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A first step for the global poor – shatter six myths

Abject poverty takes a terrible toll. We can stop it. But we must start by separating fact from fiction.

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While humanitarian assistance has saved millions, consider this startling conclusion from a recent study by the Center for Global Development: When aid rises to 8 percent of a recipient nation's gross domestic product, it has zero effect on economic growth. Above that, it has a negative effect.

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The serious challenge is one of coordination. Chronic shortages of skilled citizens in the very worst-off nations mean that more resources simply can't be deployed effectively. Instead, donors, NGOs, and private philanthropies trip over one another, competing to give money away, rather than coordinating at ground level to get results. More isn't always better; smarter is better.

Globalization is hurting the poor.

By what measure? Agricultural reform and liberalized trade and investment have lifted nearly half a billion people out of extreme poverty in China and India, supporting their survival.

No doubt global competition has caused major upheaval, which can hit the poor especially hard. That should lead to better efforts to buffer the last billion from globalization's shocks – but we shouldn't deprive them of its abundant benefits.

Trade invariably generates mutual gains. Unfortunately, given the win-lose quality of political brawls, many don't believe in mutual gains, assuming that one country's wealth must be explained by another's exploitation. This breeds cynicism about globalization.

For anyone on the edge of survival, the real risk isn't globalization. It's isolation. The most sustainable contribution that developing nations can bring to world markets is their labor. It produces far more widely felt economic benefits than extraction of natural resources such as oil. But with labor capacity in eastern and central Asia growing so dramatically, potential workers in the very poorest nations risk being shut out of world labor markets for another two centuries.

None of this is to suggest that globalization's negative effects should go unchecked. Trade protesters aptly call out Western hypocrisies, corruption, and exploitation. They help governments make rules to protect the weak. But developing nations that grow their economies through global trade are able to afford more mature regulatory regimes, enforcement of decent labor standards, and better environmental technology. Cutting off trade is a death sentence.

Wealthy nations must work to reduce poverty everywhere.

Why? This well-intended ethic is driven by a natural – but in this case dangerous – human tendency to focus on relative standing, independent of absolute wellbeing.

Imagine a Masai tribesman in the Serengeti, describing himself as happier when the grass thatch on his hut is thicker than his neighbor's. In absolute terms his wealth is negligible. And by first-world standards he might consider it miserable. The primacy of relative inequality means that, especially as globalization puts a sharper focus on disparities of wealth, egalitarian ideals prompt wealthy nations to devote resources to reduce relative poverty everywhere.