Archive for November, 2007

Social Capital Lowers Poverty in the US

30 November, 2007

Penn State University researchers have examined the incidence of poverty in the US and its relation to social and political factors that are not usually included in studies. They have come up with some interesting findings, notably: ‘Counties with more self-employed workers or entrepreneurs, more immigrants and more community leadership and participation, known as social capital, have lower poverty rates’. They also find that those areas that have greater competition between two political parties tend to have lower levels of poverty.

A brief synopsis can be read here. The research is published in the Journal of Socio-Economics, by Anil Rupasingha and Stephan J. Goetz in their article ‘Social and political forces as determinants of poverty: A spatial analysis’.

Human Development Report highlights the impact of climate change on poverty

29 November, 2007

The UNDP’s Human Development Report released on Tuesday highlights the impact climate change is likely to have on poverty and the attempts to achieve the Millennium Development Goals. It notes that ‘In today’s world it is the poor that are bearing the brunt of climate change’. Failure to tackle the issue ‘will consign the poorest 40 percent of the world’s population – some 2.6 billion people – to a future of diminished opportunity. It will undermine efforts to build a more inclusive pattern of globalisation, reinforcing the vast disparities between the ‘haves’ and the ‘have nots”.

The report draws an analogy with the ‘fight against the much higher inflation rates of the distant past’, in which institutions were found, such as more independent central banks, that allowed lower inflation to be achieved despite the short term economic difficulties encountered. Of course, the problem with that is that the efforts to tackle high inflation had the support broadly of the middle classes, whose interests were directly affected. As the HDR itself states, however, with climate change at present it is not the middle classes that are being particularly adversely affected, althought they will be in the long run.

The report can be found here.

In the Human Development Index this year, Iceland comes out top. The UK is in 16th place, just ahead of Belgium.

EU pressuring China to strengthen its currency

28 November, 2007

The EU is expected to put pressure on China in a bilateral summit this week to allow its currency to strengthen more quickly, says the BBC here. Luxembourg’s prime minister, Mr Juncker, has claimed that the yuan is undervalued by 20-25%, leading to a soaring trade deficit between China and the EU which rose by 25% in the first eight months of the year to £50.23bn.

China has also come under considerable pressure from the US over recent years to strengthen the yuan due to the large bilateral trade imbalance between the two. Official US government figures showed a bilateral trade deficit with China in 2005 of $202 billion, although these figures are somewhat exaggerated by certain quirks of the US method of measuring trade flows with China. The US has criticised China’s tight control of its exchange rate and pushed them to float the yuan.

Ironically , floating the yuan is likely to worsen the problem (if it is a problem) rather than improve it. As UNCTAD’s 2007 Trade and Development Report argues (pages 13-29), floating its currency would open up opportunities for ‘carry trade’ – that is, the practice increasingly employed by investment funds to borrow money in local currency from a country with low interest rates, and then convert it into another currency (often US dollars) that earn a higher yield. That is, borrow money at low interest rates (China’s current real interest rate is negative) and lend the money in a different currency where it earns high interest rates. As UNCTAD say (page 28), ‘if China were to give in to the pressure from the United States and float its exchange rate, [the yuan] might risk following the examples of the yen and the Swiss franc and be carried to high interest rate locations. If that were to happen, it would depreciate and cause a further increase in China’s competitiveness instead of reducing it. Such an outcome would clearly worsen the global imbalances’.

China, as we all know, is currently growing at around 10% a year by steadfastly ignoring the advice it receives from what Ha Joon Chang has termed the Bad Samaritans (i.e. Western governments) and has lifted millions of people out of poverty by doing so. It would be a shame if that process were halted by increased instability resulting from China giving in to badly thought out recommendations for floating their currency from countries that not long ago managed to precipitate a financial meltdown across Asia with their advice for capital account liberalisation.

IMF warns of vulture funds undermining debt relief

23 November, 2007

The IMF warned last month that ‘legal action worth almost £1bn by “vulture funds” against some of the world’s poorest countries poses a threat to the debt cancellation deal agreed by the G8 at Gleneagles in 2005’. A report by IMF staff found that 11 out of 24 poor countries approached said that they were involved in litigation, worth a total of $1.8 bn with 46 creditors.

Read the Guardian’s report here.

New section on poverty facts and stats

23 November, 2007

I’m constantly coming across interesting facts and figures that I subsequently want to pop into something I’m writing. By that time, more often than not I’ve forgotten where I found them. I’ve therefore created a new page on the blog on which I’ve been placing (what I thought were) interesting facts and stats about poverty. Each one should have a reference or link, so that you can drop them into an article easily. Please feel free to add any you fancy or point things out to me for me to add them. I hope to make it longer over time.

To get there, click here, or use the link in the ‘Pages’ section on the right.

