Global Poverty Rethinking Causality Edited by Raju J. Das and Deepak K. Mishra LEIDEN | BOSTON For use by the Author only | © 2023 Koninklijke Brill NV Contents Acknowledgements vii List of Figures and Tables ix Notes on Contributors xii 1 Analysing Poverty Causally An Introduction 1 Raju J. Das and Deepak K. Mishra 2 Absolute, Relative and Multidimensional Measures of Poverty Steven Pressman 3 Poverty A Marxist View 46 Michael Roberts 4 Why Is There Poverty in the Rich Countries? A Marxist Analysis Jamie Gough and Aram Eisenschitz 5 Class and Social Needs A Marxian Theory of Poverty Anjan Chakrabarti 27 67 98 6 Needs, Capital Accumulation, and Poverty The Case of Food 129 Mizhar Mikati 7 The Rise and Fall of Inequality and Poverty Reduction in Brazil Marcelo Milan 8 Neoliberalism, Financial Imperialism, and Capitalist Growth Why Pakistan Still Wallows in Poverty 170 Tarique Niazi 9 The Impoverishment of a Nation The Greek Financial Crisis and Troika’s Free Market-Austerity Policies 206 John Marangos, Eirini Triarchi and Themis Anthrakidis 151 For use by the Author only | © 2023 Koninklijke Brill NV vi Contents 10 Betraying the Struggle Corruption and Poverty in Post-apartheid South Africa 230 Macayla Kisten and Brij Maharaj 11 Poverty, Living Wage and Income Inequality in the Developing World Views and Visions from the Philippines 250 David Michael M. San Juan 12 Tackling Poverty or Inequality? You Don’t Have to Choose Thaddeus Hwong 13 The Political Economy of Poverty and Uneven Development The Case of Odisha, India 316 Deepak K. Mishra Index 296 341 For use by the Author only | © 2023 Koninklijke Brill NV chapter 3 Poverty A Marxist View Michael Roberts 1 Defining Poverty To define poverty, the World Bank adopts a global poverty threshold (recently raised to $1.90 per person a day) – any adult below receiving income below this level is considered ‘poor’. This is problematic in many ways. If this threshold is extended back in time, it would suggest that ‘extreme poverty’ was the norm, for virtually all humanity was in “extreme poverty”. Our World in Data (owid, a statistical database, 2017) used the $1.90 a day marker to claim that extreme poverty was the natural or baseline condition of humanity, extending far back into the past: “in the thousands of years before the beginning of the industrial era, the vast majority of the world population lived in conditions that we would call extreme poverty today.” In other words, virtually all of humanity, for all of history, was destitute until the 19th century, when at last colonialism and capitalism came to the rescue. This is the evidence that Bill and Melinda Gates, the richest family in the world, have been keen to use in arguing that the battle against global poverty was being won, which on this World Bank definition, had been cut by half since 1990 (Gates 2019). Robert Allen questions this conclusion (Allen, 2020). He shows that the gdp data used by owid yields significant distortions when used to assess poverty. Instead, using consumption data, Allen constructs a ‘basic needs’ poverty line that’s roughly equivalent to the World Bank’s $1.90 line and calculates the share of people below it for three key regions: the US, UK and India. In contrast to owid, the results show that the high rates of extreme poverty in Asia in the 1980s are a modern phenomenon – “a development of the colonial era,” Allen writes: “Many factors may have been involved, but imperialism and globalization must have played leading roles.” Allen’s findings indicate that extreme poverty in 20th century Asia was significantly worse than under 13th century feudalism. Indeed, Allen finds that the $1.90/day line is lower than the level of consumption of enslaved people in the US in the 19th century. In other words, the poverty threshold the World © Koninklijke Brill NV, Leiden, 2023 | DOI:10.1163/9789004514607_004 For use by the Author only | © 2023 Koninklijke Brill NV Poverty 47 Bank uses, and which underpins the ‘progress’ narrative, is below the level of enslavement. Jason Hickel (Hickel 2019) points out that the $1.90 threshold is ridiculously low. $5 a day is what the US Department of Agriculture calculated was the very minimum necessary to buy sufficient food. And that’s not taking account of other requirements for survival, such as shelter and clothing. Hickel shows that in India, children living at $1.90 a day still have a 60% chance of being malnourished. In Niger, infants living at $1.90 have a mortality rate three times higher the global average. In a 2006 paper, Peter Edward of Newcastle University (Edward 2006) uses a measure that calculates that, in order to achieve normal human life expectancy of just over 70 years, people need roughly 2.7 to 3.9 times the existing poverty line. In the past, that was $5 a day. Using the World Bank’s new calculations, it’s about $7.40 a day. That delivers a figure of about 4.2 billion people live in poverty today, or up 1 billion over the past 35 years. Others argue that the reason there are more people in poverty is because the world’s population has risen in the last 25 years. You need to look at the proportion of the world population in poverty and at a $1.90 cut-off, the proportion under the line has dropped from 35% to 11% between 1990 and 2013. So the Gates’ were right after all, goes the argument. But this is disingenuous, to say the least. The absolute number of people in poverty has still increased, even if not as much as the total population in the last 25 years. And even then, all this optimistic evidence is based mainly on the dramatic improvement in average incomes in China (and to a lesser extent in India). Peter Edward found that there were 1.139bn people getting less than $1 a day in 1993 and this fell to 1.093bn in 2001, a reduction of 85m. But China’s reduction over that period was 108m (no change in India), so all the reduction in the poverty numbers was due to China. Exclude China and total poverty was unchanged in most regions, while rising significantly in sub-Saharan Africa. Again, according to the World Bank, in 2010, the “average” poor person in a low-income country lived on 78 cents a day in 2010, compared to 74 cents a day in 1981, hardly any change. But even this small improvement was all in China and India. In India, the average income of the poor rose to 96 cents in 2010, compared to 84 cents in 1981, while China’s average poor’s income rose to 95 cents, compared to 67 cents. 