Yves here. Jomo’s title and his new post describes how the poor are slipping even further behind despite the appearance of generally rising living standards in most of the world. On a macro level, it really is true that the rich are getting richer and the poor are getting poorer. The rise in the concentration of income and wealth at the top of the spectrum has been accompanied by even more decay at the bottom
By Jomo Kwame Sundaram, former UN Assistant Secretary General for Economic Development. Originally published at Jomo’s website
Many low-income countries (LICs) continue to slip further behind the rest of the world. Meanwhile, people in extreme poverty have been increasing again after decades of decline.
Falling Further Behind
World output more than doubled from $36 trillion in 1990 to $87 trillion by 2021 (in constant US dollars), but this growth has not been evenly distributed, causing most LICs to fall further behind.
Many of the world’s poorest economies have had meagre growth since the 1960s. As most developing countries have made progress, income gaps among nations have declined.
World economic stagnation adversely affects most countries and people, especially developing countries relying on commodity demand and prices. As much of the world grew, most LICs fell further behind.
Hundreds of millions are stuck in extreme poverty, with incomes per capita in many post-colonial countries barely changing. A World Bank paper argues the poor are especially worse off.
Many poor nations have not caught up, let alone diversified their colonial-type economies. Meanwhile, many poor nations remain mired in conflict, deepening their stagnation.
Poverty has risen due to poor progress as populations grew. Another World Bank report found lower growth correlated with conflict deaths and institutional fragility. Unsurprisingly, these countries often had the world’s highest poverty rates.
Worse, global warming disproportionately harms poor tropical nations and their populations much more. Climate change is expected to push well over a hundred million into extreme poverty by 2030.
Left Behind
Paper co-author Paul Collier identified 58 countries in Africa, Asia and Latin America, with about 1.4 billion people in 2021, as the ‘Bottom Billion’. Collier argues most still face problems and have failed to progress since.
These nations have long suffered from persistent poverty, low growth, and failure to develop. Their plight has been exacerbated by civil conflict, geographic constraints, and, often, the inability to use their natural resources to accelerate economic development.
Since the 1980s – not the 1960s and 1970s, as the Bank paper claims – the Bottom Billion countries have failed to grow, falling behind instead. By contrast, the few former LICs that sustained high growth now enjoy per capita outputs at least thrice that of other Bottom Billion countries.
Except for these few notable exceptions, most of the 58 Bottom Billion countries remain LICs or have become lower-middle-income countries. Only six have achieved upper-middle-income country status in the past decade, mainly due to rapid growth thanks to oil and gas.
Although the Bottom Billion countries exist in all regions, about two-thirds (38 of 58) are in SSA. They account for 77% of the Bottom Billion population. Over half have abundant natural resources, but most have not used their mineral wealth to sustain economic progress.
In 2012, the IMF classified 34 of the 58 Bottom Billion countries as ‘resource-rich’, with non-renewable resource exports and revenue often exceeding 20% of their total exports and government revenue, respectively. But most still experience lacklustre growth, if any.
Since 1990, Sub-Saharan Africa (SSA) averaged barely 0.8% annual per capita income growth. Meanwhile, global growth rates doubled as regions like East Asia registered more than 6% yearly per capita growth rates.
Anaemic growth meant that the average incomes of Africans and other slow-growing LICs slipped further behind the rest of the world. Using the World Bank’s global poverty line, the number of poor Africans grew by tens of millions.
If current growth and poverty trends persist, many slow-growing or stagnant LICs, mainly in Africa, will be unable to end extreme poverty, let alone catch up with the rest of the world.
Poorest Worst Off
Conventional growth models imply that countries lagging behind should grow faster than those already ahead. East Asian industrialisation – supposedly emulating earlier European growth – supports this notion.
Growth in many LICs has slowed since the turn of the century. The paper finds that “The Bottom Billion fared worst of all”, as per capita output barely rose.
The poorest Bottom Billion did not experience convergence by catching up with the others. While some studies suggest overall income convergence, the world’s poorest are relatively worse off.
Now, the Bottom Billion are ‘falling behind’ while those in extreme poverty may be rising again. Incomes of the world’s poorest countries and people are likely to fall behind, even if only relatively, despite some convergence among countries.
The situation has worsened since 2022. In addition to the commodity-price collapse since 2015, the COVID-19 pandemic, the Ukraine and Gaza wars, and geopolitically driven unilateral sanctions have ensured protracted stagnation.
Bottom Billion countries lack the policy and fiscal space to cope with, let alone address, the impending debt crises. The situation has been exacerbated by tighter credit with high interest rates set by the US Fed.
Despite decades of recognising LIC characteristics, the World Bank has yet to develop strategies, policies and means to overcome their poverty. It is unclear why the Bank has endorsed the Bottom Billion designation, although it has not enhanced our understanding of poverty.
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One day the world bank will take responsibility for its actions.
It has consistently ignored the European colonization that stripped nations bare and after the end of empire, the resources were forceably sold through western commodity markets, thus keeping them poor Instead of being given access the world market, the poorest were forced to go through their former colonizers and this is still the case, with trading in USD for international exchange, with countries lacking education facilities the trained and educated are forced overseas for work thus depriving the LDCs of the fruits of their own labors
I hope that “One day the world bank will” BE FORCED TO “take responsibility for its actions.” It will never do so otherwise.
