Government gets to grips with tackling the causes of poverty

From 2002 to 2011, China's GDP grew by 150 per cent, compared to the US which grew by 15 per cent. However, it's GDP per capita relative to the US only went from 3 per cent to 11 per cent. Even at 150 per cent growth, it would take China 30 years to match the US.

The fastest growing economy in that time was Timor-Leste and its GDP per capita is still only 10 per cent of that in the US and much of that growth was due to oil wealth which is poorly distributed.

A good illustration of how far many countries have to go is Botswana. Since 1970, Botswana has had the highest sustained GDP growth of any country, averaging 9 per cent annual growth. However, it's still considered poor because it started 1970 with a GDP per capita of USD96. It could take another 40 years before Botswana is seen as wealthy.

The Tanzania government is today prepared to tackle various bold and ambitious proposals. The government gets to grips with tackling “the causes of poverty - weak institutions, corruption and a lack of basic freedoms - as well as setting out an ambitious vision of ending things like hunger, illiteracy and violence against women, and so on.”

The 12 new targets also include suggestions to strengthen productive capacity and improve business or industrialisation environments, and recognises the importance of peace, good governance and rule of law.

This more holistic approach to development has the goal of ending extreme poverty by 2030, defined as living on less than one dollar and 25 cents a day.

This is vital work because the government cannot compete, thrive and lead in isolation from the rest of the world. Notwithstanding, we were pleased by the tentative 2030 poverty target but we have to warn that future goals would be undermined "without action to ensure that wealth is spread more fairly.”

"Millions of people risk being left behind by economic growth, and in a world of finite resources the wealthiest cannot continue to expect more and more without hurting the rest," as observed by experienced policy advisors.

Save the Children it was up to all of us to commit to these "world-changing and ambitious measures without watering them down or losing the focus of the agenda.”

The Millennium Development Goal target for access to improved sources of water has already been reached as has halving the proportion of people living in extreme poverty but others, including on improving access to education, are unlikely to be met, because the process is sometimes very complicated but yet it can be done as long as each of us plays his or her part effectively.

It is commonly reported that the birthrate is much higher in the developing countries than developed countries, and therefore the developing world's population will grow relative to the developed world's population. What this ignores is economic growth is transforming developing countries into developed countries.

In the past few decades the rise of countries like South Korea, Poland, and others to developed status and immigration from the Third world to the First has largely balanced the higher birth rate of the Third world.

With the elevation of Russia to developed status the developed world began to grow much more quickly than the world as a whole. With the very rapid economic growth rate of China, India, and much of the rest of the Third World we will see the developing world shrink and the developed world grow over the course of this century.

Many people may regard this as far too optimistic, so before we show why it is reasonable let us quickly point out why it is at least plausible; before preceding a few definitions.

In this analysis developing counties are the Third World and developed countries are the First World. We use both terms so the webpage can be found using either term. Also the World Bank calls low and middle income countries developing, and high income countries developed.

India is about one fifth of the Third World, and through Internet outsourcing it has gotten fairly close to super growth. India averaged close to six and a half percent per capita growths 2000-2011 according to World Bank figures.

Between China and India 45 percent of the Third World has at least approached super growth. What was once the miracle of Japan and then a few other East Asian Tigers have been the norm for almost half of the Third World.

While the rest of the Third world has not been doing quite as well they have been growing fairly rapidly and more rapidly than they have in the past. In the 2000-2011 period per capita Gross Domestic Product, GDP, in the developing countries (low and middle income combined) grew 5 per cent per year. With compounding that means doubling every fourteen years.

Furthermore, the rate of growth is accelerating. Annual growth in total GDP was about two percent higher in the 2000-2011 periods than it was in the 1990-2000 period. Given that population growth was lower this means that the growth rate for the Third World close to doubled.

The success was not universal on the national level, total GDP in Zimbabwe actually declined during the 2000-2011 period, and GDP per person declined in a few other countries in the same period.

But this represents the political turmoil and other difficulties of a few individual nations; the trend for the whole, and the nine different categories was toward accelerating growth.

The growth of the Third World before the current long economic slump was very impressive, perhaps the best ever. Even the First World's current slump has not stopped the rapid growth of the Third World, though admittedly it has slowed the rapid growth some.

When the First World finally pulls out of this slump, the Third World's growth will accelerate, and the Third World is quite likely to achieve even faster rates than before.

The recent success of the Third World suggests we can have a solid hope that developing nations will develop. Let us go deeper and understand how, nations that seemed mired in poverty are now growing.

Over the last several decades light industry has been a major route into the First World. A major difficulty with this route has been that the people of the First World rarely wear more than one pair of underwear at a time. As there is limited demand for the products of low skill, light industry, most countries had to more or less wait while light industry transformed a few countries at a time, for example, China.

The rapid growth of India based on Internet outsourcing suggests there may be a second route. So while a large portion of the Third World can grow to First World status through light industry, another large portion can take this second route, the Internet, without hindering the first group.

In fact quite the contrary, if the countries that are growing through outsourcing buy the light industrial goods of the light industrial exporters then the new group, the outsourcers, will actually help the old group, the light industrial exporters, to grow.

Finally, the success of these two routes is pushing up natural resource prices which are providing a third route to the First World, the export of natural resources. Several routes to success means that Third World nations may not have to wait their turn, or at least wait as long, to get on a path to rapid development.

The future is, as always, uncertain. Nevertheless, a good deal of optimism is justified. The huge and until recently growing gap between rich and poor nations is likely to be temporary; it seems to be shrinking now. We have reason to hope that will continue and even accelerate.

There will need to be considerable adjustment in the First World. The increased prices for oil which are a result of increased demand from China, India, and the Third World, illustrate the basic point that we will have to share access to the world's resources.

The First World will have to meet the challenge of reinventing the technology of a rich society so that we can provide a comfortable life style with fewer resources and less harm to the environment.

Furthermore, many First World industries will move to the Third World. Industrial production of consumer goods will be concentrated in the Third World.

The First World will pay for them with capital goods which will enable the Third World to rapidly increase its productivity and achieve First World status.

In the process many First World workers will lose their jobs. The pain of readjustment in the First World will be real, but relatively minor compared to terrible suffering the Third World poor currently experience.

Will First World countries fall to Third World status? Many people fear this, but the history of many decades suggests it is unlikely. The richer First World countries with broad based industrial economies tend to grow at about two percent a year.
There are recessions where income per person declines a few percentage points. In the past we knew that growth could slow for a decade as it had for Japan, Finland, and Sweden.

Because of the current slump we now know that most First World countries simultaneously can suffer slow growth. But as most broad based industrial economies are several times as rich as “the $12,615 threshold between developed and developing countries” and really serious economic decline is unknown in broad based rich industrial countries there is little reason to fear First World nations becoming Third World Nations.

Of course oil and Gas rich nations and even a natural resource producer like Tanzania move up and down between high and middle income depending on the prices of their exports. But the broad based industrial nations are unlikely to suffer any serious decline; once a First World nation always a First World nation!

MUHARRAM MACATTA is a retired civil servant, a graduate in liberal arts, majoring in economics and political science. He served as a director of internal and international trade, import and export section, with the then ministry of commerce and industries,

which later became to be the ministry of commerce and cooperative; and served as principal marketing officer assigned to several marketing boards. He established state motors corporation and also founder regional offices; and first director of the Saba Saba International trade Fairs.