2 Convergence or Divergence? Even if poverty remains, perhaps the so-called Global South is steadily closing the gap with richer countries and so will eventually reduce poverty. This is the For use by the Author only | © 2023 Koninklijke Brill NV 48 Roberts argument of economists Dev Patel, Justin Sandefur and Arvind Subramanian (2018). They did a regression of growth on income in the 1960s or 1970s, and found a positive correlation, i.e. richer countries probably tended to grow a bit faster than poor ones. But that correlation is now negative and flipped sometime in the 1990s. This means that since the 1990s, there has been a negative relationship between growth and income: the poorer you were, the faster you tended to grow. That’s the classic ‘economic convergence’ prediction. “Since the mid-1990s, developing countries began to converge toward levels of income of advanced countries. This process accelerated and became strongest in the 2000s … [This] is not driven by advanced nations lowering their growth performance but rather by developing countries raising theirs … Essentially, the entire distribution of growth amongst rich countries has remained stable over time; in contrast, the entire distribution of poor country growth has shifted up.” (Patel et al. 2018). But if correct, the fact that so-called ‘middle-income countries’ have been growing faster than poor countries suggests a divergence within the Global South – some countries have been pulling away from the pack and joining the developed nations, while others have languished. As a whole, Asia has been taking off, Latin America and the Middle East have grown at a more moderate pace, Africa has lagged behind and South Asia, which was similar to Africa until the 1990s, is now starting to pull away. And the convergence of East Asia is primarily due to China and the spill-over of China’s fast growth in per capita income into the rest of East Asia – a function of the general clustering of supply chains and product demand in Asia. Philip Alston (UN, 2020), until recently UN special rapporteur on global poverty, agrees that huge progress has been made in improving the quality of life for billions of people over the past two centuries. But it did not follow that “extreme poverty is being eradicated.” Alston commented that “many world leaders, economists, and pundits had enthusiastically promoted a selfcongratulatory message, proclaiming progress against poverty to be “one of the greatest human achievements of our time,” and characterizing “the decline [in poverty] … to less than 10 per cent, [as] a huge achievement.” But Alston disputed this rosy picture. The World Bank’s International Poverty Line (ipl) was dubious to say the least. Alston pointed out that the current ipl was derived from an average of national poverty lines adopted by some of the world’s poorest countries, mostly in Sub-Saharan Africa. Unlike many national lines, it is not based on any direct assessment of the cost of essential needs. It is an absolute line, constant in value, calculated and expressed using purchasing power parity (ppp) dollars, which are designed to adjust for the costs of goods in For use by the Author only | © 2023 Koninklijke Brill NV 49 Poverty 55.0 60 41.9 40 18.9 20 12.7 9.9 0.0 1.7 1.0 0 Thai US World Bank S Afr Mex Naonal figure 3.1 Poverty rate according to world bank and national thresholds (%) source: world bank and national statistics different countries in a way that market exchange rates do not (notwithstanding the many challenges to the validity of the ppp s). The current ipl of US$1.90 2011 ppp per day represents what that amount could buy in the US in 2011. But the ipl is well below the national poverty lines of most countries and accordingly generates dramatically lower numbers in poverty. Using the most recent comparisons available, Thailand has a poverty rate of 0.0 percent under the ipl but 9.9 percent under the national line, the United States, 1 percent versus 12.7 percent, South Africa, 18.9 percent versus 55 percent, and Mexico, 1.7 percent versus 41.9 percent (Figure 3.1). To replace the ipl, David Woodward (Woodward 2010) has proposed a “right-based poverty line” consistent with a minimum morally acceptable standard of living. He found that achieving an average infant mortality rate in 2010 would require a line 4.2 times higher than the Bank’s then-ipl. In 2006, Peter Edward’s “ethical poverty line” (Edward op cit), that would enable people to achieve normal human life expectancy, produced a global headcount for poverty around three times higher than the ipl at the time. Robert Allen (Allen, 2017) criticizes the ipl’s reliance on 15 mostly tropical countries, rather than using any direct assessment of basic needs, thus ignoring higher spending on essentials like fuel and clothing in cold countries, and housing in wealthy countries. Using an austere approach to determine the lowest possible cost of a balanced 2,100 calorie diet and allowing for three square meters of living space, he calculates higher lines of $2.63 in developing countries and $3.96 in high-income countries. His research generates a poverty headcount 1.5 times larger than the Bank’s line and suggests that simply meeting food or housing costs under that line could be extremely difficult, if not impossible, in certain countries. For use by the Author only | © 2023 Koninklijke Brill NV 50 Roberts Even under the World Bank’s line, there are still 700 million people living under $1.90 a day. Rather than one billion people lifted out of poverty and a global decline from 36 percent to 10 percent, many lines show only a modest decline in rate and a nearly stagnant headcount. The number living under a $5.50 line held almost steady between 1990 and 2015, declining from 3.5 to 3.4 billion, while the rate dropped from 67 percent to 46 percent. Today, the leading global non-monetary measure of deprivation, the Multidimensional Poverty Index, covering 101 developing countries, yields a poverty rate of 23 percent (undp 2019). And between 1990 and 2015, the number of people living under the line in Sub-Saharan Africa and the Middle East rose by some 140 million. The standard of