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Ghana’s Blue Economy

Blue Economy
More than half the population of Ghana gains their income in one of three industries; agriculture, forestry and fishing. The waters of Ghana are rich with different types of fish such as tuna, barracuda, cape hake and more. The fish is present in the local market and locals export it around the world as well, which could improve Ghana’s blue economy.

Economic Crisis

One might wonder if the ocean could be more useful to Ghana than it already is. Dr. Emmanuel Kofi Mbiah, former Chief Executive Officer of the Ghana Shippers Authority and current maritime consultant and legal practitioner, believes that Ghana’s blue economy could possibly save Ghana from its economic issues. Currently, Ghana is experiencing an economic crisis that it has not seen since the 1980s. Consumer prices have risen more than 40% and there have been widespread food shortages nationwide. The country’s currency continues to depreciate and is currently one of the worst-performing currencies. With that, 3.4 million people in Ghana are living in extreme poverty in 2022.

Blue Economy

Dr. Mbiah is urging the Ghana government to take a severe look at capitalizing on the blue economy to help alleviate some of the economic turmoil the country has been facing. The blue economy is an economic term that is linked to the exploitation and conservation of the maritime environment. He believes that the economic resources that come from the ocean can lift Ghana out of its economic turmoil. Mbiah stated that the ocean and its resources could be worth “over $24 trillion.”

In 2020, the United States of America had 1.7% of its GDP from its ocean economy – which amounts to more than $360 billion. Meanwhile, the ocean economy is worth about €500 billion for the European Union. For these people, they realized long ago the potential of Ghana’s blue economy. Not only does Dr. Mbiah believe that the fishing industry can produce more than it already does, but he also noted that Ghana could use the ocean for its energy power. With renewable energy becoming the new way of the world, Dr. Mbiah wants the government to look into how it can use the power of the ocean for its energy as well.

The Future

By capitalizing on Ghana’s natural resources, the country can help alleviate some of the economic hardships plaguing the country over the last few years. The government should take the potential that the industry has with serious thought. With the proximity to the ocean and the skills that Ghana has, the sea leads to endless possibilities and opportunities.

– Olivia MacGregor
Photo: Flickr

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Transnational Companies: The Good and The Bad

Transnational CompaniesA transnational company is a global company that has factories and offices in different countries around the world. The headquarters are usually in advanced countries and its factories and manufacturing facilities are in less developed countries. Most of the transnational companies have home headquarters in Western Europe, Japan or the United States. Suppliers can be anywhere in the world depending on the necessary goods. However, companies usually set up their manufacturing centers in places where labor is cheap to keep operating costs low.

The operation of transnational companies in less developed countries where rates of poverty are high can be helpful in aiding people to break out of the cycle of poverty, but the risks of exploitation and low wages are still present.

Advantages

  • Creating jobs for the local population – Undoubtedly, transnational companies create jobs for the local population; they account for at least one-fifth of total paid employment in manufacturing in a number of developing countries. The creation of more and more jobs not only boosts the economy of the country but also provides local workers with a stable income, albeit that pay is low. Furthermore, these jobs help in improving the skills of its employees, which can then be transferred to future jobs and taught to others in their communities.
  • Economic growth for the country – Transnational companies bring much-needed money into a developing nation. Although most of the profits do return to the company’s country’s headquarters of origin, the local economy does benefit. By boosting business activities in the country, transnational companies contribute to economic growth and development. They could also act as growth poles for other similar companies by encouraging them to locate to that country, thus bringing in even more economic support.
  • Developing infrastructure and technology – Developing countries do not have sufficient resources needed to boost research and development, leaving them technologically behind. Transnational companies however bring in technology and knowledge that the host country does not possess, consequently furthering their development. They are a source of inventions and innovations. Also, infrastructure in the ways of transport links, airports and services are also developed as a result of transnational companies.

Disadvantages

  • The exploitation of workers – Even though transnational companies do provide employment opportunities, they also can exploit the employees. The minimum wage rate for the workers is very low when compared to the work that they complete and the long hours spent, commonly with little or no breaks. The income that workers receive may be stable, but it is not enough to survive on, let alone enough to live a decent quality of life. In a desire for cheap labor, working conditions may also be poor and sick leave that workers are entitled to may be refused.
  • Environmental damage – Transnational companies often receive critics for their harm to the environment. The use of cheaper, non-renewable resources limits sustainability and the burning of materials such as plastic and rubber pollutes the environment. Developing countries need environmental sustainability since for many their health and livelihoods greatly rely on the natural environment and the risks of air and water pollution further diminish their development.

