Your NPR news source

Global Capitalism and Poverty

SHARE Global Capitalism and Poverty
Global Capitalism and Poverty

Wall Street may be down, but not the subscribers to Trader Monthly. On average, claims the magazine's publisher, they make $653,000. No wonder, reports the New York Times, they are "prime targets for advertisers like Hermes, Cessna and Johnnie Walker."

Cessna is less interested in a different group of traders located a few hours plane ride to the south. Mostly they trade in weavings. According to the United Nations Human Development Report for 2005, the bottom one fifth of Guatemalans make on average $550 per year.

That's $1.50 a day, far below the international poverty line of $2 a day. So the annual earnings of a single subscriber to Trader Monthly could double the incomes of more than a thousand poor Guatemalans.

Is this inequality moral? What of the global capitalist system that makes it possible?

Being poor, after all, is not merely a matter of not having ten bucks to buy a copy of Trader Monthly. It means that you probably will not live as long. On average in America, men like Wall Street traders, in the top 5% income bracket, live about 25% longer than men in the bottom 5%.

Being poor also means that your children are more likely to die. In Guatemala the children of the poorest fifth of the population are more than twice as likely to die before age five as the kids of the most affluent fifth. In Peru the gap is even worse: poor kids are five times as likely to die as the well-off.

But hold on. Defenders of global capitalism will say that we tried the alternative – State-planned economies – and they didn't work. If they had, Vladimir Putin would be running the Soviet Union, not Russia. East Berlin would have been the envy of West Berlin, not the other way round.

Defenders may also credit capitalism with alleviating poverty. In the aggregate, reports the UN, "the past two decades have witnessed one of the most rapid reductions in poverty in world history." In 1981 four of every ten people in the world lived below the global poverty line. By 1990 the figure was less than three in ten. By 2001 it was down to two in ten.

Even as global poverty rates fell by half, inequality rose. But in most places that is because the rich got richer, not because the poor got poorer.

If we look behind global aggregates, however, it turns out that almost all poverty reduction in recent decades took place in East and South Asia. The Asian Tigers, together with China, managed a four-fold reduction in the percentages of their populations living in poverty. They cut East Asia's poverty rate from 56% in 1981 down to 14% in 2001. China alone lifted 130 million people out of poverty in the decade from 1990 to 2001.

Meanwhile the rest of the world did less well. The percentage of poverty in Latin America stayed about the same. In North Africa and the Middle East, poverty dropped during the 1980's, but not since 1990. And after 1990, the number of poor people in the nations of the former Soviet Union rose by 70 million, and in sub-Saharan Africa, by almost 100 million.

These facts temper any temptation to proclaim the triumph of capitalism as an engine of prosperity for most people. They dampen even more the claims of free market capitalism: the biggest gains against poverty were achieved, not by the market economies of the West, but by the planned economies of the East, especially China.

China participates in the global capitalist economy, but only within bounds set by the Communist Party. Unemployment is not left to the market, but is carefully planned by Beijing's leaders, who fear social turmoil if too many Chinese lose their jobs.

What we need, then, as economist Jeffrey Sachs argues in his recent book, The End of Poverty, is not to jettison capitalism, but to give it a human face.

Consider health care. The US leads the world in health care spending, but we are the only wealthy country with no universal health care system. Over a third of poor Americans have no health insurance. As a result, our infant mortality rate is about the same as that of Malaysia – a country whose average income is only one quarter of ours.

Or compare our health outcomes with those of Cuba. Even though Cuban incomes are only a fraction of ours, Cuba's infant and child survival rates equal ours.

As of 2005, Americans can expect to live 77.4 years; Cubans can expect to live 77.2 years. Not that we should adopt Fidel Castro's economic – let alone political – model. But clearly, in health care, he is doing more with less, and we have something to learn.

China, too, is instructive. Chinese market reforms ended public health care in rural areas. Three quarters of rural Chinese now have no health insurance.

While child mortality in Beijing and Shanghai is now no higher than in the US or Cuba, in poor rural China it is seven times higher – comparable to Namibia.

In the 1930's the New Deal of Franklin Delano Roosevelt -- called a traitor to his capitalist class -- saved American capitalism from the excesses of unregulated markets. FDR brought in government to keep tabs on Wall Street traders and to provide a social safety net. Global markets alone will not make capitalism work for most people. We need a New Deal – updated and expanded -- for the world.

Doug Cassel's commentaries are generally broadcast Wednesdays during the noon hour of the Worldview program on Chicago Public Radio, 91.5 FM, and rebroadcast at 9 PM in the evening. Views expressed are personal views of the author and not necessarily those of Notre Dame Law School, the Center for Civil and Human Rights or Chicago Public Radio.

More From This Show