Acton Institute Powerblog

Absolute and Relative Poverty: The ‘Dogma’ of Economic Equality

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On Friday April 11, the Vatican newspaper, L’Osservatore Romano, featured a front-page article on the progress made in international development since Pope Paul VI wrote the encyclical Populorum Progressio in 1967. The author of the article, Fr. Gian Paolo Salvini, S.J., is director of the journal La Civiltà Cattolica. He has a degree in economics and since he has lived in Brazil for many years, he has first-hand experience of development issues.

Salvini’s article is entitled “Incomplete Development” (“Uno sviluppo incompleto”) but his overall assessment of what has happened over the last 40 years is positive. He cites various statistics showing that “spectacular progress” has been made in terms of reducing absolute poverty. The number of people who have to live on less than one dollar a day has fallen from 29 to 18 per cent between 1990 and 2004. Also the data for longevity, child mortality and literacy show clear improvements.

Salvini identifies international trade as one of the key factors that has contributed to this trend. He is aware that progress has been uneven and that improvements in Asia have been far more marked than in Africa. This highlights that “the greatest success stories are due to the formula industrialize for exports”.

His most striking example to illustrate this point is that of South Korea. The fact that the country’s economic indicators were similar to those of Zaire (today the Democratic Republic of Congo) in the 1960s reflects the central importance of engaging with international trade: Korea’s achievement is largely due to its ability to export its manufacturing products to North America and Europe. This also explains why Dependency Theory, which was fashionable in the sixties and which advised developing countries to disengage with global trade, “is not taught anymore”.

The power of trade to transform poor countries is nowadays beyond doubt and Salvini notes that today it is often “the developing world which is asking for more free trade”, whereas Europe and the United States are obstructing the free flow of goods in agriculture.

But towards the end of the article, Salvini raises a more critical point regarding achievements in international development. He says that in contrast to absolute poverty, relative poverty is increasing: “The distance between those who are doing well and those doing badly, or to put it better, those who are doing well and those who are doing less well is growing.”

Salvini does not provide any data to illustrate this point and his assertion is, in fact, questionable. At the Populorum Progressio conference organized by Istituto Acton in Rome in February, Prof. Philip Booth from the Institute of Economic Affairs in London, specifically addressed the issue of relative poverty:

We should recognise that relative poverty has decreased during the process of globalisation .… Most dramatically, the gap between countries that have recently seen rapid growth and those countries that have been relatively well off for many decades has narrowed significantly … Whilst European Union countries, the US, the UK and Japan grow well below the world average (indeed disposable incomes are broadly stagnant across much of the developed world), over half the world’s population now lives in 40 countries that are growing at more than 7% per year. Development is happening and is benefiting huge numbers of previously-poor people.

Salvini may be referring to an increase in income inequality within countries but in that case he is not looking at poverty in terms of human needs and real deprivations, but as compared to an abstract “ideal”.

Reducing income inequality may seem like a noble aspiration, but it is of minor importance. Prioritizing the alleviation of relative poverty would yield the absurd situation where society as a whole is made poorer only to make it more equal. A desire for greater equality should not justify giving up the real and tangible benefits globalization has brought the poor over the last couple of decades.

Bernd Bergmann


  • Clare Krishan

    Not buying “real and tangible” until you define the terms (currency deposited over what time frame) so I can “take it to the bank”?

    “The number of people who have to live on less than one dollar a day has fallen from 29 to 18 per cent between 1990 and 2004.”

    Not sure whether this is good news or not, since statistics can lie. The FOREX exchange value of a dollar has fallen in that time period. So one would expect a smaller number of people qualify for living beneath its lower value, right? No net gain there!!

    I think Acton would do well to analyze what “$37,831 circulated in 2005 for every troy ounce of gold held by the United States when gold was worth only about $500” and consider the implications of our inflationary FIAT federal note currency. How safe are we at 1/80 leveraging of capital reserves?

    Are people going to starve like the leaders at the IMF and WorldBank say they are?

    And why? How complicit have we been in encouraging a voracious greed for credit by robbing entrepreneurs of their natural profits (our command economy of central bank interest rates that undercut the market STEALS any incentive to risk capital in production since borrowed money is cheaper than working capital under inflation)

    These amateur attempts to persuade folks of the “inherent virtues” of a means (the free markets) to an end (a vigorous and virtuous man), instead of studying the means to measure the application of virtue (what juridical basis is assured in law for currency values, aka credit inflation by central banks is theft, for example)

    Even the Pope’s Palm Sunday homily noted the corrupt law that so offended Jesus when he expelled the “speluncam latronum” from the temple.

    (Read Jesus de Soto’s footnote 33 in Chapter 2 of his book “Money, Bank Credit, and Economic Cycles” for his affirmation on this reading of Holy Writ)

    Acton would do well to dwell on the Pope’s denouncing of the dictatorship of relativism before claiming the absolute truth on relative poverty… and study Fr. Dempsey’s analysis of fractional reserve banking as a form of institutional usury…

    Until then so much of what appears here is a “ringing bells and clanging symbols” Calvinism, a false prosperity a la Smith’s invisible hand…

    Liberty demands responsibility, can we deliver?

  • Anonymous

    Meadowcroft in MandM says: “To suggest that prices should not be attached to environmental resources is to negate the fact that conservation involves benefits and costs. It is imperative, however, that prices arise out of the heuristic exchange of property titles in the marketplace and are not simply arbitrarily attached by politicians or bureaucrats.”

    Where do we stand when the dollar’s value is so closely tied to petroleum prices (no titles there, only a stream of public income from mining rights) controlled by 85% nationalized production under command economies of OPEC countries. Meanwhile our only “moral” agency is our vote for an adminstration who may have the privilege to nominate Governors to the Fed who arbitrarily attach prices (interest on money) and they’re NOT even a politician or a bureaucrat – they operate for the gain of their private member banks and can cause money to be printed out of thin air by dictate of FIAT??????

    I want to know what’s “absolute” about that? It seems like a pretty clear example of “relativism” and a very good example of “tyranny” to me… and the most vulnerable are continuing to suffer …

  • Barry E Lerner

    The comments on the article seem too clever by half. I suggest reading MENSA magazine’s April ’91 cover story on free trade for an analysis of the forest, rather than individual twigs.

  • great post! thanks very much for sharing