money in reliable banks can it be channeled from the idle to the industrious or from the rich to the poor...Financial globalization means that, after more than three hundred years of divergence, the world can no longer be divided neatly into rich developed countries and poor less-developed countries. The more integrated the world's financial markets become, the greater the opportunities for financially knowledgeable people wherever they live - and the bigger the risk of downward mobility for the financially illiterate."

The argument in favor of the modern financial system offered by Niall Ferguson is not tenable, as the present banking system that relies on the cruel sophistications of free market capitalism is known to have increased poverty by using small depositors' money to augment banking system's wealth. Who gets the credit and on what terms, is the prerogative of the bankers, not the depositors.

Financial literacy is also the domain of the rich. A villager or a factory worker cannot be expected to match the skills of Wall Street investment bankers. It means that the financially illiterate majority is at the mercy of financially literate minority, which by itself is an unjust proposition and in plain words appears to be rule of the jungle.

The flow of wealth and income, from the poor to the rich, has simply been scaled up by the modern financial and capital markets.

The 2011 World Hunger and Poverty Facts and Statistics developed by World Hunger Education Service identify, beside hunger, conflicts and harmful economic systems as the contributing factors to the growing world poverty.

The inter-nation and intra-nation conflicts result in the displacement of people. According to UNHCR, the number of refugees and IDPs reached 36 million by the end of 2008. Conflicts in Iraq and Somalia have significantly contributed to the number of displaced people. The prevailing economic and political systems have been traced as the major cause of poverty.

Control over resources and income ends up in the hands of military and political powers essentially formed of the society elites with the result that economical wealth concentrates in the hands of a few while the majority of poor people are left to struggle with hunger and disease.