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Comment on Prof. Ferreira's Paper

When I was a boy, we were used to think that every year the rich became richer and the poor became poorer. The solution was to give money for the support of the poor countries. Now we learn that the number of absolute poor in the world is decreasing and even the difference between rich and poor countries is diminishing. What is the cause of this dramatic change? Of course all social phenomena of this magnitude have more than just one cause, but it is difficult to deny that the main cause seems to be the new wave of globalization of world economy that begins with the Marrakech Agreements of 1994. This runs directly counter the underdevelopment theories of the seventies. They said that the growth of the poor was only possible outside the world market, which was a system of capitalistic exploitation. Some countries tried to construct their autonomous path of development out of the world market but they were not successful and ended up in an unqualified disaster. The countries that succeeded in negotiating their position in the world market grew at an astonishingly accelerated pace. In the beginning they were a few small countries of East Asia, but the real turn came with the dramatic change of policies of China. Later, India and some countries of Latin America and of Africa followed suit. There is something worse than to be exploited by the capitalist market and this is not to be exploited by the capitalist market. Not by chance Pope Francis does not speak so much of exploitation as of marginalization. The poorest among the poor are those who are excluded from the market.

The figures on the decrease of poverty are comforting but we need to subject them to a critical examination. A first observation regards the fact that several hundred millions of people still live in a condition of abject poverty. Six million children die every year and all the poor people of the earth could be brought beyond the level of absolute poverty with the expenditure of more or less 0.5% of the gross product of the affluent countries. The good news on growth and the concentration of our attention on growth policies should not induce us to forget about those who are starving now and can be saved. We need first aid policies against extreme poverty based on the transfer of resources from wealthy countries and we should not set them aside to concentrate only on growth policies. First aid policies are not, properly speaking, development policies, although they are, of course, intertwined with them. If somebody is starving, the first urgency is to feed him. Later, you will have time and leisure to introduce him to the path of economic development.

A second observation regards the emerging difference between poverty as defined through statistical measures, and poverty as perceived by the people. Sometimes poverty diminishes in statistical terms but the perception of poverty grows. Why? I wish to explore here two possible reasons.

The first regards the possibility that per capita income may be inadequate to measure the real level of satisfaction of the people. All goods and services produced out of the market (within the household, for self-consumption etc.) are not measured in the per capita income. Equally important are the personal services rendered to each other within the structure of the enlarged family, or the support expected by the neighbourhood in case of need or the benefits of the natural or human environment etc. It is possible that in some situations the increase of monetary income is more then compensated by the loss of non-monetary goods and services.

The second regards the fact that nations or social groups who are deluded in their hope to better their situation or see their position on the social ladder worsened experience a frustration that leads them to exaggerate their condition of poverty. It is easier to be poor if everybody is poor; if my neighbour becomes less poor and I do not, than my poverty becomes intolerable.

Equally, if one has the perception of becoming less affluent that he used to be, or that his social status is lowered, he can feel much poorer than he really is. This is due also to the fact that this subject has developed a system of needs and expectations that he cannot satisfy any more. It seems that demands of social change and even of revolutionary change are not so much dependent upon absolute poverty as upon perceived poverty. People feel unhappier although they may be globally less poor.

A third observation regards the causes for the decrease of poverty and inequality Ferreira has brought to evidence. It seems that this is linked with the globalization of world economy. I have the impression that globalization was good for the rich of the rich countries and for the poor of the poor countries. The rich of the rich countries could freely invest their capital in poor lands where labour costs and protection of workers’ rights were extremely low. This created great occasions of profit for the capital and many jobs for the poor of poor countries. Manufacturing migrated, to a large extent, from Europe and the United States towards China and other poor countries. The process, of course, did not reach all the poor of the earth, but was a major force in the advancement of the underdeveloped countries. The extremely rich and the very poor are the winners of globalization.

Are there any losers? Who are the losers of globalization? At a first sight the losers of globalization are the middle classes and the poor of the rich countries. They are exposed to the competition of the poor of the poor countries, they lose jobs to the new countries and see that their wages do not grow as they were used to or are even lowered. There is growing dissatisfaction in Europe and in the United States against this state of affairs and important populist movements want to stop globalization and close the borders. They express the discontent of sectors that are actually impoverished or are afraid of losing their welfare in the near future.

Is this process unavoidable? Are we in the wealthy countries really condemned to lose our prosperity? Perhaps not. We live in an age in which the practical use of knowledge becomes more and more important for the economy. There are two ways of being competitive. The first way is to lower salaries and workers' rights. The other way is to innovate: innovation of products (one creates new products the others do not know how to produce) and innovation of methods of production (one produces old products with new, more economic methods of production).

We need in the developed countries a strong emphasis on innovation and on the systematic use of knowledge in the economy. It is the so-called knowledge economy. If we do that we will be able to sell to developing countries the new goods and services with a high informative content and to buy from them traditional manufacture. We can grow together, old and new economies, but in order to do that we need adequate policies and a high level of international cooperation, a functioning world governance.

One answer to the present difficulties of the developed countries is innovation and the knowledge economy. Another answer regards the reform of our welfare systems. Perhaps we can reach a higher level of satisfaction of the people with less monetary resources in our welfare if we reconstruct communitarian environments in which goods and services are exchanged on a non-monetary basis. This means, first of all, to reconstruct families because the family is typically the place of social exchanges on a basis of gratuity. One example: in well-integrated families grandchildren take walks together with their grandparents. It is a matter of everyday life. Imagine now an old man who is alone. If he wants to take a walk and breathe some fresh air he has to pay somebody who escorts him. In hiring somebody for this task he generates national income. If he takes a walk with his grandchild he will be happier but in the census statistics this satisfaction will not be registered. To reconstruct communitarian environments makes it possible to maintain and increase the levels of satisfaction of the people while reducing at the same time the costs of the welfare state. If we associate this reform of the welfare state with a strong investment in the knowledge economy we can go through the process of globalization without substantially reducing the standard of living of our people.

If, on the other hand, we overcome the frustration of the people of the rich countries and their fear of a gloomy future it will be easier to convince them to keep the markets open and not to hinder the economic progress of the underdeveloped countries. It will be easier also to convince them to finance the first aid measures that can bring the hundreds of millions who still suffer from hunger and undernourishment beyond the threshold of absolute poverty.

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