living of the world’s poorest, surviving on just half the Bank’s austere line, has only increased a small amount in 30 years (Ravallion 2016). The world is not even close to ending poverty. Looking ahead, assuming that every country grows from now on at the rate that it did between 2005 and 2015 (very doubtful), the World Bank projects a poverty rate of 6 percent in 2030. Under a $5.50 line, projections show 28 percent of the world, or 2.35 billion people, still in poverty in 2030. These projections have already been revised for the worse as covid-19 continues to ravage economies and public health. According to the World Bank, the pandemic will erase all poverty alleviation progress over the past three years and will push an extra 176 million people into poverty at the $3.20 poverty line. 3 Global Inequality The global economy has doubled since the end of the Cold War, yet half the world lives under $5.50 a day, primarily because the benefits of growth have largely gone to the wealthiest. That brings us to the relation of inequality to poverty. They are closely linked. Between 1980 and 2016, the top 1 percent captured 27 percent of total real income growth and in 2017 captured 82 percent of new wealth. Meanwhile, incomes of the poorest have grown far slower than global gdp. Mostly everyone who’s interested in global inequality has come across the famous elephant graph, originally developed by Branko Milanovic and Christoph Lakner using World Bank data (Lakner and Milanovic 2013). The graph charts the change in income that the world’s population have experienced over time, from the very poorest to the richest 1%. The elephant graph has been used by some to argue global inequality has declined since 1980. The graph suggests that the biggest gains in income have gone to the poorest 60% For use by the Author only | © 2023 Koninklijke Brill NV 51 Poverty 100 Mainly a China phenomenon 80 60 40 20 Collapse of incomes in ex-Soviet bloc 0 –20 0 20 40 60 80 100 figure 3.2 Elephant graph: Change in real income 1980–2008 at various percentiles of global income distribution (2005 dollars) source: milanovic and lackner of the world’s population, whose incomes have grown two or three times more than those of the richest 40% (Figure 3.2). But if we render the elephant graph in absolute dollar terms to see who’s benefited most from the distribution of new income around the world, suddenly the story changes. It becomes clear that it’s the richest 1% who have gained the most – by far. The incomes of the world’s poor have barely budged by comparison. The elephant graph shows relative gains with respect to each group’s baseline in 1980. The poorest 10–20th percentile gained sharply over this period. But that decile started from a very low base. For people earning $2.40 per day in 1980, their incomes grew to no more than $4.36 per day over a period of 36 years, or about 5 cents per year. And the poorest 60% – the ones depicted as the “winners” in the elephant graph – continue to live under the international poverty line of $7.40 per day (2011 ppp). Meanwhile, the global rich may have seen their incomes increase by a smaller proportion, but because they started from a much higher base, their absolute gains have been far greater. Those in the 70–80th percentile, the “losers” according to the elephant graph, are revealed to have gained more than twice that amount. Those in the 80–90th percentile (also represented as losers in the elephant graph) gained four times more. And the richest 1% got one hundred times more. As for the very top incomes, multi-millionaires doubled or tripled their annual incomes, gaining some 14,000 times more than the average person in the poorest 60% of the world’s population! Milanovic reckons that global inequality can be decomposed into two parts. The first part is due to differences in incomes within nations, which means that that part of total inequality is due to income differences between rich and poor For use by the Author only | © 2023 Koninklijke Brill NV 52 Roberts Americans, rich and poor Chinese, rich and poor Egyptians and so on for all countries in the world. If one adds up all of these within-national inequalities, you get the aggregate contribution to global inequality. Milanovic calls this the traditional Marxist “class” component of global inequality because it accounts for (the sum) of income inequalities between different “income classes” within countries. The second component, which he calls the “location” component, refers to the differences between mean incomes of all the countries in the world. Around 1850, ‘class’ explained nearly half of global inequality. But around 2011, around 80% was due to where you lived, ‘location’. When Milanovic first developed this distinction, he concluded that the Marxist class analysis has been proved wrong: “Karl Marx could indeed eloquently write in 1867 in “Das Kapital”, or earlier in “The Manifesto” about proletarians in different parts of the world – peasants in India, workers in England, France or Germany – sharing the same political interests. They were invariably poor and, what is important, they were all about equally poor, eking out a barely above-subsistence existence, regardless of the country in which they lived. There was not much of a difference in their material positions.” But not now. However, Milanovic’s latest data suggest that inequalities within nations have increased so much that, given current trends, by 2050 such inequalities will play just as important role as they did 200 years ago when modern capitalism first rose to dominance as a mode of production. Indeed, the only reason that ‘location’ has been so important for global inequality is the huge difference in living standards for the working populations of the leading imperialist powers and those living in the ‘global south’. That gap has been closed mainly by the rise of China (and east Asia and India to a lesser extent), although, as we have shown, not anywhere else. But inequality within China and India has also risen sharply. That adds into to the global inequality index. The British think-tank Resolution Foundation has also analysed the Elephant chart (Corlett 2016). The Resolution Foundation found that faster population growth in countries like China and India distort the conclusion that it was the lower classes of the advanced capitalist economies that had no income gains since 1988. Indeed, if we assume for the moment that incomes were unchanged in every country, then the population effect alone would lead to apparent drops of 25 per cent in parts of the global income scale associated with poorer people in rich countries. But a revised graph that removes the effect of different population growth would show that the lower income groups in the advanced capitalist economies did see real incomes rise since For use by the Author only | © 2023 Koninklijke Brill NV Poverty 53 the late 1980s – although nowhere near as much as the top 5–10% of income earners. 