The Scourge of Poverty

Many Countries Left Behind in Economic Development

By Father John Flynn, LC

ROME, NOV. 5, 2007 ( The poorest countries need help, and the more developed countries need to come to their aid, the Vatican has been insisting of late. Almost 10 million children below 5 years of age die each year from preventable illnesses, denounced Archbishop Celestino Migliore, permanent observer of the Holy See to the United Nations.

The archbishop’s Oct. 9 speech to the U.N. General Assembly examined progress toward meeting a series of targets for development, known as the Millennium Development Goals.

“The global community seems to have been losing focus on the need to ensure the right to basic health care for all,” he added.

Archbishop Migliore recognized that some countries have made gains, but a number of states are trailing the rest of the developing world. He called for greater attention to these states, and the encouragement of more investment and the creation of a favorable economic and social climate, along with the establishment of peace and security and the rule of law.

On Oct. 19 Archbishop Migliore returned to the question of economic development, in a speech to the General Assembly on the project New Partnership for Africa’s Development (NEPAD).

Africa has started to benefit from this initiative, he noted, in part because of favorable international economic conditions. “Nevertheless, these positive signs stand in stark contrast with situations of conflict and the reality of extreme forms of poverty difficult to uproot,” the Holy See representative added.

He called for renewed efforts in the prevention, management and resolution of conflicts in Africa. Fairer access to world markets, more investment, transfer of technology, and better educational and health systems were among other points made by Archbishop Migliore.

Poverty trap

An analysis of why many poor countries are failing to develop came from Paul Collier, an economics professor at Oxford University. His book, published earlier this year, was titled: “The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It,” (Oxford University Press).

A group of nations concentrated in Africa and Central Asia, accounting for around 1 billion of the world’s population, face seemingly intractable problems in their attempt to achieve economic growth. The answer, argues Collier, is unfortunately not as simple as just giving them more money. In fact, with some exceptions, aid has not worked well in these countries and change must come predominantly from within.

Collier acknowledged that the various traps that countries fall into, which contribute to keeping them poor, are indeed complex. His book, however, concentrates on four of the most important.

— The conflict trap. No fewer than 73% of the people in the societies in the bottom billion have either recently been through a civil war or are still in one. Not only are civil wars bloody and economically disruptive, but they also tend to last a lot longer than international conflicts.

— The natural resources trap. Many countries that rely on exporting natural resources fail to develop other sectors of their economies and they tend to experience a cycle of boom and bust, as commodity prices fluctuate. As well, the easy money from exports, particularly in the case of oil, tends to encourage corruption and a bloated government sector.

— The trap of being landlocked with bad neighbors. A country with no direct access to the sea faces higher transport costs for imports and exports. If in addition to this factor the neighboring countries have a poor transport infrastructure, or are in the midst of conflicts, then costs quickly escalate.

— The trap of bad governance in a small country. Bad government and erroneous economic policies quickly destroy an economy. Collier observes, many of the politicians and senior officials live a life privilege and riches, immune to the poverty and chaos their policies inflict on the rest of the population.

Finding remedies to overcome these traps is far from easy. Collier suggested a variety of measures, ranging from greater international efforts to end conflicts and civil wars, to renewed efforts against corruption and the adoption of sound economic policies. The establishment of the rule of law and greater transparency by governments, plus reforms in the way aid is administered were among other recommendations.

Investing more

Some good news came in the “World Investment Report 2007,” published Oct. 16 by the U.N. Conference on Trade and Development (UNCTAD).

For the third consecutive year, global foreign direct investment rose in 2006. It rose by 38% to reach $1.306 billion. This was close to the record level of $1.411 billion reached in 2000, the report observed. Moreover, the growth of investment occurred in all three groups of economies: developed countries, developing countries and the transition economies of Southeast Europe and the Commonwealth of Independent States.

A significant cause of the increase was due to increasing corporate profits and higher stock prices, along with the higher value of cross-border mergers and acquisitions. Nevertheless, UNCTAD commented that new investment in developing countries also increased.

Africa attracted $36 billion in investment in 2006, twice the 2004 level. According to the report, this was due to increased interest in natural resources, improved prospects for corporate profits and a more favorable business climate.

The geographical pattern of investment is also changing, the report observed. There is an increase in the flow of funds from developing and transition economies, instead of the traditional pattern of investment from richer nations to poorer countries. China consolidated its position as a major investor, and India is rapidly catching up, UNCTAD noted.

A closer look at the economic situation of Africa came in another UNCTAD report, “Economic development in Africa,” released Oct. 11. It noted that recent economic performance in Africa has been strong, with a growth rate of 5.7%.

These rates are insufficient, however, for African countries to reach the first Millennium Development Goal of halving poverty by 2015. Achieving this target requires growth rates of 7% to 8%.

Among the factors holding back economic growth, the report commented on the lack of legal protection for investors and high tax rates. African countries have also suffered from a lack of diversification in their exports.

In addition, the report urged that each country requires an appropriate set of policies, tailored to the specific situation, rather than the imposition of a one-size-fits-all approach to economic development.

A moral task

The fight against poverty is a moral duty, stated Archbishop Silvano Tomasi, permanent observer of the Holy See to the Office of the United Nations and Specialized Institutions in Geneva, to a July 4 session of the U.N. Economic and Social Council.

In several regions of Africa and Asia, life expectancy is almost half of that in rich countries and illiteracy reaches high levels, he pointed out.

The improvements sought through aid and debt cancellation have not yielded all the results expected, he observed. The archbishop suggested that greater concentration on projects that will create jobs could be one way to reduce poverty. “Work is the only possibility for a community to generate its own value added that pays the way out of poverty,” he said.

The Holy See, Archbishop Tomasi emphasized, has repeatedly insisted on the responsibility of poorer countries to strive for good governance and do all they can to eliminate poverty. No less vital is help by other countries that are better off. Such assistance he urged, is a grave moral responsibility.

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