Mensur Boydaş: Vahdi Boydaş

1. WORLD POVERTY
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2. Some terms:
GDP: gross domestic product: all the goods and
services produced on record in a country in a
year
GNP: Gross national product: all the goods and
services produced in a country plus all foreign
earnings in a given year

3. GNI per Capita
•
Gross national income per person on average
Total GNI
Total Population
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4. Economic Growth
• Growth in GDP per capita over time,
usually several years
• Calculated two ways:
– As average annual growth rate of real GDP
– As average annual growth in GDP minus
average annual population growth, over some
time period
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5. Average Annual Economic Growth Rates
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6. Problems in Measuring Well-Being
• Use of GNI and GDP data ignores issue of
composition of GDP
– Items of production of which GDP consists
• Distribution of GNI
– Distribution of income between different
income groups
• Income is never distributed equally; therefore, high
value of GNI per capita really tells us nothing about
standard of living of most of country’s residents,
because it tells us nothing about distribution of this
income
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7. Income Distribution
• Two ways to measure:
– Share of country’s total income that goes to each fifth of
population
• Lorenz curve
– Share of total income that goes to poorest 20 percent of
population
• Measures to improve equality:
– Elimination of price distortions to ensure that certain groups
receive more adequate incomes
• Raising of agricultural prices would lead to higher incomes for lowincome farmers, for example
– Higher taxes on wealth and income of high-income people
• Government might use this revenue to improve basic services to
poor
– Redistribution of assets (property that is owned, such as land)
• Greater equality in ownership of income-earning assets is often
fundamental to ensuring greater equality of incomes
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8. Income Distribution in Selected Countries
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9. High income countries
• 40 countries (Western Europe, USA,
Canada, Japan, Australia, New Zealand)
• Per capita annual income: USD 9,360 and
above
• 15 percent of world population (870 million
people)
• More than half the world’s total income

10. Middle Income Countries
About 90 countries fall in this category.
One third of humanity lives in middle income countries.
Latin America, the Middle East, East Asia, West Africa
Per capita annual income between USD 760 and 9,360.
Half of the population lives in cities. They have moderate
levels of industrialization.
Several distinct groups within this category:
*Newly Industrializing Countries (NICs): Brazil, Argentina,
Mexico, South Korea, Taiwan.
*Oil-producing nations of the Middle East
*former Soviet bloc countries

11. Low income countries
• Half of humanity lives in low income
countries
 About 60 countries, mostly in central and
eastern Africa and South Asia
• Per capita annual income less than USD
760
• 25 percent of the population lives in cities
• Little industrialization, mostly agricultural

12. The world according to incomes

13. THE EXTENT OF POVERTY GLOBALLY
Poverty exists in all countries of the world;
but it is most severe in low and middle
income countries
Poverty rates are highest in countries that
have weak economies, weak
industrialization, and high rates of
population growth

14. • Relative poverty: a level of poverty in which a
person lacks resources that other members of
her society has access to.
• Absolute poverty: less than 1 $ per capita
income per day
This is a life-threatening level of poverty, a
situation in which a person faces the prospect of
hunger and disease on a daily basis

15. • Amartya Sen’s definition of poverty: it should be
seen as a “deprivation of basic capabilities
rather than merely a lowness of incomes”
The Human Development Index (HDI) makes more
sense according to this definition
HDI measures a combination of life expectancy,
per capita income, and education (number of
years of schooling and adult literacy)

16. Some facts on absolute poverty
20 percent of world population (1.3 billion) is in
absolute poverty. They are seriously
malnourished.
Among these, 800 million are at risk of their lives.
Sub-Saharan Africa is hardest hit by absolute
poverty.

17. Poverty Statistics
• Some 2,600 million people live on less
than $2 per day
• In the poorest countries of the world:
–
–
–
–
43% of children under age five are stunted
Over 12 percent die before reaching age five
Average life expectancy is 59
50 percent of women and girls over age 15
cannot read and write
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18. HOW CAN POVERTY BE
EXPLAINED?
1)
Technology: most poor nations are still agricultural; they don’t
have much industry
But does this explain poverty?
2)
Population growth: the poorest nations have the highest
population growth rates
But what’s the correlation between poverty and high birth rates?
3)
Cultural patterns
Some poor nations are more “traditional”. But what does this mean?
4)
Gender inequality:

19. 6) Global power relationships: historically, wealth
flowed from poor to rich nations
Colonialism: political domination and economic
exploitation of some countries by others
Neo-colonialism: economic exploitation of some
nations by multinational corporations and
wealthy countries, but without political
domination

20. Three theories on global
inequality and “development”
• Modernization theory (W.W. Rostow)
• Dependency theory (A.G. Frank)
• World systems approach (I. Wallerstein)

21. Modernization theory
It is a theory of social and economic development
which explains global inequality between
countries in terms of different levels of
technological development
Traditional societies are “backward,”
“underdeveloped,” and poorer.
Societies which embrace modernity and change
are wealthier and more developed

22. Modernization theory
Western Europe, and then North America
“modernized” and “developed” thanks to
the Industrial Revolution.
If traditional societies industrialize and
embrace modernize, they will also
become developed.
So, the path to modernization is open to all
who want it.