4 Inequality within Nations Indeed, the Resolution Foundation’s analysis does not do away with the incontrovertible fact that inequality of incomes and wealth has increased since the early 1980s in virtually every country. The Resolution Foundation found that a large section of Western lower middle and working classes experienced a cumulative real income growth of c25% (with Japanese lower income deciles experiencing contraction, US lower income deciles experiencing low but positive growth and Western European lower deciles experiencing c45% cumulative income growth). But these levels of cumulative income growth have been lower than the income growth at the top of each of the income distributions for the respective developed market blocs (leading in many developed countries to higher levels of income inequality) and lower than the income growth of the global median or global poor (leading to lower levels of income inequality across the globe, principally due to the rise of China). And so, while real incomes have risen for lower middle and working classes in absolute terms, the bottom 80% labour share of gdp in the UK and US has declined as a proportion of gdp (defined as the labour share of gdp multiplied by the proportion of labour income received by the bottom 80% of the income distribution), while the relative cost of labour in the West vs the rest of the world has reduced. In other words, the rate of exploitation has risen in the last 30 years in the major economies. McKinsey (2016) found that in 2014, between 65 and 70 percent of households in 25 advanced economies were in income segments whose real market incomes – from wages and capital – were flat or below where they had been in 2005. This does not mean that individual households’ wages necessarily went down but that households earned the same as or less than similar households had earned in 2005 on average. In the preceding years, between 1993 and 2005, this flat or falling phenomenon was rare, with less than 2 percent of households not advancing. In absolute numbers, while fewer than ten million people were affected in the 1993–2005 period, that figure exploded to between 540 million and 580 million people in 2005–14. For example, 81 percent of the US population were in groups with flat or falling market income. According to the latest report by the US Census Bureau, households at the 10th percentile – those poorer than 90 percent of the population – are still a bit For use by the Author only | © 2023 Koninklijke Brill NV 54 Roberts poorer than they were in 1989. Across the entire bottom 60 percent of the distribution, households are taking home a smaller slice of the pie than they did in the 1960s and 1970s. The 3.4 percent of income that households in the bottom fifth took home in 2015 was less than the 5.8 percent they had in 1974. By contrast, households in the top 5 percent have profited nicely from America’s expansions. In 2015, they took in $350,870, on average. That is 4.9 percent more than in 1999 and 37.5 percent more than in 1989! Indeed, there are still 43.1 million people living in poverty in the US. The US poverty rate has hardly budged since the 1980s. 5 Wealth or Income? Moreover, most discussions on poverty and inequality, whether between nations globally or within nations, take place around income. Data and papers on inequality of income are profuse, particularly on the rise in most major economies since the 1980s and the cause of it. But discussion and analysis of inequality of wealth (personal wealth) does not get so much attention. And yet, anybody with huge amounts of wealth (defined as ownership of property, means of production and financial assets) correspondingly obtains high levels of income – and, it seems, relatively lower levels of taxation. Both in advanced and emerging economies, wealth is significantly more unequally distributed than income. The World Economic Forum (2021) reports that: “This problem has improved little in recent years, with wealth inequality rising in 49 economies.” And when you compare the gini index of inequality for both income and wealth for each country, the difference is staggering. Take a few examples. The gini index for the US is 37.8 for income distribution (pretty high), but the gini index for wealth distribution is 85.9! Or take supposedly egalitarian Nordic nations. The gini index for income in Norway is just 24.9 but the wealth gini is 80.5! It’s the same story in the other Nordic countries. The Nordic countries may have lower than average inequality of income, but they have higher than average inequality of wealth. You might expect to find some of these countries listed here in the top ten: ie very poor or ruled by dictators or military. But the top ten also includes the US and Sweden – both a ‘neoliberal’ advanced economy and a ‘social democratic’ economy make the list: capitalism does not discriminate when it comes to wealth. The US stands out as leader in the top G7 advanced economies in both wealth and income inequality (Figure 3.3). Indeed, we can discern that high inequality in wealth is closely correlated with inequality in incomes. Using the wef index, there is a positive correlation For use by the Author only | © 2023 Koninklijke Brill NV 55 Poverty 95 92.6 91.7 90.1 86.7 85.9 85.1 90 84.9 83.9 83.7 83.4 85 80 75 figure 3.3 Wealth gini index source: world bank, world economic forum, author’s calculations WEALTH GINI 100 90 80 70 60 50 INCOME GINI 40 20 30 40 50 60 figure 3.4 Relation between wealth and income inequality source: world bank, world economic forum, author’s calculations of about 0.38 across the data: so the higher the