Saturday, September 24, 2005

Growth isn't the only thing good for the poor

The old saw, "the rich get richer, but the poor get poorer", is all bunk. Economic growth is good for most people, including the poor. What's better is: The rich get richer, but many of the poor get left behind. This is the misfortune of uneven growth. However this doesn't mean we should stunt the economy. That would be a terrible tragedy. Poverty can only be eradicated once and for all by a healthy and growing economy.

However this fact should not paralyze anti-poverty efforts. Much can be accomplished to alleviate poverty without compromising rapid economic growth. In many cases antipoverty programs can simultaneously address growth and poverty reduction - for example, public health measures can simultaneously address a basic need and raise worker productivity.

The latest Human Development Report (United Nations Human Development Program) highlights this very well. They rank countries based on the Human Development Index (HDI, a broad indicator of a country's well-being) as well as per capita GDP (an income indicator of average well-being). If you look at the last column of Table 1, you will see the difference between per capita income rank and the HDI rank. A positive difference means that per capita income rank is below the HDI rank - meaning, the country does relatively better in delivering human development, given relatively inferior incomes. Lots of "bang for the buck". A negative difference means a country is underperforming - average income is relativeley high, but its ability to deliver human development relatively low.

So look at Cuba - the rank difference is +40! (Whatever damage socialist policies have done, they should be recognized for their accomplishments.) Oil states Oman and Saudi Arabia are -30 and -37 respectively. Wonder where all that oil revenue is going.

The Philippines (ranked right in the middle at 84 with respect to HDI) has a rank difference of +19. Not bad, not bad at all. China, despite growing income inequality in the last three decades, still weighs in at +11 (to be socialist once seems glorious!)

Now scrolling down to the bottom are some eye-popping numbers: South Africa, -68, Equatorial Guinea, -93; Botswana, -70. (A lot of this has got to do with diminished life expectancy due to the AIDS epidemic.)

Everybody should get busy making money and getting the growth engine running. But general-benefit institutions (government, donor agencies, noprofits, etc.) should be even busier, and be adequately funded. (That means your pocket, and mine too.)

Thumb twiddling is not an option.

3 comments:

Mr. Econotarian said...

Brad DeLong has pointed out "Cuba in 1957 had lower infant mortality than France, Belgium, West Germany, Israel, Japan, Austria, Italy, Spain, and Portugal. Cuba in 1957 had doctors and nurses: as many doctors and nurses per capita as the Netherlands, and more than Britain or Finland. Cuba in 1957 had as many vehicles per capita as Uruguay, Italy, or Portugal. Cuba in 1957 had 45 TVs per 1000 people--fifth highest in the world. Cuba today has fewer telephones per capita than it had TVs in 1957...You take a look at the standard Human Development Indicator variables--GDP per capita, infant mortality, education--and you try to throw together an HDI for Cuba in the late 1950s, and you come out in the range of Japan, Ireland, Italy, Spain, Israel. Today? Today the UN puts Cuba's HDI in the range of Lithuania, Trinidad, and Mexico. (And Carmelo Mesa-Lago thinks the UN's calculations are seriously flawed: that Cuba's right HDI peers today are places like China, Tunisia, Iran, and South Africa.)"

More info:

http://www.worldbank.org/wbi/reducingpoverty/docs/FullCases/LAC%20PDF/Cuba.pdf

"The Cuban government...never publishes statistics on the incidence of poverty"

Econblogger said...

I wasn't aware of that. Thanks for the info. I was under the impression that the socialist economy at least performs well in terms of promoting human development, though at inexcusable cost in terms of foregone growth. As you've noted in the case of Cuba, it doesn't even do that!

Anonymous said...

we thank de long. it is quite easy to throw figures together and reach the conclusion of where cuba should have been by now. maybe you might also want to project further lows that the pre-castro regimes will have been dealing with had they had a crippling US blockade, the collapse of their main trading partners and an appreciable level of isolation from their neighbours. that should be easy enough.