Investment Insight Say a little prayer...
8 October 2015
As I have noted previously, some of the most insightful and
interesting business and economic comments of the past few
years seem to have come from faith leaders rather than
business leaders. Not all politicians and policymakers find
these messages palatable, but they have to acknowledge that
they resonate with many of the people that they govern.
Continuing on this trend, during his recent visit to the United
States, Pope Francis stopped off at the World Bank to keep a
papal eye on its list of “Global goals for sustainable
development – to rescue humanity.” These are aims it shares
with the UN and range from “ending hunger” to “eradicating
extreme poverty.”
On the face of it, we should be encouraged that poverty – if we
subscribe to the World Bank’s definition – has halved in the
last few decades. Furthermore, it reckons that extreme poverty
has fallen by a quarter since 2012, and that 130 million fewer
people living in extreme poverty than previously thought.
While the charity of governments and individuals alike has
surely helped, a more important factor is likely to have been
global economic growth – specifically the explosive growth
experienced by China and Brazil.
Furthermore, some doubt may be cast on the veracity of the
statistics. The World Bank’s number crunchers have revised the
definition of "extreme poverty" from one of an income of
US$1.25 per day to US$1.90 per day.
At the same time, although it has updated its figures on relative
purchasing power of local currencies. This latter change has a
massive effect on the figures. It may come as a bit of a surprise
to many millions of India’s underclass that they are no longer
classified as poor, given the relative strength of the rupee.
Putting this (not insignificant) quibble to one side, though, it is
clear that the World Bank sees economic growth as crucial for
the alleviation of poverty. The fact that recent figures indicate
there is a little less of it about should concern both the policy
makers and churchmen who wrestle with these issues.
Another World Bank statistic notes that war-torn failed states
are home to 400 million of the world's poor. That is a figure
which has remained unchanged for 25 years. By 2030 the
World Bank expects 90% of the world's poor to live in what
they describe as ‘fragile states’. Indeed, that forecast may be
understated, given that it uses data pre-dating the current
misery afflicting Syria and Iraq.
Most of the world's poor depend on agriculture for their
US$1.90 per day. Accordingly, the recent sharp falls in the
prices of global soft commodities (generally those that are
grown rather than mined) will have had a massive impact on
the world's poorest households. Whatever ends up driving
these prices – regulations pertaining to climate change,
perhaps – will have huge implications for the world's poor.
As ever, these are complex issues. Everyone has a view – be
they churchmen, economists, policymakers or the general
public. Many actions have been taken over the past decade
both helpful and unhelpful. That so many have been lifted out
of poverty over the past decades must be one of the great
successes of a global economic structure has seen much
criticism of late. Those remaining in poverty, however that is
defined, will be hoping for similar results in the years ahead.
Richard Dunbar
Investment Solutions
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