inequality of personal wealth in an economy, the more likely that the inequality of income will be higher (Figure 3.4). The question is which drives which? This is easily answered. Wealth begets wealth. And more wealth begets more income. A very small elite owns the means of production and finance and that is how they usurp the lion’s share and more of the wealth and income. Moreover, wealth inequality has risen. The real wealth concentration is expressed in the fact that big capital (finance and business) controls the investment, employment and financial decisions of the world. A dominant core of 147 firms through interlocking stakes in others together control 40% of the wealth in the global network according to the Swiss Institute of Technology (Vitali, 2013). A total of 737 companies controls 80% of it all. This is the inequality that matters for the functioning of capitalism – the concentrated power of capital. Marx’s argument that capitalism would lead to greater concentration and For use by the Author only | © 2023 Koninklijke Brill NV 56 Roberts centralisation of wealth, in particular, in the means of production and finance, is borne out. 6 The Causes: The Classical View The classical economists of the early 19th century were well aware of the poverty that existed in the rising industrial economy of England. Indeed, part of the moral motivation of Adam Smith, the father of free market economics, was to find ways to eradicate or mitigate poverty, caused, he thought, by monopoly interests and mercantilist distortions that market economies could remedy. David Ricardo was much less sanguine, indeed disinterested (Ricardo 1817). Despite being a radical politician in his time, both anti-slavery and antilandlord, he argued that there was an ‘iron law of wages’ that meant most labourers would be on ‘subsistence’ in order to ensure maximum profitability for capital and thus industrialisation, although things would be helped by breaking the dominance of landlords over the price of basic foodstuffs like corn.1 Thomas Malthus was supporter of the first interpretation of Jesus’ remarks. He argued that if living standards rose for the masses through wage increases, people would just breed more and the rising birth rate would outstrip even a high death rate leading to increased population. That would outstrip the productive capacity of food production and cause famine and then a reduction in population. There was no escape from this dilemma. The problem was that people breed geometrically while production grows arithmetically. Labour is to be blamed for its own misery.2 Before 1600, there is evidence to support the Malthusian case. The period from 1300 to 1450 in Europe was a period of frequent plagues – the most famous being the Black Death of 1348. Over this period, the population of England fell 1 Ricardo reckoned the ‘natural price’ of labour was the cost of maintaining the labourer. However, Ricardo did believe that the market price of labour or the actual wages paid could exceed the natural wage level indefinitely due to countervailing economic tendencies. 2 “Through the animal and vegetable kingdoms, nature has scattered the seeds of life abroad with the most profuse and liberal hand … . The germs of existence contained in this spot of earth, with ample food, and ample room to expand in, would fill millions of worlds in the course of a few thousand years. Necessity, that imperious all-pervading law of nature, restrains them within the prescribed bounds. The race of plants, and the race of animals shrink under this great restrictive law. And the race of man cannot, by any efforts of reason, escape from it. Among plants and animals its effects are waste of seed, sickness, and premature death. Among mankind, misery and vice. “ – Thomas Malthus. For use by the Author only | © 2023 Koninklijke Brill NV Poverty 57 by a factor of two, resulting in a sharp drop in labour supply. Over this same period, real wages rose substantially. Then from 1450 to 1600, the population (and labour supply) recovered and real wages fell. In 1630, the English economy was back to almost exactly the same size it was at in 1300. But did the Malthusian case match the situation in early 19th century England when the capitalist mode of production became dominant? Writing in the early 1840s, Friedrich Engels delivered a blistering dismissal of Malthus’ ideas. (Engels 1844). Engels recounts Malthus’ view. “Malthus, the originator of this doctrine, maintains that population is always pressing on the means of subsistence; that as soon as production increases, population increases in the same proportion; and that the inherent tendency of the population to multiply in excess of the available means of subsistence is the root of all misery and all vice... [T]his is the case in all circumstances – not only in civilised, but also in primitive conditions. In New Holland (the old name for Australia), with a population density of one per square mile, the savages suffer just as much from over-population as England.” Engels ridicules Malthus’s argument: “In short, if we want to be consistent, we must admit that the earth was already overpopulated when only one man existed.” (Engels op cit). And he goes on to describe the genocidal character of Malthus’ conclusions. “The implications of this line of thought are that since it is precisely the poor who are the surplus, nothing should be done for them except to make their dying of starvation as easy as possible, and to convince them that it cannot be helped and that there is no other salvation for their whole class than keeping propagation down to the absolute minimum. Or if this proves impossible, then it is after all better to establish a state institution for the painless killing of the children of the poor, such as “Marcus” has suggested, whereby each workingclass family would be allowed to have two and a half children, any excess being painlessly killed.” (Engels op cit). Here Engels echoes the satire of Jonathan Swift’s Modest Proposal (Swift, 1729), written one hundred years earlier, that suggested how the impoverished Irish might ease their economic troubles. Engels adds that Malthus theory meant that “Charity is to be considered a crime, since it supports the augmentation of the surplus population. Indeed, it will be very