This article was first published by Business Day on 26 September 2023
Just moe than 20 years ago I debated in print a rather gloomy position about the state of the world promoted at the time by an SA economist. I described his position as “free trade and markets … don’t work and the proof is that the state of the world’s poor is declining and global wealth inequality is growing”.
It was one thing to disagree with a position, but an opinion without evidence has little value. So I looked at hard data from sources such as the UN Development Programme and the World Bank, along with numerous academic studies. What the data showed then was lower infant mortality rates, higher literacy, greater food security, less poverty and greater economic equality.
Since then the rise of populist politics on the right has seen the same antimarket doom and gloom being trumpeted as the left has done some years ago. Even in the US more and more people seem convinced that life is getting worse. A recent poll found only 24% of Republicans agreed that life in America today is better than it was 50 years ago. For Democrats it was 47%, and where 30% of Democrats thought it was worse 59% of Republicans did. Yet the data is extremely convincing — by almost every standard life in the US is better than it used to be.
Republican presidential candidate Nikki Haley recently jumped on the bandwagon, lamenting how life was better 50 years ago. Yet my research finds that the violent crime rate, especially murder, is down, while life expectancy is higher, unemployment is down, teen birth rates are down, and median household income is up so poverty rates are far lower. The comparisons could go on and on. It appears we need to take a fresh look at what the actual data says, not what people imagine to be the case.
World trends as I outlined in 2002 remain generally true, but two recent developments have a negative effect on the wellbeing of people, especially the most vulnerable in developing nations. One was the Covid-19 pandemic, which according to the World Health Organisation resulted in about 7-million recorded deaths. You can’t have that number of deaths without substantive negative fallout for the economy. On top of the costs of lost lives, enormous medical costs were incurred in addition to severe supply chain disruptions. Remember: in free markets it is people, not minerals, who are the ultimate resource.
Hanan Morsy of the UN Economic Commission for Africa says one of the most critical implications of Covid-19 has been the reversal of hard-won gains by the continent in terms of reducing poverty. Sadly, many poorer nations compound problems with detrimental regulations, lax property rights, impediments to trade and a plague of economic albatrosses in the form of wealth-destroying state-owned enterprises.
Ken Gichinga of Kenyan business analytics consulting firm Mentoria Economics says better policies can reverse a lot of the negativity: “We need strong fiscal policies and monetary policies, but most importantly we need policies that encourage business policies that encourage enterprise, which means things like VAT and taxation. Those things need to be reduced so that we have money in the pockets of people so that there is demand for goods and services.”
A second factor with a negative effect on lower-income people is the war crimes being committed by Russian President Vladimir Putin and his invading forces in Ukraine. These criminal attacks are harming the world’s food and oil supply, which is increasing food and energy costs. It is one thing when people in wealthier nations pay more for essentials, but quite another when it affects low-income groups.
Between Putin and the pandemic Africa is being hit particularly hard with a decay in economic wellbeing. Bitsat Yohannes-Kassahun of the UN Office of the Special Adviser on Africa says the costs of the invasion imposed on the world’s poor “comes as African economies are still trying to emerge from the effects of the Covid-19 pandemic, for which they did not have enough resources to cushion themselves”. In particular, the war drove up food and energy prices, with the IMF saying “staple food prices in Sub-Saharan Africa surged by an average 23.9% in 2020-22 …”
President Cyril Ramaphosa recently joined a “peace mission” of a small number of African leaders to Russia and Ukraine. At a press conference in Ukraine he admitted: “This conflict is affecting Africa negatively” and said “there is a need to bring this conflict to an end sooner rather than later”. But he seemed to treat both the aggressor and the victims as equal partners in this atrocity. He said “the road to peace is very hard”, but that is only so if the aggressor continues his aggression. The Ukrainian war ends when Russian aggression ends.
While all nations were hit by the double blow of Covid-19 and Putin’s war, not all were hit equally, and nor does it negate the truth that “the last 30 years have seen dramatic reductions in global poverty,” as stated by the Brookings Institution’s Centre for Sustainable Development in a report, “The evolution of global poverty, 1990—2030”. It found that outside Africa poverty has declined dramatically, especially in India and China. It projects that “India will … experience a short-term spike in poverty due to Covid-19, before resuming a strong downward path. By 2030 India is likely to essentially eliminate extreme poverty, with less than 5-million people living below the .90 line.”
The Brookings Institution expects that only three Asian nations will fail at eradicating extreme poverty: North Korea, Afghanistan and Papua New Guinea. So globally the trends I outlined in 2002 remain true for most of the world. Africa, which was doing well, started losing ground again only recently. The Brookings report should be a wake-up call for African politicians, but sadly many cling to their old policies, embrace the Russian war criminals and turn a blind eye to the pandemic.
Brookings warns that these trends point to the emergence of a very different poverty landscape. Whereas in 1990 poverty was concentrated in low-income Asian countries, today’s (and tomorrow’s) poverty will be found largely in Sub-Saharan Africa and fragile and conflict-afflicted states. By 2030 Sub-Saharan African countries will account for nine of the top 10 countries by poverty headcount. About 60% of the global poor will live in fragile and conflict-affected states. Many of the top poverty destinations in the next decade will fall into both of these categories: Nigeria, Democratic Republic of Congo, Mozambique and Somalia.
If Africa is to regain the ground that has been lost in recent years its political leaders are going to have to wake up and abandon the failed policies and charlatans they have embraced.