Wealthy people, countries and institutions are very quick to call those who have the least “irresponsible,” whereas they are the fount of the greatest irresponsibility of all: limitless GREED.
Take responsibility in what way? Post an apology on X, and promise to do better in the future?
Thank you! It seems that there were some returns to the second wave of globalisation after 1990, but these have largely been spent. Of course, that globalisation has now gone into moderate reverse, although that reversal may accelerate as the US becomes increasingly frustrated by its inability to resolve its deficits with China (that frustration being amplified by anxieties about de-dollarisation).
The second wave of globalisation was largely to the benefit of China, whilst other developing nations continued to stagnate: the post-pandemic rise in interest rates after more than a decade of heavily discounted debt flowing from metropoles to the ‘periphery’ has resulted in a second round of debt crises. However, the rise of China has resulted in a corresponding decline in the power and welfare of ‘Western’ nations. There is a perception that the ‘rise of the rest’ entails a decline within the ‘core’, especially if the reversal of globalisation increases zero sum game dynamics.
It is perhaps for that reason that many Western countries are that much more anxious to keep those countries which have not benefited meaningfully from second wave globalisation in a state of economic subjection, in order to prolong post-colonial dynamics for as long as possible in order to offset the ‘rebellion’ of much of the Global South. This, then, means that the pursuit of debt by Western countries (sanctified by their courts) has become that much more important – witness the legal travails of Argentina between 2001 and 2015 – at the behest of ‘vultures’ like NML and Singer. This attitude may be contrasted with the relatively more benign approach taken by Brady in the early 1990s: then, the US could afford to provide debtors with ‘latitude’, which it perhaps cannot do so now that rentier dynamics have become that much more firmly entrenched.
The decline of UNCTAD after Prebisch, and most especially after 1976 may also help to explain the increasing turn to BRICS as an alternative source of *relatively* less predatory credit than that supplied by the West and its IMF/World Bank adjuncts: https://www.phenomenalworld.org/analysis/grievance-and-reform/. This is not to say that China is not completely predatory, only that it *seems* to be *relatively* less so than the West; its credits to developing nations are not quite as contingent.
Immediately preceding Jomo’s closing paragraph referencing the World Bank’s ‘wearing blinders’ is the sentence “ The situation has been exacerbated by tighter credit with high interest rates set by the US Fed.” The Creature of Jekyll Island is once again at the root of this evil of economic despair. Both “banks” are literally owned and controlled by global MOTU-type bankers – the very same ones that General Smedley Butler (ret) wrote about in “War is a Racket”. So is widespread impoverishment and resource extraction and exploitation. These racketeers need to be ‘taken out’- and as it has been said, “power will not yield without a fight”. It’s pitchfork time folks! Additionally, I fully endorse Yves’ “Skunk Party Manifesto” – I had the delightful opportunity to get acquainted with her at one of the last NYC “meetups” (Michael Hudson was there too!) and one of my very first questions to her was about the possibility of actually forming such a party – she smiled and demurred with some reference to the logistical can of worms it would entail. A most memorable evening indeed!
I would love to see more news on Sub-Saharan Africa on this site. There is so much going on in Burkina Faso and the new military alliance formed in opposition to ECOWAS. I see only fascinating snippets and yearn for some comprehensive high-level analysis.
surprise surprise, he mentioned the 1990’s.
https://cepr.net/images/stories/reports/nafta-mexico-update-2017-03.pdf
this was of course predicted: Mexico’s long-term economic failure, including the 23 years since NAFTA, it is unlikely that immigration from Mexico would have become a major political issue in the U. S., since relatively few Mexicans would seek to cross the border.
Mexico today would be a high-income country, with income per person comparable to Western European countries. If not for NAFTA
i predicted it for sure, along with many others.
http://cepr.net/publications/reports/did-nafta-help-mexico-an-update-after-23-years
Did NAFTA Help Mexico? An Update After 23 Years
March 2017, Mark Weisbrot, Lara Merling, Vitor Mello, Stephan Lefebvre, and Joseph Sammut
En español
This paper compares the performance of the Mexican economy with that of the rest of the region and with its own economic performance, over the 23 years since NAFTA took effect, based on the available economic and social indicators.
Among the results, it finds that Mexico ranks 15th out of 20 Latin American countries in growth of real GDP per person, the most basic economic measure of living standards; Mexico’s poverty rate in 2014 was higher than the poverty rate of 1994; and real (inflation-adjusted) wages were almost the same in 2014 as in 1994.
It also notes that if NAFTA had been successful in restoring Mexico’s pre-1980 growth rate — when developmentalist economic policies were the norm — Mexico today would be a high-income country, with income per person comparable to Western European countries.
If not for Mexico’s long-term economic failure, including the 23 years since NAFTA, it is unlikely that immigration from Mexico would have become a major political issue in the United States, since relatively few Mexicans would seek to cross the border.
This report updates a version released in February 2014.
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there was a reason why Hitler was so enamored with free trade.
the world bank and the fed get their power from of free trade.