advantageous to declare poverty a crime and to turn poor houses into prisons, as has already happened in England”. Engels concludes: “Am I to go on any longer elaborating this vile, infamous theory, this hideous blasphemy against nature and mankind? Am I to pursue its consequences any further? Here at last we have the immorality of the economist brought to its highest pitch. What are all the wars and horrors of the monopoly system compared with this theory!” Engels argued that Malthus was wrong because he ignored the effect of the rising productivity of labour through science and mechanisation under For use by the Author only | © 2023 Koninklijke Brill NV 58 Roberts capitalism that could easily keep pace with, even surpass, population growth. “For us the matter is easy to explain. The productive power at mankind’s disposal is immeasurable. The productivity of the soil can be increased ad infinitum by the application of capital, labour and science.” And so it has proved. The productivity of labour has rocketed since Malthus wrote, easily outstripping the expansion of the population; indeed, enabling such an expansion. And anyway, it is not the population that matters but the size of employment. If all at working age were employed, production would meet the needs of all others too. And work would raise skills and productivity. Engels argued: “The second error he [Malthus] committed was to confuse means of subsistence with [means of] employment. That population is always pressing on the means of employment – that the number of people produced depends on the number of people who can be employed – in short, that the production of labour-power has been regulated so far by the law of competition and is therefore also exposed to periodic crises and fluctuations – this is a fact whose establishment constitutes Malthus’ merit. But the means of employment are not the means of subsistence.” (Engels op cit). Engels was horrified at the poverty and misery that he saw in Manchester. The city had grown up around the cotton industry and was a mass of filthy slums. Infant mortality, epidemic diseases and overcrowding were all facts of life. Up to a quarter of the city’s population were immigrant Irish, driven there by even worse conditions in their own country. Poverty had existed in the old towns and rural areas – as it had done in Germany – but the growth of the big cities exacerbated and accentuated these conditions. Engels summed up the position of the poorest. “In 1842 England and Wales counted 1,430,000 paupers, of whom 222,000 were incarcerated in workhouses – Poor Law Bastilles the common people call them. – thanks to the humanity of the Whigs! Scotland has no poor law, but poor people in plenty. Ireland, incidentally, can boast of the gigantic number of 2,300,000 paupers.” (Engels 1845). Slavery was awful, but, in England, after the 1833 abolition of slavery bill, the poor in England were still being sold in markets. Parents selling their children because they had no homes and couldn’t feed them. In the mines in Lancashire five-year old children spent 12 hrs a day, completely alone in complete darkness, wafting the fans. The average life expectancy was 25. 7 The Causes: A Marxist View At the heart of the misery, Engels argues, was the very nature of the capitalist system: production for profit through the exploitation of labour. The For use by the Author only | © 2023 Koninklijke Brill NV Poverty 59 competition between capitalists leads them to pay their workers as little as possible, while trying to squeeze more and more work from them: ‘If a manufacturer can force the nine hands to work an extra hour daily for the same wages by threatening to discharge them at a time when the demand for hands is not very great, he discharges the tenth and saves so much wages. This leads in turn to competition between workers for jobs, and to the creation of a pool of unemployed who can be pulled into the workforce when business is booming and laid off again when it is slack. The existence of this reserve of unskilled and unemployed workers – especially among the immigrant Irish in the cities of the 1840s – holds down the level of wages and conditions for all workers.” (Engels 1845 op cit). So there is downward pressure on the real wage resulting from the use of machinery and division of labour, and from downward mobility into the workforce in consequence of the concentration of capital: “The former lower strata of the middleclass – the small tradespeople, shopkeepers, the retired, the handicraftsmen and peasants – all these sink gradually into the proletariat, partly because their diminutive capital does not suffice for the scale on which modern industry is carried on, and is swamped in the competition with the large capitalists, partly because their specialized skill is rendered worthless by new methods of production” (Engels 1845 op cit). ‘The poor are always with us’ is an aphorism that approximates to what, according to the gospel of Matthew in the New Testament of Christian writings, Jesus said, namely that “The poor you will always have with you” (Matthew 26:11). Sometimes this verse is interpreted as if to say, “You can’t overcome poverty; it’s a useless cause. Don’t waste your money on it”. Alternatively, it could be interpreted as a sharp criticism of societies that allow or create poverty for the many by the rich few. Either way there is no doubt that poverty (however defined, and we shall come to that) has existed for millennia. The question is why and can it be eradicated? Extreme poverty is defined crudely as being on the borderline of starvation. This has historically been the product of famine and disease – in other words, from the lack of basic needs as the result of exogenous forces out of the control of human action. In this view, poverty has been unavoidable, at least until the last hundred years or so since which industrialisation, urbanisation and technology (particularly as applied to agriculture) has mushroomed. But the Marxist view of poverty is not one based on the exogenous forces of nature or even on political action like war, but on the laws of motion in the modern mode of production called capitalism. Under capitalism, poverty is clearly the result of human action, or precisely in Marxist terms, exploitation of labour by capital. This