Growth Alone Is Not Enough

“We all know the basic facts. Half the people in the world live on less than $2 a day. A fifth live on less than $1 a day. Over the next three decades, two billion more people will be added to the global population – 97 percent of them in developing countries, most of them born into poverty.” 

– James D. Wolfensohn, President, World Bank, Oct. 3, 2004

Even where there is economic growth, many poor people are left behind. Economic growth alone does not necessarily translate to poverty reduction. In Latin America, for instance, the number of people in poverty has increased in the last decade even as the GDP per capita has increased, indicating that economic inequality has intensified (Chen and Ravallion 2004:31; World Bank 2005:24).

In China, too, the nation’s growing wealth has by-passed many families, with the benefits often captured by rapidly industrializing regions and cities, and missing many rural residents. One result has been a widening of the income gap between urban and rural areas over the last two decades, as well as greater growth and poverty reduction in China’s coastal provinces where the engine of economic growth runs hottest (Ravallion and Chen 2004:15-16, 25). Moreover, the rural poor often suffer the environmental costs of China’s industrialization and rapid growth disproportionately. Highly polluting industries have routinely relocated from cities to China’s rural areas to avoid clean-up costs, leaving a legacy of water and air pollution that many rural residents are too poor to escape (Yardley 2004:1). All too often, such inequalities in income and vulnerability among groups are exacerbated by rapid economic growth, with the poor falling further behind (Kakwani 2004:6).

Perhaps the most striking examples of the difficulty of spreading the benefits of growth equitably occur in the industrialized world, where poverty persists in spite of the general affluence of the population. In the United States, the number of poor has risen steadily since 2000, reaching almost 36 million people in 2003 – some 1.3 million more than in 2002. Historically marginalized groups such as Native Americans, African Americans, and Hispanics continue to suffer significantly higher rates of poverty. For example, 24.4 percent of African Americans fell below the poverty line in 2003, compared to the national rate of 12.5 percent. Among Native Americans and Hispanics, poverty rates were 23 percent and 22.5 percent, respectively (DeNavas-Walt et al. 2004:10). (See Figure 1.1: United States Households Falling Below the National Poverty Line, 2003)

In general, research shows that to benefit the poor most, economic growth must be coupled with policies that reduce inequalities and improve how income is distributed in a society (Kakwani 2004:6). Where dependence of the poor on natural resources is high, as it is in most developing nations, these policies must necessarily involve the environment. And they must translate to governance practices that increase the poor’s access to vital natural resources and their ability to govern those resources so that they share in the income from them.