Making poverty perpetual


According to the sages at the Chronic Poverty Research Centre - an international partnership of universities, research institutes, and non-governmental organisations - the UN’s Millennium Development Goals are not ambitious enough.  Even if they are met, there will remain 800 million ‘chronically’ poor people around the world.

In order to lift these marginalised people from poverty, their report advocates a massive scaling up of state welfare in developing countries, ranging from cash benefits to ‘minimum income guarantees.’

Later this year, the World Health Organization is also likely to recommend expanded social protection – including minimum wages -- as an essential means of improving the health of the poor.

These kinds of interventions are likely to make the problem of ‘chronic’ poverty worse.

Take minimum wages. In richer economies, they don’t cause too much economic damage during times of rising prosperity. The problems start when an economy begins to slow down.

When things get tough, employers will dispense with those they regard as the most marginal workers first, such as unskilled people, part-timers, women, and so on.

But in fragile African economies, asking the private sector to provide ‘minimum income guarantees’ is tantamount to telling them not to bother employing anyone at all. As the World Bank has shown, there are enough bureaucratic hurdles to starting a business in the poorest countries, without this costly extra burden. 

And without a strong private sector creating wealth, there will be no juicy tax revenues to fund state welfare – unless, of course, western governments are prepared to underwrite African welfare systems indefinitely.

Countries like Britain have had enough experience with welfarism to know that it is not the way to eradicate poverty.  As the light shone on Glasgow East during the by-election has amply demonstrated, it entrenches it.

Making Poverty History? Making Poverty Perpetual would be more accurate.