H&M in Ethiopia

One example of transnational companies operating in a less developed country are the textiles and fashion companies such as H&M, Guess and others in Ethiopia. They create job opportunities for local people and particularly for women. However, as mentioned above, the risks of exploitation are prevalent. Garment workers in Ethiopia are among the lowest paid, with a 2019 study from the Center for Business and Human Rights reporting that they have an extremely low pay of just $26 a month. This does not cover basic needs thus not enabling the workers to live a decent quality of life.

There are several NGOs who work towards tackling exploitation in the garment industry; one such example is CARE International, one of the biggest defenders of workers’ rights in all areas, including the fashion industry. It currently has work going on in 95 countries around the world, reaching 56 million people directly via approximately 1,000 projects and indirectly working towards 340 million lives globally.

The Overall Impact on Poverty

So, transnational companies do provide jobs and boost a country’s overall development, but at what cost? There are other ways to help local workers in improvising their livelihoods without the risk of exploitation and capitalist benefits. One such example of this is Farm Africa, a more sustainable and locally oriented initiative. Farm Africa is a charity that helps to reduce poverty by helping local people in eastern Africa to earn more from their produce. Working in DR Congo, Ethiopia, Kenya, Tanzania and Uganda, Farm Africa works to boost the economic welfare of the people, whilst also ensuring environmental sustainability, thus protecting their environment for generations to come.

For a transnational company to be effective, it would need to involve the local people, not just use them for cheap labor to boost its own profits. It is imperative for an initiative to tackle poverty to be sustainable not only environmentally, but also socially and economically.

– Ruby Wallace
Photo: Flickr

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A Partnership for Women’s Economic Empowerment

Economic Empowerment
One of the goals of decreasing global poverty is tackling historical inequities that disadvantage certain groups in society. Local, national and international institutions work to empower women in the economic sphere to bring together a variety of groups in society. Four agencies within the United Nations began a partnership to focus on economic empowerment for women in rural regions.

A new phase of the Joint Program: Accelerating Progress Toward Rural Women’s Economic Empowerment (JP RWEE) launched in March 2022 at the 66th Session of the Commission on the Status of Women. This program is a collaboration between five agencies including the Food and Agriculture Organization of the U.N., the International Fund for Agricultural Development, U.N. Women, the U.N. Entity for Gender Equality and the World Food Program (WFP). As the breadth of involved agencies suggests, the program aims to build economic empowerment for rural women in the agricultural sector by increasing their ability to obtain resources and services enabling them to succeed in their own livelihoods. The intended result is a decrease in poverty in rural regions as women unify in communities and combat historically limiting social norms.

Phase 1

The first phase of the JW RWEE was launched in 2014 and ended in 2021. The focus regions were Ethiopia, Guatemala, Kyrgyzstan, Liberia, Nepal, Niger and Rwanda. Results indicate that economic empowerment goals succeeded in raising agricultural production by 82% and assisting about 80,000 women. The new phase of the program also seeks to improve the lives of rural women through sustainable development. 

The program is part of the larger 2030 Agenda to improve poverty in rural communities. Initiatives within the program include improving food security, increasing the income of rural women, strengthening skills in leadership and community and promoting gender inclusivity to complement the goal of economic empowerment. The Norwegian Ministry of Foreign Affairs and the Swedish International Cooperation Agency provide funding.

Phase 2

The second phase of the program will focus on Nepal, Niger, the Pacific Islands, Tanzania and Tunisia. Norway and Sweden donated $25 million toward the initiative. In October 2022, one component of the program began in Tanzania. Over the course of five years, the program will cost $5 million and will target the provinces of Singida, Dodoma and Zanzibar in Tanzania. In that nation, subsistence farming contributes 80% of women’s income. Thus, the five-year JP RWEE will deliver economic empowerment in the form of agricultural assistance to provide resources and skills to combat changes in climate and leadership.

