Growth is Good for the Poor– Right?

My good friend Thomas Ginn*, a senior economics major and accomplished anti-poverty crusader, recently lent me his copy of The Bottom Billion by Oxford professor Paul Collier. It is a fascinating read and I would highly recommend it to anyone interested in foreign aid, economic development, econometric tools, or helping poor people in general.

Anyway, one of the bits from the book that I found most striking is this anecdote from Dr. Collier:

“While I was directing the World Bank’s research department, the most controversial paper we produced was one called ‘Growth is Good for the Poor.’ Some NGO’s hated it, and it was the only time in five years that Jim Wolfensohn, the Bank’s president, phoned me to voice his concern.”

Now why would some of the world’s leading poverty reduction organizations be so uncomfortable about economic growth? Isn’t the problem with poor people the fact that they are poor? Wouldn’t growth go a long way toward alleviating poverty?

Dr. Collier points out that some people are concerned that economic growth doesn’t always trickle down: “The growth of Equatorial Guinea, for example, produced benefits for only a handful of its people.” Thus there is a focus among anti-poverty NGO’s on “sustainable, pro-poor growth.”

As one might expect, however, the case of Equatorial Guinea “is exceptional; growth usually does benefit ordinary people.” In fact, Dr. Collier (who is scrupulously nonpartisan) warns that focus on “sustainable, pro-poor growth” has actually “inadvertently undermined genuinely strategic thinking.”

As an example, he mentions a banking expert who was trying to promote banking reform which evidence strongly suggested would improve economic growth. However, he was hindered by concerns that NGO’s wouldn’t accept it since there was considerably less evidence that the reforms would help the poor.

Is this a case of bleeding hearts gone awry? Perhaps—it certainly seems that the NGO leaders have been at least a little influenced by leftist politics.**

Leftists the world over consistently appeal to people’s envy, the only one of the seven deadly sins that does not give at least temporary pleasure (to borrow a line from George Will), which is why you hear so much whining and complaining about “inequality.”

I would like to posit here that inequality is not really a problem—or, in any case, only a rather minor problem. Consider: if a starving Ugandan doubles his annual income and is now able to feed his family, does it really matter to him if his neighbor has quadrupled his income? The first man may be a bit envious, but certainly things could be worse: his primary problem has been fixed.

As Dr. Collier declares, “We cannot make poverty history unless the countries of the bottom billion start to grow, and they will not grow by turning them into Cuba.” Paging President Obama…

*Disclaimer: Thomas Ginn does not necssarily endorse any of the views presented here. Actually, I’m pretty sure he would disagree with me on some points.

**Not to let right-wingers totally off the hook: Dr. Collier notes a tendency among the right to view poor policy as the cause of poor country’s problems. That is a problem, to be sure, but the rest of the book details other significant non-governmental problems that keep the bottom billion down.

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