From poverty to power - Oxfam-Québec

FROM POVERTY TO POWERbetter off even in a shrinking economy, but in practice redistributionalone has never reduced poverty for more than brief interludes. Thesubstantial reduction in poverty in most OECD countries during thetwentieth century came through a combination of long-termeconomic growth and modest redistribution. 164According to the Commission on Growth and Development, invery poor countries growth is the main route to poverty reduction,but as a country develops redistribution becomes more important asa way to reduce poverty. 165 As economies grow worldwide, redistributiontherefore should become an increasingly important feature ofgovernment policy.Economic growth is a measure of the increase in the output ofgoods and services in the monetised part of the economy. Growth mayresult from an increase in the number of workers or an increase intheir productivity (producing more goods and services per worker).The latter can be achieved through better technology, throughimproving the health and skills of the workforce, discovering anddeveloping new natural resources, and through greater efficiency via‘economies of scale’. Upgrading in this way often requires painfulstructural change,such as moving out of agriculture into manufacturingor higher-tech companies squeezing out lower-tech ones, a processmemorably described by the economist Joseph Schumpeter as the‘creative destruction’ at the heart of capitalism. 167For neoclassical economists and for many policy makers, growthin the market economy is so important that they often lose sight of thefact that growth is a means to promote human welfare, not an end initself. But growth is inherently disequalising, since richer peoplegenerally find it easier than those living in poverty to take advantage ofnew opportunities and to protect themselves from shocks. Effectivestates are essential to containing and reversing this disruption, forexample through taxation, spending, credit, and regional policies andinvestment decisions.At a global level, growth is an increasingly blunt instrument forreducing poverty. Between 1981 and 2001, world GDP increased by$18,691bn. Of this, only $278bn, or 1.5 per cent, accrued to peopleliving below the $1-a-day poverty line, even though they constitutedone in three of the world’s population at the start of the period.180