In Africa, the first phase of the JP RWEE assisted Ethiopia, Liberia, Niger and Rwanda. The new phase of the program will continue to assist the country in gender equality and economic empowerment. In addition, all countries in Africa agreed to the Convention on the Elimination of All Forms of Discrimination Against Women, and many also agreed to the African Charter on Human and Women’s Rights. However, despite these efforts, women in Africa still continue to face discrimination on a regular basis. The African Union’s ten-year strategy for gender equality lasts until 2028, but leaders have expressed their commitment to reinforcing gender equality across the continent beyond that timeframe.

– Kaylee Messick
Photo: Flickr

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Libya’s Digital Strategy

Libya’s Digital Strategy
Libya is a country in North Africa. One of the largest countries in Africa, Libya has many deserts and is rich in culture and natural resources. There is a greater requirement for a digital lifestyle in today’s culture. The expanding digitalization in Libya is now undergoing exploitation effectively for the country’s benefit. Beginning on February 15, 2022, in New York, the United Nations Development Program (UNDP) in Libya will concentrate on a new digital strategy to help communities and countries use digital technology as a tool to help combat and expand economic opportunity, promote diversity and reduce inequality. UNDP intends to keep up with the constantly evolving digital landscape and advance the Sustainable Development Goals (SDGs) with its daring new Digital Strategy 2022–2025.

Implementation

According to UNDP Libya, the strategy provides a three-pronged strategy for how UNDP would help countries profit from digital technology. First, UNDP will integrate digital into its work, experiment with new methods and technologies, scale up effective solutions and use foresight to comprehend potential futures in order to amplify development outcomes. Second, it will ensure that everyone is included in digital technology by making building more “inclusive digital ecosystems.” Third, UNDP will keep evolving and setting the bar high in order to satisfy present and foreseeable technical needs. To promote cooperation around the ethical and sustainable use of technology, UNDP will also interact with business entrepreneurs, academics, researchers, students and policymakers.

The Reason the Digital Strategy is Necessary

Libya has grappled with the problem of conflict since April 2019. Unfortunately, this has negatively affected Libya’s services such as electricity. According to a Human Rights Watch article, “The United Nations-recognized and Tripoli-based Government of National Accord (GNA) has been embroiled in an armed conflict with the rival Interim Government based in eastern Libya.” As a result, violence impeded the delivery of essential services, including power and health care. Armed groups on all sides persisted in carrying out illegal killings and indiscriminate shelling that killed civilians and destroyed crucial infrastructure.

In addition, when Libya’s provisional unity government formed in March 2021, internet freedom declined significantly. The population became less able to have access to the internet. The population grew adamant about better living conditions and less corruption in 2020 and as a result, local authorities throttled cell service. Libya has endured technological issues and the plan will guide UNDP’s efforts to address the new issues that the new digital environment brought on. There is also a large digital gap that UNDP is trying to diminish. There is a digital gap of about 2.9 billion people in developing countries and this consists mainly of women and children. Digital technology has the potential to amplify biases and further inequities if it is not used responsibly.

A Promising Future

Libya’s digital strategy has a strong potential for success. It will help Libya to benefit from a more digitized economy. According to UNDP Libya, “the strategy complements the U.N.’s global efforts to expand access to affordable broadband and enhance the digital capacity of key groups including women and people with disabilities – ultimately creating new opportunities like jobs while boosting human development.” Libya’s Digital Strategy is helping lessen the burden on the less fortunate by ensuring that everyone has access to digital futures, which can improve job opportunities and education.

– Frema Mensah
Photo: Flickr

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The Role of Oil in Algeria’s Economic Future

Algeria’s Economic Future
Algeria’s economic future looks bright as its role as a supplier of liquid crude oil has expanded amidst the shifts in European sourcing due to the Russian invasion of Ukraine. Algeria typically provides only 8% of natural gas for the European Union. However, the country is already taking steps to provide more oil as nations look to lessen their dependence on Russian oil. Such a change in supply could mean an economic boost, enabling Algeria to build future long-term renewable energy and labor markets.