Slavery in Florida

23 November, 2007

The 2007 Anti-Slavery Award, given out by Anti-Slavery International, has been given to the Coalition of Immokalee Workers for their work on tackling modern-day slavery in the United States agricultural industry. CIW investigations have contributed to prosecution of six slavery cases over the last 10 years. For example, three people were convicted of conspiring to enslave hundreds of workers on citrus farms in Florida in 2002 and sentenced to between 10 and 12 years. You can read a little more about the case here.

Migration and poverty alleviation via Western Union

22 November, 2007

This is an interesting story in today’s New York Times on the ubiquitous Western Union, and how it both helps poor people and is shaped by their movements around the world.

Food Insecurity in Bangladesh: the Other Crisis

22 November, 2007

by David Hulme

Global attention on Bangladesh is focused on the crisis created by the November 15th cyclone. This has caused horrific suffering, but the country also faces a more insidious and slowly unfolding crisis. Below is a note that a colleague in Bangladesh has emailed me. As the country is under a caretaker administration, backed by the military, s/he cannot reveal their identity. The recent increases in global food prices are clearly already putting enormous pressure on poor people’s incomes around the world – but, is Bangladesh really facing a ‘near famine’. Let me know what you think.

The Impending Food Crisis in Bangladesh

Food prices in Bangladesh are galloping by the day, and essential commodities, such as rice, wheat flour, cooking oil, onion and lentil are now well beyond the reach of the common man. It was not that prices were downward during the five-year period of the last elected government, but these have been continuously creating all time high records during the last one year, that is after a civilian caretaker government, armed with emergency provisions, backed by the armed forces and enjoying the blessings of the international development partners, took over in Bangladesh. Indeed, with various reforms, including a crackdown on corruption, it was widely expected that economic development would further pick up, and there would be an accelerated reduction of poverty in Bangladesh. Unfortunately, the records show an unmistakable downturn in the economy with dwindling investments, both internal and external. In fact, Mr. Forrest Cookson, an American free-lance consultant living in Bangladesh, has recently commented that this year, the GDP growth rate in Bangladesh may be in the negative. Compare it with the 6 percent growth rates of recent years.

So, the question to ask is ‘what happened during the last one year’. It seems that the poor economic mismanagement under the caretaker government started with indiscriminate raids on the godowns (Wharehouses) of large food dealers and importers on the pretext of cracking down on food adulteration. This is one of the usual gimmicks of Martial Law/Semi-Martial Law governments in their initial phase to win popularity and pressure the private sector into submission. Adulteration of food is certainly a problem in Bangladesh, and action against it was progressing quite impressively during the rule of the last elected government. However, the brutal and thoughtless manner in which it was operationalised by the caretaker government had a disastrous impact. Many food importers and food merchants stopped importing and distributing food. This was despite the amendments and inducements introduced later and solemn promises made by the high-ups not to harass them in the future.

Second, the interim government has dragged its feet on importing food grains for at least six to nine months, given the slow and complicated policy-making and implementation mechanism in place in Bangladesh and despite the emergency provisions. In countries like Bangladesh suffering from food insecurity, it is important (more…)

Poverty raised as an issue in the 2008 US Presidential elections

21 November, 2007

Opportunity 08, a joint venture by ABC and the Brookings Institute to focus presidential candidates and public attention on important issues facing the US, is this week focusing on poverty (see ABC News). Thirteen per cent of US citizens are classed as in poverty, and eighteen per cent of children (mirroring the higher rates of poverty among children in the UK which I wrote about here). This is higher than was seen in the 1970s, and reflects the falling real wages of most workers since the 1970s, particularly among those on lower wages. The State of Working America report by the Economic Policy Institute notes, ‘in 2003 the minimum wage was worth just 34% of what an average worker earned hourly, the lowest point for 40 years’ (down from 50% in the late 1960s and 40% in the early 1990s). There have also been significant decines in the number of jobs providing health insurance and pensions over this period.

Bush is doing his bit. On Tuesday he vetoed $150.7 billion in discretionary spending for the Departments of Education, Labor, and Health and Human Services. He has also repeatedly blocked any raising of the minimum wage, although in May this year a $2.10 rise (to $7.25 an hour) was passed. This is the first time the minimum wage has gone up in ten years.

There are therefore good reasons for poverty to be an issue in the election. We wait to see how much of an impact Opportunity 08 actually has on the debate.

New report highlights the depth of child poverty in the UK

19 November, 2007

A report, Living With Hardship 24/7, was published recently by the Frank Buttle Trust, detailing the hardships faced by the one in three children that grow up in poverty in the UK. It finds that a quarter of the country’s poorest households cannot afford to put a daily hot meal on the table for every family member. Children as young as five were found to be so aware of thier parents’ financial difficulties that they gave back money to help support the family.

The Independent’s report can be found here. It is claimed that the report can be downloaded from the Buttle Trust website here, but I can’t find it.