The globally dominant view is that economic growth reduces poverty. This is the view that is pushed by the IMF and World Bank. It is now being claimed to be implemented by such diverse governments as those of Nigeria, Senegal and Britain. It is also the approach that is adopted by Peter Obi. In each case, the governments are emphasizing economic growth and fiscal stability. They are all demanding that their populations sacrifice now in the hope that economic growth will bring prosperity to all in the medium term. However, at least in the case of Nigeria, poverty has not reduced since independence. Nigeria failed to reduce poverty for the Millenium Development Goals and poverty has continued to increase since 2015.
Growth of numbers in poverty in Nigeria from 1980 to 2010 and beyond, Nigeria Poverty Profile, 2010
Even when the per capita GDP (average income per person) was growing well, between 2000 and 2024, the number of people living in poverty increased massively in Nigeria.
The widely agreed strategy adopted by the World Bank and many governments, including that in Nigeria, is contradicted by the economic research that has been undertaken across the world. We know, from local bitter experience, that the relatively sustained economic growth in Nigeria over the last 25 years has resulted in economic growth, but this has also been associated with an increase in the incidence of poverty. The following research has confirmed this experience at the global level and indicates that directly redistributing wealth is far more successful at reducing poverty.
In addition, in a finite world, continued economic growth is just not possible, at least at the global level. Climate change is already having a catastrophic impact with the floods across Nigeria and beyond this year. So we should emphasise redistribution of wealth through increasing taxation of the rich to pay for frequent increases in the minimum wage and higher spending on public health and education, for example.
Deborah Rogers and Balint Balazs (2016) demonstrate that in very poor countries, a relatively small distribution of wealth from rich to poor could eliminate poverty: Using numbers which approximate those of Bangladesh in 1995-96, a redistribution of 3% of the income from the top quintile (reduced from 40.2% to 37.2%) to the bottom quintile (raised from 9.3% to 12.3%) results in a reduction in extreme poverty from 20% to 0%.
In contrast, the dominant view of reducing poverty through economic growth would require enormous growth over the long term: Attempting to reduce poverty by a similar amount through growth of the economy requires an expansion of total income of approximately 45%. (Rogers and Balazs 2016: 62)
It would also take many generations. Ending global poverty through economic growth alone would take more than 200 years (based on the World Bank’s inhumanly low poverty line of $1.90 a day) and up to 500 years (at a more generous poverty line of $10 a day) (Hoy and Sumner 2016).
In a similar vein, Chris Hoy and Andy Sumner show how very limited wealth redistribution (through, for example, redirection of fuel subsidies away from their relatively well-off beneficiaries to the poor) can have significant effects: “most developing countries have the financial capacity to end poverty at the $1.90, or a slightly higher line of $2.50 and potentially $5 a day” (Hoy and Sumner 2016: 3). Putting it another way, “Over three-quarters of the world’s poor at a US$ 5 {N75k in 2018} per day poverty line (well above the US dollar 1.9 global poverty line) live in countries that potentially have the capacity to end poverty (sometimes many times over) by national redistribution through changes in public spending and new taxes.” (Sumner, 2019: 417) There is also evidence that redistribution and growth are not mutually incompatible. Even IMF research has shown that “more equal societies grow faster and more sustainably than less equal ones” (Berg et al 2018).
Poverty rate increasing in Nigeria, estimated by World Bank, October 2024
Socialism is about massively reducing inequality in incomes, wealth and power. We cannot just wait for this to arrive, but need to struggle for reducing inequality in the here and now. Progressive policies should mean reducing poverty, inequality and corruption and increasing the powers and combativity of the trade unions. They are not about building capitalist economies in the vain hope that the increased wealth will trickle down to the poor.
We need to emphasise the demand for redistribution rather than hoping that economic growth will reduce poverty. We need to continue to demand a higher minimum wage (with annual increments at least in line with inflation). We also need to demand progressive taxation of the rich to fund public health and education for all. At the same time we should demand the reduction of taxes, fees and charges for the informal sector.
References
Berg A, Ostry JD, Tsangarides CG (2018) Redistribution, inequality, and growth: new evidence. J Econ Growth 23:259–305
Hoy, C, and A, Sumner (2016). ‘Global Poverty and Inequality: Is There New Capacity for Redistribution in Developing Countries?’ Journal of Globalization and Development, 7(1), 117-157 [not available]
Rogers, D, and B, Balázs (2016). ‘The view from deprivation: poverty, inequality and the distribution of wealth’. In Cimadamore, A, G, Koehler, and T, Pogge (eds). Poverty and the Millennium Development Goals. (Chicago: University of Chicago Press)
Sumner A (2019) ‘Global Poverty and Inequality: Change and Continuity in
Late Development’, “Development and Change” 50(2): 410–425.