Historical Context

Algeria is a country with a deep history of relying on its own resources and people to power its economy. Having internationally-recognized independence since 1962, Algeria has had to resort to its oil exports, internal agricultural labor and deals with neighbors such as Morocco and Spain in order to stay afloat. After former president Abdelaziz Bouteflika resigned in 2019, the old guard of Algerian leadership faced a new era in which the country’s non-oil industry required expanding and strengthening in order for its economy to have a bright future.

How Algeria’s Role is Currently Changing

Countries such as Spain, Italy, Greece and France are weaning off of Russian oil, while capital cities such as Madrid, Athens and Rome are currently setting up new energy provisions with Algeria.  In its most recent report, the World Bank noted that Algeria’s economy grew 3.9% bigger due to the extra demand for European oil alongside new construction and industrial activity. To maintain this continued growth Algeria’s leaders need to pay close attention to the possible obstacles.

In order for Algeria’s economy to find the funds to diversify its future economy, it must be able to provide more oil to European countries in the first place, an increase estimated at 12% to 38% of its current rate by the fall and winter of this year.  However, the state-run oil company Sonatrach is facing bureaucratic slowdowns, hacking to the refinery operations, and complications maintaining its already existing contracts.

In addition, there is a geopolitical complication in Algeria’s current status as a primary buyer of Russian weapons and arms, according to Modern Diplomacy.  If Russia can mitigate some of its lost oil revenue by increasing weapons sales to a growing Algerian economy, then European nations may turn away from contracting more oil supplies from Algeria.  These are complications that make Algeria’s economic future a tricky path of policy and economic landmines.

Possible Solutions

The primary solution for longer-term economic growth is to focus on building non-hydrocarbon industries with the profits from oil exports that could take place in the coming months. One major way to do this is for the World Bank to support further private sector projects related to agriculture, construction and development. In addition, Algeria could create stability in its current leadership by funding social programs, human rights protection and anti-corruption legislation. These measures could help prevent the widespread political uprising from citizens and extremist groups while keeping the leadership needed to maintain the centralized economy going.

According to Council on Foreign Relations, the U.S. role in Algeria’s economic future should be kept to a minimum of interference. Algeria is a nation that is very insistent on being self-sufficient and sovereign. In order for political and economic stability to succeed, U.S. measures need to include not sending more troops or intelligence to Algeria and instead diplomatic peers in order to better understand the needs and wants of the nation, CFR stated.

Algeria’s economic future looks bright when taking into account the post-COVID-19 recovery and the opening avenues for revenue to which Algeria can build a stronger, more diversified economy. This serves two primary purposes: keeping intact its sovereignty and forging a new path forward to end its long-tenured instability.

– Albert Vargas
Photo: Flickr

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House of Trade Alleviates Impacts of Fast Fashion

House of Trade
House of Trade is a new platform based on an ancient method: bartering. Inspired by the sneakerhead community, the House of Trade offers a fresh take on fashion sustainability while reducing the exploitation of underpaid workforces in developing countries and providing a safe and efficient method for sneakerheads to trade their sneakers.

House of Trade: A Trading App for Sneakers

One of only five startups chosen for the 2021 Covintus National Technology Accelerator program, House of Trade is a trading app for sneakers: an app that allows sneakerheads to use their new or lightly-used sneakers as “closet currency” to trade items with other users. House of Trade facilitates each trade using a mail-in system, ensuring authenticity and trustworthy bartering commerce.

Founded in April 2020 by Chris Holloway and Keren Nimmo, the team behind the scenes at House of Trade represents diversity and supports the colorful world of sneakerhead culture on a weekly YouTube podcast called Kicks of the Trade. The trading platform does not end with sneakers — the team plans to expand the platform to include the trade of a variety of other items, from luxury handbags and watches to streetwear and sports cards.

A Trading App’s Role in Fashion Sustainability

House of Trade reduces fashion consumption by offering its users a solution: the user’s unwanted items can stand as “closet currency” for the items they do want, lessening (or even eliminating) the need to buy factory-new fashion.

The fashion industry has a significant impact on the environment. The industry produces 10% of the world’s carbon emissions, equating to more than all the emissions of “international flights and maritime shipping combined.” In addition, the fashion sector stands as “the second-largest consumer of water worldwide” in a world where 785 million people go without access to clean drinking water. On top of this, the fashion sector contributes to “20% of all industrial water pollution worldwide.”

