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The Poverty Traps

LONDON: Few debates are more rote -- and more ideologically rigid -- than those concerning economic growth and economic justice. Growth, of course, cannot guarantee that material wealth will be distributed in a just, let alone an equal, manner. Yet it is impossible even to conceive of falling incomes bringing about greater justice in the world.

Neither the intensity of these arguments, nor mountains of sophisticated data, can relieve me of the feeling that this debate is stuck in a rut and stunted: stuck, because beyond the notion that growth is a necessary but insufficient condition for reducing poverty, our ideas on the matter have changed little over the years; stunted, because two vital things are often missing from these arguments. The first missing ingredient is a clear reckoning as to how justice itself is measured, especially the net effects of trade-offs between, say, child labour and starvation. The second missing element concerns the weight to be given to non-material factors when measuring the distribution of material rewards in richer countries as much as in poor ones.

All these tattered arguments were replayed at the G-8 summit in Okinawa last week. Mainstream economists and policymakers had no difficulty in demonstrating that the establishment and spread of regulated, open, world trading system created extraordinary new wealth. But such "proofs" had scant effect on their opponents, who shout that globalization aggravates poverty and inequality while blighting communities and the environment.

The best answer to such gripes is not to retreat but to remove what distortions remain in the world trading system through a comprehensive opening of rich country markets to competitively priced 'low-tech' imports from poor countries. But, starting with the US and EU, rich countries fear increasing unemployment due to competition from developing countries armed with cheap labour. Here an irony intrudes. Issues raised by globalization’s opponents, such as labour standards in poor countries -- all those images of exploited women and children in sweat-shops -- are manipulated by rich countries as a form of protectionism by other means.