China, poverty and the global economic system

BEIJING, October 17, 2022 /PRNewswire/ — Robert Walkerwho is an Emeritus Fellow of Green Templeton College, Oxford Universityand a professor at Beijing Normal University, gives his opinion to China Focus.

More than 650 million people in the world still live in extreme poverty, the kind that China eradicated in 2021. Although the United Nations has pledged to reduce these numbers to zero, this is unlikely to happen.

The reason is the structure of the global economic and trading system that offers its greatest rewards to powerful corporations and the nations that largely control it.

The UN is aware of the problem. When presenting his priorities for 2022 to the United Nations General Assembly, Secretary-General António Guterres said that “the global financial system is morally bankrupt. It favors the rich and punishes the poor”.

Indeed, when the UN defined its poverty reduction strategy – the 17 Sustainable Development Goals (SDGs) – in 2015, it hoped that the peoples of the world would rise up against the global economic order, demanding that the SDGs are achieved, and that poverty is eradicated. This does not happen.

For most people, global poverty is a minor concern and, in rich countries surveyed in 2018, two-thirds would not feel guilty if they “personally ignored the needs of poor people in poor countries”. National populations are divided on the importance of overseas development aid, with only minorities wanting it to be increased – except when understood as a matter of enlightened national interest.

This lack of altruism extends to domestic politics once poverty falls to “acceptable” levels. Indeed, support for further poverty reduction decreases even more if respondents are required to contribute through increased taxation.

There is evidence that political leadership, especially left-wing politicians coexisting with active coalitions working within supportive institutions, can help reduce domestic poverty levels and increase development assistance.

Even the Center for Strategic and International Studies (CSIS) recognizes the uniqueness of the Chinese aid model in its propensity to first “summarize its own development experiences and then share them with other developing countries”.

The origins of poverty are structural. Poverty stems from the unequal distribution of natural resources and the legacy of historical exploitation embodied by, but not limited to, colonization. Recent research has shown that half of the variation in countries’ GDP per capita, a measure of national income, can be explained by differences in national incomes in 1870.

However, poverty is continually reproduced by capitalism and the global trading system which promote income inequality and the concentration of economic power. In 1870, per capita incomes in Western Europe were about four times those of Africa; by 2008, this income difference had tripled.

Individual incomes and the degree of inequality result from two factors: the primary and secondary distribution of resources. Primary distribution is market driven. It takes place within countries and between countries through the production and sale of goods in the country and/or abroad that generate income in the form of wages and returns to assets and investments. Secondary distribution is that designed by governments through taxation and transfers that determine the resources that individuals can access and deploy.

It takes an intergovernmental body to organize a secondary distribution of the world’s resources by redirecting excess income from richer countries to poorer countries.

It should be noted that the G77 and China grouping of developing countries does not seem to be included in the biennial summits. The earlier idea of ​​forming a United Nations Economic Security Council was rejected because powerful nations insisted on staying powerful.

An organization responsible for regulating trade, the WTO promotes the interests of wealthy trading nations. Its origins date back to 1950 when US President Truman refused to back a 56-nation proposal to establish a trade organization under the auspices of the UN. He feared that American influence in the organization was limited.

WTO rules discriminate against developing countries, thus amplifying the inequalities created by globalization. Developing countries face tariff spikes on a disproportionate number of exports, exemplified by US tariffs of over 150% on peanuts and sugar. The system of tariff escalation – with higher tariffs imposed on processed products than on raw materials – serves to prevent exporting countries from developing viable domestic processing industries. In addition, the proportion of trade covered by restrictive import measures has increased by 27% since 2012.

The UN SDGs relied on reforming the WTO to redress the inequitable distribution of power. This goal was to be achieved through the so-called Doha Round, a series of trade negotiations launched in 2001. However, these negotiations were abandoned in 2015, the same year the United Nations announced the SDGs.

Yet, for the first time in human history, sufficient resources exist permanently to eradicate extreme poverty in the world. In simple mathematical terms, high-income countries could eradicate all extreme poverty in low-income countries by investing just 0.1% of their collective GDP. For low-income countries, eradicating poverty without aid would mean spending more than 5.3% of their GDP continuously for more than 30 years. However, during the negotiation of the SDGs, rich countries refused to give more money to developing countries, only promising to divert part of their international development aid to poorer countries. Instead, they encouraged governments to increase tax revenues and look to the private sector for help.

China proposes an alternative model: one that makes “development more balanced, coordinated and inclusive”… “to create a development paradigm where its outcome benefits every person in every country more directly and more equitably.”

While building a fairer economic system may prove difficult, the decision to begin rests on a simple moral choice between two principles: (1) Me and my country first or (2) Shared prosperity for all.

In today’s world, it takes great political courage to make the right choice and follow the Chinese model. Continuing with the bad guarantees that global poverty will never be defeated.

Bai Shi
Tel: +86 106-899-6995
E-mail: [email protected]


SOURCE Focus on China