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The Economics of Poverty Elimination

The Economics of Poverty Elimination. Jon D. Erickson Department of Economics Rensselaer Polytechnic Institute Troy, New York, USA. The Economics of Poverty Elimination. World Development as Growth Policy Growth as Cumulative Causation Examples If Not Growth, then What?.

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The Economics of Poverty Elimination

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  1. The Economics of Poverty Elimination Jon D. Erickson Department of Economics Rensselaer Polytechnic Institute Troy, New York, USA

  2. The Economics of Poverty Elimination • World Development as Growth Policy • Growth as Cumulative Causation • Examples • If Not Growth, then What?

  3. I. World Development as Growth Policy Rationale: the world economy can grow its way out of poverty and environmental degradation Dominant Strategy: unbalanced, industrial, directly productive, export-led growth. Recipe: technological progress, market com-patible institutions, available resources, capital markets, and entrepreneurship

  4. . . . World development as market expansion . . . “In a market economy, the price system ensures that no one can consume resources without first creating some of equal or greater value.” ~ N. Gregory Mankiw

  5. Population 20% 20% 20% 20% 20% Income 82.7% 11.7% 2.3% 1.9% 1.4% II. Growth as Cumulative Causation 1950  1992 Over 5x increase in global output Nearly 12x increase in world trade 1950 – Haves 30x over the Have Nots 1989 – Haves 60x over the Have Nots

  6. Cumulative Causation A self-reinforcing process whereby the disproportionate rewards of economic development attract further disproportionate development. Progressive Modernization of Poverty

  7. III. Examples • 20 buyers and 160+ sellers To attract companies like yours . . . We have felled mountains, razed jungles, moved rivers, relocated towns . . . all to make it easier for you to do business here. ~ Philippine government ad in Fortune, 1975

  8. III. Examples • Redistribution of pollution • Pharmaceutical markets • Creating demand for debt and technology “. . . most of these systems were installed not because there was a local consumer demand for them but because a Northern entrepreneur was able to find a Northern aid agency to support their establishment as ‘demonstration’ projects.” ~ Anil Agarwal et al. • The development industry

  9. IV. If Not Growth, then What? • Many alternatives: Steady-state economy (Daly), an economics as if people mattered (Schumacher), people-centered development (Korten), ecological economics? • Sense of stability • Sense of limits • Need for local voice • Align agency interests with the poor’s interests • Compatible community development • Think in terms of socio-ecological classes

  10. Earth’s Three Socioecological Classes

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