Pollution is especially detrimental to developing countries where the U.S. fashion industry outsources 97% of manufacturing and where toxic wastewater from factories often ends up in rivers and oceans. For example, in India, a country where the sacred but polluted Ganges River supports one of the most densely populated regions in the world, 88 million people lack access to safe water. One of the contaminants that make the Ganges unsafe is chromium, a compound for dyeing fabrics and tanning leather.

How Outsourcing Fashion Manufacturing Exacerbates Poverty

The outsourcing of manufacturing exacerbates conditions of poverty in countries where exploitative working conditions go unregulated. As an example, Nike as one of the largest makers of footwear globally sold a record 25 shoes every second in 2018. In general, Nike’s sales average 780 million pairs of shoes annually. However, the manufacturing of Nike’s massive product line is outsourced to more than 41 different countries.

By outsourcing to developing countries, Nike and other major sportswear brands can maximize production at minimum costs. But, low overheads for big companies come at a high price for the people who work in the factories. According to the Clean Clothes Campaign (CCC), a worker rights coalition that comprises more than 235 organizations in more than 45 nations, the average salaries of factory workers in Indonesia, Vietnam and Cambodia (countries where Nike contracts much of its manufacturing) are 45%-65% lower than the average “living wage.” To put this into perspective, in March 2020, the Global Living Wage Coalition reported just 7,446,294 VND ($321) as the monthly living wage for a person in urban Vietnam.

House of Trade Offers a Solution to Fast Fashion

Several advocates and unions have called out leading fashion and sportswear companies for prioritizing profits over the well-being of workers, the planet and humanity at large. With these issues coming to the forefront, many consumers across the world aim to make conscientious shopping choices to alleviate these impacts.

At the forefront of fashion industry reform, the House of Trade offers an alternative to factory-new consumerism while ensuring that sneakerheads and fashion enthusiasts have access to the styles, brands and quality they desire. In a “global sneaker resale market” that projections have determined could expand from $6 billion in 2019 to $30 billion by 2030, platforms such as House of Trade are in the ideal position to maximize profits while providing a solution to alleviating the impacts of fast fashion.

– Jenny Rice
Photo: Flickr

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5 Alternatives to Fast Fashion

Alternatives to Fast Fashion
The fast fashion industry creates inexpensive clothing to keep up with rapidly changing trends. Many brands in the fast fashion industry use cheap labor to produce garments, which often leads to the exploitation of workers and the environment. Fast fashion companies tend to target workers in low-income areas who have limited alternatives for employment. As a result, people in low-income areas are more likely to tolerate the poor, exploitative labor conditions that are prevalent in fast fashion. Microfibers and waste are often byproducts of fast fashion, contributing to water pollution and food chain disruptions, which disproportionately affect impoverished areas. Several alternatives to fast fashion can make consumers’ wardrobes more ethical and sustainable, reducing global poverty at the same time.