23. Rostow’s stage theory of modernization
W.W. Rostow’s book : The Stages of Economic
Growth. A Non-Communist Manifesto (1960)
All societies will eventually pass through the
following stages
1) Tradition
2) Preconditions for take-off
3) Take-off
4) Drive to technological maturity
5) High mass consumption

24. Rostow’s modernization theory
• Each country reaches the “take-off” for
industrialization when a market economy
emerges. Britain reached that stage in 1800.
Non-western nations will reach that stage when
their productive investments grow. How?
Through foreign aid and technology transfer.
• By the 1950s, the US reached the stage of “high
mass consumption.”

25. Modernization
Role of rich nations in the “modernization” of
the poor
-- foreign aid
-- industrial technology transfer
-- transfer of food production technology 
the Green Revolution

26. Criticism of Modernization Theory
1) Modernization theory is the ideological
justification of Western-led capitalism
2) Modernization theory does not take into
account the colonial exploitation of the
non-Western world by Europe
3) Wealthier nations are often the cause of
poverty, rather than being a solution for it

27. Cont’d
4) The wealth gap between the rich and the poor
countries is not diminishing; in fact, it has
increased since the 1950s
5) Industrialization does not guarantee an
increase in living standards
6) Modernization theory looks for internal causes
of poverty; doesn’t consider any external
factors
7) It holds the life style of Western countries as a
yardstick to judge the development of other
nations. Hence, it is ethnocentric.

28. Dependency theory
A model of economic and social development that
explains global inequality in terms of the
historical exploitation of poor societies by
Western nations.
Andre Gunder Frank: The Development of
Underdevelopment (1975)
He argued that colonial and post-colonial
exploitation by Western Europe and the USA
caused the underdevelopment of non-Western
societies, rather than their development
Why?

29. Dependency theory
• Rich and poor nations are linked economically.
“Modernization” of countries cannot be considered in
isolation from each other.
• During colonial period, European countries extracted raw
materials, mineral and food from their colonies.  this
enabled them to industrialize
• Exploitation of their resources left colonized societies
poor. They were dependent on imports of industrial
goods from Europe. Most of the peasantry worked on
farms or mines from which products were exported to
Europe

30. Did the end of colonization –
“decolonization” – bring an end to
exploitation of the newly independent
states?
No.
 Political liberation has not translated into
economic autonomy.

31. World systems perspective
This perspective builds on the “dependency” approach. But
it has a “world systemic” angle.
Immanuel Wallerstein (1974): The Modern World Economy
Wallerstein argues that capitalism is a “world economy.”
The unit of analysis for studying the world economy is the
“world” rather than individual nation-states (contra
modernization theory)
The capitalist world economy emerged in the 16th century in
western Europe in the wake of the “discovery” of the
Americas

32. World systems perspective
The capitalist world economy consists of a “core,” a “periphery,” and a
“semiperiphery.”
Historically, the core was western Europe, which became industrialized
by “extracting surplus” (funneling raw materials and precious
metals) from the “periphery.”
The semiperiphery stood in-between the core and the periphery in
terms of incomes and levels of industrialization.
In this world economy, the core exploited, or extracted surplus from the
periphery in terms of cheap labor, natural resources, raw materials
and as markets for European manufactures.
Example: In the 19th century, the Ottoman Empire was an exporter of
dried fruits and nuts to Europe and was dependent on imports of
manufactures (“English cloth,” for example). It was heavily indebted
to European countries.

33. World systems perspective
What is the situation today?
In the postwar period, many countries in the
periphery have become relatively industrialized
For example, Turkey is a relatively industrialized
nation today, the majority of whose exports are
manufactures (industrial goods)
Does this mean that the core no longer extracts
surplus from the periphery?
Or, does it mean that peripheral countries have
entered the core?

34. The answer to both questions is no.
1) Surplus extraction from the periphery to the core
is still ongoing.
2) Only a few countries have entered the
semiperiphery or the core (e.g. South Korea) in
the postwar period.
Wallerstein calls this situation, “development by
invitation.”

35. “Commodity chains”
1) Peripheral countries are usually specialized in
low-profit and labor-intensive links in
international commodity chains. Core countries
are usually specialized in high profit links of
commodity chains.
A commodity chain: a chain of activities from the
manufacturing to the distribution of a final
product.
Example: the apparel (ready-to-wear clothing)
commodity chain includes, cotton growing,
textile mills, stitching of garments, design,
marketing, distribution, retailing

36. Apparel commodity chain
Multinational companies are concentrated in the high profit
end of the apparel commodity chains such as design,
brand names, high technology and marketing
Companies in countries such as Turkey and Mexico are
concentrated in labor-intensive activities such as the
stitching of garments
Example: when Levi’s manufactures jeans in Turkey and
sells them in Europe, it retains a higher proportion of the
profits because of its world-popular brand name.
What about Mavi jeans?