is the key thread of the Marxist view of poverty. For use by the Author only | © 2023 Koninklijke Brill NV 60 Roberts On the one hand, the introduction of new machinery or technology will lead to the loss of jobs for those workers using outdated technology. On the other hand, the new industries and techniques could create new jobs. Again, this debate over the impact of technology and jobs is topical with the advent of robots and artificial intelligence now. Robots do not do away with the contradictions within capitalist accumulation. The essence of capitalist accumulation is that to increase profits and accumulate more capital, capitalists want to introduce machines that can boost the productivity of each employee and reduce costs compared to competitors. This is the great revolutionary role of capitalism in developing the productive forces available to society. For example, in England, one of the first countries where the capitalist mode of production became dominant, there was hardly any growth in productivity before 1600 (Bouscasse 2021). Then from about 1600 to 1810, there was a modest rise of the productivity of the labour force in England of about 4% in each decade (so 0.4% a year), but after 1810 with the industrialisation of Britain, there was a rapid acceleration of productivity growth to about 18% every decade (or 1.8% a year). The move from feudal social relations to agricultural capitalism in the 17th century boosted the productivity of labour and then, with the arrival of industrial capitalism, productivity growth rocketed. And yet, poverty by any reasonable measure remains for billions globally. Even with the development of modern capitalist production in agriculture, industry and transport, poverty is still with us. But there is a contradiction. In trying to raise the productivity of labour with the introduction of technology, there is process of labour shedding. New technology replaces labour. Yes, increased productivity might lead to increased production and open up new sectors for employment to compensate. But over time, a capital-bias or labour shedding means less new value is created (as labour is the only form of value) relative to the cost of invested capital. There is a tendency for profitability to fall as productivity rises. In turn, that leads eventually to a crisis in production that halts or even reverses the gain in production from the new technology. This is solely because investment and production depend on the profitability of capital in our modern mode of production. As Paul Krugman (Krugman, 2012) put it: “The effect of technological progress on wages depends on the bias of the progress; if it’s capital-biased, workers won’t share fully in productivity gains, and if it’s strongly enough capitalbiased, they can actually be made worse off. So it’s wrong to assume, as many people on the right seem to, that gains from technology always trickle down to workers; not necessarily. It’s also wrong to assume, as some (but not all) on the left sometimes seem to that rapid productivity growth is necessarily jobs- or wage-destroying. It all depends.” For use by the Author only | © 2023 Koninklijke Brill NV Poverty 61 Empirical evidence for the 19th century supports Engels’ thesis. Carl Frey (Frey, 2019) reckons that the early inventions of the Industrial Revolution were predominantly labour-replacing: “If technology replaces labour in existing tasks, wages and the share of national income accruing to labor may fall. If, in contrast, technological change is augmenting labor, it will make workers more productive in existing tasks or create entirely new labour-intensive activities, thereby increasing the demand for labour.” The divergence between output and wages, in other words, is consistent with this being a period where technology was primarily replacing labour. Artisan workers in the domestic system were replaced by machines, often tended by children – who had very little bargaining power and often worked without wages. The growing capital share of income meant that the gains from technological progress were very unequally distributed: corporate profits were captured by industrialists, who reinvested them in factories and machines.“ There was a growing gap between wages and productivity growth as workers were displaced by new technology and nominal wages were kept stagnant. Indeed, former Bank of England governor Mark Carney has suggested that the period since the Great Recession of 2008–9 confirmed Engels’ theory (Carney 2016). Carney pointed out that since the global financial crash of 2008, average real incomes in Britain have taken the biggest plunge since the 1860s, when “Karl Marx was scribbling in the British Library.” And “it was the poorest (who) are hit the hardest. During recessions, the lower-skilled, lower paid people tend to lose their jobs first.” Carney continued that “Engels exposed the misery and poverty engendered by the replacement of manual skills with machines and kept real incomes stagnant.” Now, says Carney, “Marxism might again be relevant with a new burst of ‘capital bias’ (ie a rise in machines relative to human labour power). Automation may not just destroy millions of jobs. For all except a privileged minority of high-tech workers, the collapse in the demand for labour could hold down living standards for decades. In such a climate, “Marx and Engels may again become relevant”, said Carney. However, Carney was at pains to claim that capitalism has worked for people: “global markets and technological progress has lifted more than a billion people out of poverty, while a series of technological advances have fundamentally enriched our lives”. And Engels too looked at this other side of the coin. He argued that there are “other circumstances” at play including re-employment generated by the reduced costs resulting from new technology: “The introduction of the industrial forces already referred to for increasing production leads, in the course of time, to a reduction of prices of the articles produced and to consequent increased consumption, so that a large part of the displaced For use by the Author only | © 2023 Koninklijke Brill NV 62 Roberts workers finally, after long suffering, and work again in new branches of labour.” (Engels 1845, op cit). If there has been a reduction