5 Alternatives to Fast Fashion

  1. Support local thrift stores. Thrift shopping is a simple and affordable alternative to fast fashion. Thrift shops offer clothes at more affordable prices than fast fashion companies without causing harm to workers or the environment. Individuals can also help second-hand stores thrive by donating clothes. Donating to thrift shops provides a wider range of options for consumers who cannot afford ethical, sustainable fashion elsewhere. Thrift shopping can be a great alternative for people who do not wish to promote poor working conditions in the fashion industry.
  2. Buy, sell and trade clothes online. Internet users can buy, sell and exchange clothes on a plethora of apps and websites. For example, Etsy offers a range of ethical, sustainable, second-hand and handmade clothing at varying prices. Individuals can also use social media platforms like Facebook Marketplace and Instagram to buy, sell and trade used clothing instead of supporting fast fashion brands that exacerbate poverty. Some apps like Depop are specifically designed for people to buy and sell second-hand clothes online, without the hassle of visiting a thrift store in person.
  3. Buy clothes from ethical and sustainable brands. Consumers can still purchase brand new clothes without supporting the fast fashion industry. Clothing companies like Patagonia, Boden and Kotn offer alternatives to fast fashion for people with flexible budgets. For example, through Fair Trade certification, Patagonia supports workers in low-income areas, ensuring that workers receive fair compensation under good working conditions. Patagonia also uses renewable energy for clothing production. Boden uses recyclable packaging, ensures ethical production and pays workers fair wages. Kotn creates clothes with organic materials and maintains fair and safe labor standards. Thousands of ethical, sustainable clothing companies are available to those who can afford them.
  4. Buy timeless, good-quality clothing. People who buy fast fashion may get stuck in a fast fashion cycle. Consumers often purchase cheap, low-quality items from fast fashion companies to keep up with ever-changing trends. As a result, consumers can contribute heavily to poverty and the exploitation of workers. However, clothes from fast fashion companies often wear out and do not remain in style. Individuals who have the financial means can buy high-quality, timeless clothing as alternatives to fast fashion items that only last until the next season.
  5. Learn how to make and repair clothes. Making and repairing clothes can be an affordable, sustainable and ethical alternative to buying from fast fashion brands that intensify global poverty. People who make clothes can select their own materials, keeping an eye out for ethical and sustainable fabric brands. Those who learn to sew can also repair their old clothes instead of buying new ones from fast fashion companies. Between sewing, crocheting and other methods of creating clothes, people can create personalized, unique clothes to wear with the potential of launching their own ethically-sourced businesses.

Reducing Poverty Through Ethical Shopping

Shopping ethically contributes to combating global poverty and environmental degradation. Many fast fashion alternatives exist to help consumers stand up against workplace exploitation in low-income areas. Over time, ethical clothing purchases can make monumental impacts on the lives of people around the world.

– Cleo Hudson
Photo: Unsplash

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Modi’s Infrastructure Plan to Reduce Poverty in India

Reduce Poverty in India
In August 2021, India’s Prime Minister Narendra Modi announced that India will spend $1.35 trillion to improve the country’s infrastructure. The infrastructure plan called “Gati Shakti” will create jobs that can potentially reduce poverty in India by increasing household income across the nation and improving the economy at large. The plan also intends to expand the “use of cleaner fuels to achieve the country’s climate goals.”

The Gati Shakti Plan

The specifics of India’s Gati Shakti plan were not immediately announced, but amid the country’s economic decline and the impacts of the COVID-19 pandemic, Modi claims the plan will increase India’s economic output, which decreased by more than 7% in 2020. Specifically, “the plan will help local manufacturers compete globally and create new avenues of future economic growth.” In addition, Gati Shakti will help India “become energy independent by 2047,” by transitioning to “a gas-based economy” and developing India into “a hub for hydrogen production.”

How Better Infrastructure Can Reduce Poverty in India

Studies show a clear link between improved infrastructure and poverty reduction. Better infrastructure may help reduce poverty in India in a variety of ways. Improved infrastructure has the ability to increase economic activity in the country by minimizing “production and transaction costs” and increasing “agricultural and industrial productivity.”

Infrastructure leads to job creation due to the demand for labor in both the development process and the ongoing management and maintenance of the infrastructure. Therefore, impoverished and disadvantaged people can participate in an economy that they once had no place in.

Even though income-related aspects of poverty are at the forefront of the issues better infrastructure addresses, better infrastructure also has non-income advantages, including “health, nutrition, education and social cohesion.” These aspects improve the quality of life for people across the nation. Overall, better infrastructure has the potential to contribute to reaching the United Nations’ 17 Sustainable Development Goals (SDGs).

