The Economics of Poverty
Elimination
Jon D. Erickson
Department of Economics
Rensselaer Polytechnic Institute
Troy, New York, USA
The Economics of Poverty Elimination
I.
II.
III.
IV.
World Development as Growth Policy
Growth as Cumulative Causation
Examples
If Not Growth, then What?
I. World Development as Growth Policy
Rationale: the world economy can grow its
way out of poverty and environmental
degradation
Dominant Strategy: unbalanced, industrial,
directly productive, export-led growth.
Recipe: technological progress, market compatible institutions, available resources,
capital markets, and entrepreneurship
. . . World development as market
expansion . . .
“In a market economy, the price
system ensures that no one can consume
resources without first creating some of
equal or greater value.”
~ N. Gregory Mankiw
II. Growth as Cumulative Causation
Population
20%
Income
82.7%
1950  1992
20%
20%
11.7%
Over 5x increase in global output
Nearly 12x increase in world trade 2.3%
1950 – Haves 30x over the Have Nots
20%
1.9%
1989 – Haves 60x
20%
over the Have Nots
1.4%
Cumulative Causation
A self-reinforcing process whereby
the disproportionate rewards of
economic development attract further
disproportionate development.
Progressive Modernization of Poverty
III. Examples

20 buyers and 160+ sellers
To attract companies like yours . . . We
have felled mountains, razed jungles, moved
rivers, relocated towns . . . all to make it
easier for you to do business here.
~ Philippine government ad in
Fortune, 1975
III. Examples



Redistribution of pollution
Pharmaceutical markets
Creating demand for debt and technology
“. . . most of these systems were installed not because
there was a local consumer demand for them but because
a Northern entrepreneur was able to find a Northern aid
agency to support their establishment as ‘demonstration’
projects.”
~ Anil Agarwal et al.

The development industry
IV. If Not Growth, then What?

Many alternatives: Steady-state economy (Daly),
an economics as if people mattered (Schumacher),
people-centered development (Korten), ecological
economics?






Sense of stability
Sense of limits
Need for local voice
Align agency interests with the poor’s interests
Compatible community development
Think in terms of socio-ecological classes
Earth’s Three Socioecological Classes
Overconsumers
1.1 billion
> US$7,500 per capita
Travel by car and air
Sustainers
3.3 billion
US$700-7,500 per capita
Travel by bicycle and
public surface transport
Excluded
1.1 billion
< US$700 per capita
Travel by foot or donkey
Eat high-fat, high-calorie, Eat healthy diets of
Eat nutritionally
meat-based diets
grains, veg., &some meat inadequate diets
Drink bottled water and
soft drinks
Drink clean water plus
some tea and coffee
Drink contaminated
water
Use throwaway prod. & Use unpackaged goods
discard substantial wastes and recycled wastes
Use local biomass and
produce negligible wastes
Live in spacious, climate- Live in modest, vented,
controlled, 1-fam. homes multiple-family homes
Live in rudimentary
shelters or in the open
Maintain imageconscious wardrobes
Wear secondhand
clothing or scraps
Wear functional clothing