in poverty levels (and we have seen, that is open to question), what causes can there be? Nobel prize winner Angus Deaton (Deaton 2004) claims that humankind have never had it so good under the capitalist mode of production: “By the most meaningful measures – how long we live, how healthy and happy we are, how much we know – life has never been better. Just as important, it is continuing to improve.” Deaton emphasises that life expectancy globally has risen 50% since 1900 and is still rising. The digital revolution has allowed people to remain in touch with friends and family who once would have grown distant. The democratization of air travel, for all its indignities has helped, too. The greatest progress against cancer and heart disease has come in the last 20 to 30 years. Deaton concludes, based on the data, that rising education is the most powerful cause of the recent longevity boom in most poor countries, even more powerful than high incomes. A typical resident of India is only as rich as a typical Briton in 1860, for example, but has a life expectancy more typical of a European in the mid-20th century. The spread of knowledge, about public health, medicine and diet, explains the difference. In the other words, Deaton’s criteria for human improvement is not really due to the success of the capitalist mode of production but to the application of science and knowledge through state spending on education, on sewage, clean water, disease prevention and protection, hospitals and better child development. The World Bank concludes that the main limitation to ending extreme poverty is the failure of a transfer of resources from the rich countries to the poor. That means that poverty (as defined) could be ended if governments chose to do so. The World Bank explained it this way (World Bank, 2006): “Suppose that the real gdp growth for the developing world as a whole is 5 percent per year. If 10 percent of this gdp growth accrued to the 21 percent of the developing world’s population who are extremely poor, and this 10 percent was distributed in a way that the growth in income of each poor person was exactly his/her distance to the World Bank Poverty Line, extreme poverty would end in one.” And yet, far from resources being transferred from the rich to the poorer countries to reduce global poverty, the opposite is the case. According to unctad (2020), net resource transfers from developing to developed countries have averaged $700bn a year, even after taking into account foreign aid assistance (Figure 3.5). And recent studies on ‘unequal exchange’ from trade and financial flows have shown that, far from the poorer economies gaining from trade and capital flows from the richer, there is a large transfer of wealth and income from For use by the Author only | © 2023 Koninklijke Brill NV 63 Poverty 1000 800 600 400 200 0 2016 2014 2012 2010 2008 2006 2004 2002 2000 figure 3.5 Net resource transfers from developing to developed economies $bn source: unctad the poor to the rich nations.3 This is empirical evidence that imperialism is alive and still dominant economically and lies behind continued poverty and inequality globally. 8 Conclusion Contrary to the optimism and apologia of the mainstream economists, poverty (in wealth and income) for billions around the world remains the norm with little sign of improvement, and meanwhile inequality of wealth and income within the major capitalist economies increases as capital is accumulated and concentrated in ever smaller groups. Any improvement in poverty levels, however measured, is mainly down to rising incomes in state-controlled China and any improvement in the quality and length of life comes from the application of science and knowledge through state spending on education, on sewage, clean water, disease prevention and protection, hospitals and better child development. These are things that do not come from capitalism but from the common weal. Poverty and inequality are linked. Both are the result of exploitation of labour by capital nationally and globally. What that means is that policies aimed at reducing inequality of income by taxation and regulation, or even by boosting workers’ wages, will not achieve much impact while there is such a 3 According to various authors the transfer of value from the dominated bloc to the imperialist bloc is equivalent to approximately 1% of gdp each year and 10% of bilateral exports (Carchedi and Roberts, 2020). Ricci (2021) finds that there was a transfer of $865 billion in 2007 (1.9% of gva and 9.1% of exports); Liang and Su (2021) estimate $563bn in 2014 (1.4% of gdp); and Hickel, Sullivan and Zoomkawala (2021) $2.2trn in 2018 (7% of gdp) or $62trn at constant prices since 1960!. For use by the Author only | © 2023 Koninklijke Brill NV 64 Roberts high level of inequality of wealth. And when that inequality of wealth stems from the concentration of the means of production and finance in the hands of a few. Higher growth rates in poor countries could bring about convergence of living standards globally. But there is little sign that the neo-colonial economies under the boot of imperialism have any hope of closing the income gap with the imperialist bloc. Currently, international development assistance is a little over $100 billion a year. This is just five times more than the bonus Goldman Sachs staff paid themselves during one crisis year and more than five times less the annual income flows out of the poor countries to the rich. Philip Alston (op cit) concluded his report on global poverty by pointing out that “using historic growth rates and excluding any negative effects of climate change (an impossible scenario), it would take 100 years to eradicate poverty under the World Bank’s line and 200 years under a $5 a day line (Agenda 2230!). This would also require a 15- or 173-fold increase in global gdp respectively.” The poor will always be with us under capitalism. References Adam Corlett (2016, 13 September) Examining an elephant: globalisation and the lower middle class of the rich world. Available at: https://www.resolutionfoundat ion.org/publications/examining-an-elephant-globalisation-and-the-lower-middle -class-of-the-rich-world/. Allen, R. C. (2020) Poverty and the Labour Market Today. 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