From poverty to power - Oxfam-Québec

3 POVERTY AND WEALTH GOING FOR GROWTHWorse still, global growth is becoming less effective at reducing poverty.In the 1990s it took $166 of global economic growth, with all theassociated environmental costs, to achieve just $1 of progress inreducing poverty, while in the 1980s this figure was $45. 168 Moreover,by exacerbating climate change and other environmental problems,the $165 that poor people do not receive imposes a significant toll ontheir prospects. This cloud has a silver lining, however, as it shows thateven minor improvements in the poverty-reducing efficiency ofgrowth would have a massive impact on the lives of the poorest people.The links between growth and well-being (rather than incomepoverty) are not straightforward. Comparisons between regions ofthe world based on public surveys show a fascinating break point. 169Below a GDP of about $20,000 per head (roughly the level of Portugalor South Korea), people’s estimates of their own life satisfaction risesteadily with income. Above that amount, the graph flatlines: highernational income does not make people feel any happier. 170 In fact,subjective well-being on average has not risen in the USA, Europe, orJapan in the past 40 years, despite sustained growth. 171 In seeking toenhance well-being, there is a powerful argument for redistributingwealth from countries with average incomes above the $20,000‘sufficiency line’ to those below it.HISTORY CHALLENGES RECEIVED WISDOMFor most developing countries, post-1980 efforts to generate sustainedgrowth have relied on the dramatic shock therapy known as theWashington Consensus. Recommended by the World Bank, the IMF,and others, this called for rapid liberalisation, deregulation, andprivatisation of developing-country economies.Any proponent of theWashington Consensus visiting Latin America and China in themid-1980s would reasonably have concluded that Latin America wasbound for prosperity, whereas China was doomed. Latin America atthat time was moving into a liberalising overdrive, privatising statefirms and opening up to trade. In China, meanwhile, tariffs and nontariffbarriers remained high, and the government showed littleappetite for ending its deep involvement in crucial areas of economicmanagement such as the banking system.181