Many people are now realising that inequality matters. Even economists have caught up with the issue. So too has the FT. As it reports this morning the widely reported claim that neoliberalism has solved poverty is little more than a myth:
More than one-third of the world lives on between $2 and $10 a day, making this “fragile middle” the world's biggest income group. Some 2.8bn people — 40 per cent of the world's population — were earning $2-$10 a day in 2010, the latest year for which data are available from the World Bank's income distribution database.
Adjusting for inflation and purchasing power, the share of those living below $2 per day has dropped markedly since 1981 from 70 per cent of those living in developing countries to two in five, but the bulk of those lifted out of poverty remain only just above the line. About 1.5bn people were earning between $2 and $4 a day in 2010, and this $2-$4 group has grown more quickly than any other across the income spectrum.
But as the FT also notes:
Put in a global context, the number of solidly middle-class people remains small, while the fragile middle has grown exponentially.
Data show 2.8 billion people in the developing world sit just above the poverty line, at risk of slipping back as emerging market economies slow
A Financial Times analysis of more than 30 years of World Bank data from 122 countries in the developing world illustrates this change in fortunes. As poverty has fallen, the number of people clustered in a narrow band above the poverty line has grown. But only a relatively small number of people tend to make it beyond that. The result is that four in 10 of the word's people now live in its fragile middle.
Many of those in that fragile middle swap positions with the poor, often.
We are a long way from solving the problems of poverty. But we could solve them.
We could tax the world's wealth.
We could really make the world's multinational corporations pay tax where they earn their profits.
We could tackle tax havens.
We could have progressive taxation.
These would all help, enormously. Tax can, quite literally, liberate people if paid in the right place at the right time.
But the world's wealthy don't want these things to happen. By implication, and the causality is direct, they want the world's poor and fragile people to remain in that state.
We have a choice whose voices we listen to. I say it should be those hardest hit by poverty. What about you?
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Richard, I seem to recall that I was taken to task by one of your correspondents for suggesting that neo-liberalism had been an absolute disaster for everyone except the 1%. Well, even the FT (the FT, for goodness sake – only the Economist is now holding out!) agrees. Trouble is, the 1% have captured the castle, leaving the 99% with precious few options, other than storming the Bastille! And it will happen, I fear, unless those in their gated communities wise up, and recognize that you can only push people so far, when gated communities will offer no protection.
Would not disagree with any of your comments. But the biggest single factor in lifting people out of poverty is producing sustainable growing economies. And to do that you need the cooperation of the skilled and entrepreneurial classes i.e. much of the 1%- and that is the dilemma. That’s always been the problem for socialist governments (unless funded by large natural resources).
The biggest threat to the creation of an entrepreneurial economy is the existence of big business. It is they who oppress small business by making sure that the opportunity large business has to make monopoly profit is maintained. The sooner that this is appreciated by those who represent small business, the better
Richard
Your comment on the precarious nature of life in that ‘fragile middle’ reminded me of your discursive (in TCS)on relative poverty. It used to seem glib or naïve to make comparisons between poverty in the west and the southern hemisphere but, thanks to this government, that no longer applies (the difference between $10 and £10 per day isn’t that large after all). Moreover the use of cost of living comparators between the third world and our own, would I suspect, close the gap considerably between the two figures.
Perhaps the most salient point, though, is your comment about the ease or frequency with which the ‘fragile middle’ become ‘the poor’. I would add a third definition to your two, and that is ‘proximal or precipitative poverty’. PP is a measure of the precariousness of peoples financial security. I would suggest that here in the wealthy western world, in addition to the millions living in absolute or relative poverty, many millions more are in proximal poverty. Most of them have the appearance of affluence, certainly by world standards, but are only a heartbeat away from catastrophe. If, as Ernst and Young predicted yesterday, interest rates rise to 2.7% by 2017 we will see how real a measure ‘proximal poverty’ really is.
I’m old enough to remember the calamitous interest rate rises of Thatcher’s government and the catastrophic effect it had. What an indictment of neo-liberalism that is. After 35 years of war, austerity, and debt repayment it took interest rates of nearly 15% to wreak havoc amongst home owners. The same period of neo-liberalism it only takes base rate to hit 2.7% to achieve the same. What else needs said…
I think ‘proximal poverty’ a really good description except most will not understand it
Precarious prosperity may be better understood