37. 2) The South Korean “miracle”
S. Korea was a special case for two reasons:
a) having geo-political importance for the U.S.
and therefore a “favored” economic
relationship with it
b) having an authoritarian state which prioritized
industrialization at the expense of workers’
rights and democracy until the early 1990s

38. according to the world systems perspective,
the capitalist world economy is still a
system with structural inequalities
between richer and poorer countries

39. What is the role of multinational corporations and global
financial institutions in perpetuating global inequality?
Examples: the World Trade Organization and the IMF?
WTO (established in 1995) ensures that international trade
takes place in a “liberal” environment. But by doing so, it
prevents poorer countries from protecting their
agricultural and manufacturing sectors.
IMF (established in 1945) extends “stabilization” loans to
countries, but in turn, it requires them to cut down on
social spending (education, healthcare, public sector
jobs) and open up (liberalize) their economies.

40. Economic Development and
Standards of Living
• Economic development
– Multifaceted process that involves improvements in
standards of living, reductions in poverty, and growth
in GDP per capita
• Many economists use measures that directly
indicate actual well-being of people of lessdeveloped countries rather than rely on income
or output data alone
– Best indicators of living standards:
• Average life expectancies
– Age to which baby born in particular year can be expected to
live
• Infant mortality rates
– Number of babies who die within first year of life per 1,000 live
births
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41. Life Expectancy and Infant Mortality Rate Statistics
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42. Newly Industrializing Countries (NICs)
• Singapore, South Korea, Taiwan, and
other countries achieving rapid growth
through industrialization
– Characteristics of success:
• Well-educated labor force
• Fairly homogeneous, entrepreneurial culture
• International conditions conducive to success at
the time of early development
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43. Capital-Intensive Technology vs.
Labor-Intensive Technology
• Capital-intensive technology utilizes
large amounts of capital
• Labor-intensive technology utilizes large
amounts of labor
– Can utilize large numbers of people who
would otherwise be unemployed
• Key to development often lies in
agricultural sector
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44. Agricultural Development
•
Development of agricultural sector in most lessdeveloped countries is now recognized as
extremely important:
1. Most of world’s poor live in agricultural sector;
hence, efforts to benefit this sector will most directly
benefit needy as well
2. Agricultural sector typically offers greatest potential
for development
3. Techniques also tend to be far more labor-intensive
in agriculture than in modern industry, thereby
offering employment for larger numbers of people
4. Agricultural sector most directly addresses most vital
need of all people, that of food security
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45. Access to Inputs, Extension, and Markets
• For agricultural development to occur and food security
to be achieved, both government of developing country
and international community must fulfill important roles:
– Land must be redistributed in a manner that allows more
appropriate income distribution and maximum incentives for
agricultural production
– Farmers must have access to necessary seeds, fertilizer,
irrigation, animals, structures, and vehicles
– Financing must be arranged for masses of poor farmers
– Farmers will require extension services if they are to use
increasingly complex but more productive farming techniques
and inputs
– Farmers will also require reliable transport and market facilities
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46. Human and Natural Resource Development
• Investment in human capital
– Spending designed to improve productivity of
people
• Human investment programs have not
only an immediate benefit, namely,
improved standard of living of beneficiary,
but also long-term payoff in development
of more productive labor force and bettereducated citizenry
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47. Human and Natural Resource Development (cont.)
– Education holds most promise
• Numerous studies have linked education (primarily of
women) to widespread benefits:
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–
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Reduced infant mortality rates
Improved child nutrition
Later age at marriage
Lower birthrates
Greater likelihood that children will be educated
– Development economists are also recognizing need
for safe and convenient water supply
– Steps are also being taken to stop deforestation
(clearing of forested areas in unmanaged fashion)
and desertification (encroachment of desert on
previously fertile land)
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48. Women’s Role in Development
• Government and international policies alike have
neglected women in developing countries
– Third World women have lower standards of living
than male counterparts
– Women typically have literacy rates far below those of
men
– High maternal mortality rates
• Number of deaths of women for pregnancy-related reasons
per 100,000 live births
– Women least likely to receive agricultural extension
services, agricultural credit, and access to agricultural
inputs, even though primarily responsible for
producing most subsistence food crops
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49. Population Growth
• Many people believe that high population
growth is a problem in many low income
countries because more people means
more sharing of already limited resources
– If we consider population to be a problem only
relative to resources, then we must realize
that less than one-fifth of world’s population in
high-income countries consumes over threequarters of world’s goods and services
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50. Urbanization
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51. Underemployment
• One cause of urban poverty is high level
of unemployment and underemployment
– People work limited hours or with low
productivity
– Much underemployment occurs in urban
informal employment sector
• Employment sector consisting primarily of service
occupations in an unofficial setting
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