How Infrastructure Improvements Contribute to SDGs

  1. SDG 2: Zero Hunger. Malnutrition and food insecurity are significant problems in India, with more than 200 million citizens lacking “sufficient access to food.” Modern infrastructure can help improve people’s access to food by promoting better productivity (particularly among farmers) and by helping to decrease production costs. Decreased production costs can drive prices of food products down, making them more accessible to the impoverished.
  2. SDG 3: Good Health and Well-Being. Adequate health infrastructure means more people will have access to health care services, especially impoverished people in remote locations. Better health infrastructure will increase the number of in-hospital births, which will reduce both the infant mortality rate and the maternal mortality rate. This reduction will come as a result of the presence of skilled birth attendants and access to hospital equipment in case of emergencies. India’s current infant mortality rate stands at a staggering 28.771 deaths per 1,000 live births.
  3. SDG 4: Quality Education. Road infrastructure influences the attendance and enrollment of students in schools. This also affects the quality of teachers attracted to a school. More school facilities mean education is more accessible to children in remote locations. More than 27% of Indian youth find themselves “excluded from education, employment or training.” Education infrastructure is essential because education helps people acquire the skills and knowledge to obtain higher-paying, skilled jobs that can help them rise out of poverty.
  4. SDG 8: Decent Work and Economic Growth. Due to the economic impacts of COVID-19, according to The Indian Express, almost 200 million more Indian people could face poverty by the close of 2021. Ultimately, this means that more than 50% of the Indian population may live in poverty. Under SDG 8 is target 8.7, eliminating child labor in its entirety by 2025. Families tend to resort to child labor when they need extra income to meet their basic needs. India’s infrastructure plan can potentially help reduce poverty in India by providing adults with more job opportunities and by increasing household income, negating the need for child labor. Similarly, parents marry off their young girls to take the economic burden off the household, hoping that the girls’ husbands will economically provide for the girls. However, with increased household income and more employment opportunities, families can bear the costs of taking care of all their children. Then, marriage will be an option and not an economic necessity.

For all these reasons and more, better infrastructure can reduce poverty in India, improving lives throughout the nation.

– Jared Faircloth
Photo: Flickr

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COVID-19, Poverty and The Debt Service Suspension Initiative (DSSI)

COVID-19, Poverty and The Debt Service Suspension Initiative (DSSI)
In the wake of its continuing devastation, Covid-19 has left, among other things, recessions across the world’s poorest countries. These recessions threaten to push more than 100 million people below the $1.90-a-day threshold that defines extreme poverty. To prevent poverty exacerbation, G20 countries have been called on by the World Bank and the International Monetary Fund to establish the Debt Service Suspension Initiative (DSSI). The initiative is designed to redirect funds planned for debt liquidation towards battling the pandemic and helping the most vulnerable populations.

How Does It Work?

Established in April 2020, the DSSI allows the suspension of government-to-government debt payments for 73 eligible countries. Over 60% of these countries accepted the offer as of 2021. The International Development Association and the U.N.’s respective lists of least developed countries encompass all countries cleared for suspension, minus Angola. Qualification for deferment also requires an application for an arrangement with the IMF, along with a commitment to use unfettered money towards social, health, or economic spending designed to remedy the effects of Covid-19.

Including interest and amortization payments, the total sovereign debt servicing payments in 2020 was projected to reach nearly $14 billion. Less than $4 billion of that belongs to the Paris Club group, prompting calls for other creditors like China and Russia to take part. Additionally, the G20 received requests to include entities such as banks and investment funds in the initiative, but this call has yet to receive a favorable response. About $5.7 billion in payments were deferred in 2020, with an additional deferment of $7.3 billion planned for June 2021.

The Unturned Stones

Reservations have been voiced regarding the ability of the temporary cessation of bilateral debt payments to provide adequate relief for the countries concerned. All debt is not the sovereign debt that is accounted for in the DSSI, and the fiscal ability of the approved countries is largely insufficient to weather the inclemency of Covid-19, even with debt deferment. At the vanguard of the call to private-sector creditors to adopt the initiative is the Institute of International Finance (IIF), a global association concerned with the finance industry.

Estimations from the IIF show that participation by private-sector creditors would provide an extra $13 billion in deferment. This would offer significant potential relief from the $35.3 billion owed collectively by the countries eligible for the DSSI. However, the IIF has made its concerns clear, particularly concerning the DSSI’s lack of consideration for the unique situation of each debtor country and the doubt that this causes for private-sector creditors.

The overall narrow eligibility scope of the DSSI has also been called into question. Middle-income countries have over eight times the amount of collective external debt outstanding compared to DSSI eligible countries. With $422.9 billion in debt payments in 2020 alone, these countries also run the risk of being financially incapable of dealing with Covid-19. After foreign investors pulled approximately $100 billion from middle-income countries’ markets in stocks and bonds, capital outflows leveled. The IIF, perhaps because of this observation, projected that the countries in question will encounter difficulties in borrowing money. The IIF also made projections that indicated unparalleled fiscal deficits in 2020.

Possible Solutions

Currently, no mechanism is in place to ensure that deferred debt payments will be used accordingly. One proposal involves the creation of a central credit facility (CCF) at the World Bank. This organization, if allowed, would require countries requesting relief to deposit deferred interest payments to certify that the funds would be used to negate the effects of the pandemic. Although the CCF has gained academic support and press recognition, whether countries will adopt it is uncertain.

Corporate or individual bankruptcy for countries is not an option.  The IMF attempted but failed to establish a sovereign resolution regime with its Sovereign Debt Restructuring Mechanism (SDRM) proposal in 2002, ultimately because of conflicting opinions on how to structure its design. A notable implementation of a debt moratorium occurred in 1931 by Herbert Hoover, then President of the United States. His declaration was followed by a rush of countries defaulting. Although these countries recovered faster than countries that did not default, such countries were hard-pressed to find any foreign lending for more than 20 years after defaulting.

Forging A Way Forward

While COVID-19 inflicted disastrous financial difficulties on nations worldwide, initiatives like the DSSI work to counteract the damage. In April 2021, G20 government-to-government creditors extended the DSSI for the final time by six months, taking its activity through December 2021. Despite concerns about its implementation and consequences, the DSSI represents a positive attempt by creditors nationwide to help the most vulnerable in the wake of COVID-19.

– Mohamed Makalou
Photo: Unsplash

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How Labor Unions Can Alleviate Poverty

Developed nations are witnessing a steep decline in labor union participation. Labor unions are organized groups of workers who negotiate decisions concerning their working conditions. From 1985 to 2017, union membership declined by 13%. Several factors have contributed to this decline, however, labor unions are important as they play a role in reducing poverty across the world.

The Decline in Labor Unions

The recent trend toward globalization has admittedly fostered business competitiveness. However, this threatens labor unions due to the belief that unionization can harm a company’s ability to compete internationally. This belief stems from the strong negotiating power of unions, forcing companies to pay and treat their workers well, which many international companies do not have to do. In addition, organizational and technological changes have threatened union longevity. The final contributing factor is the decline of the manufacturing sector, a sector that is more likely to support unionization than other industries.

Along with the organizational factors contributing to the decrease in labor unions, the societal understanding of the value of labor unions is also decreasing. In part due to mass propaganda campaigns and anti-labor advertising unleashed by businesses in the last three decades, there is a growing sentiment that these organizations are no longer useful or necessary. This sentiment poses a direct threat to workers throughout the world as these organizations play an important role in poverty reduction.

Decrease in Economic Inequality

Labor unions play an important role in decreasing economic inequality. Unions provide people with the power to negotiate, which in turn, strengthens the middle class and increases salaries for blue-collar workers. Unions give power to people in lower positions in companies so they can negotiate and work for better wages. Unionized workers are typically able to raise their wages by 20% through negotiation.

White-collar workers do not reap the same benefits and labor unions play an important role in stopping runaway incomes for people at the top. This gives power to the middle class and reduces the power of the top 1%. Not only do higher wages for blue-collar workers support the workers themselves but they also boost economic mobility for future generations. By empowering workers to collectively bargain for higher wages, labor unions have played a vital role in the rise of the middle class.

Healthcare

Because members of labor unions can negotiate better benefits, they are 30% more likely to have healthcare benefits than non-union workers. Additionally, these healthcare benefits are typically higher quality than baseline coverage. On average, unionized workers are more likely to have health plans, including dental and vision care. Quality health insurance plays an important role in reducing the risk of poverty. The CDC finds that workers who possess and utilize health plans are more productive. Increased productivity among workers provides a foundation for educational and workplace success.

Along with increasing productivity, quality healthcare can reduce the risk of medical debt-induced poverty. Medical coverage for working adults can also cover the worker’s children. This is important as children who have medical coverage are less likely to develop chronic health conditions. Through family care, labor unions provide workers and their families the resources necessary to remain in good health, achieve success and protect their futures.

Work-Life Balance

Labor unions provide workers with the chance to negotiate better working conditions, including more paid time off. Unionized workers have 26.6% more vacation time on average than non-unionized workers. This time off is important for a work-life balance, overall longevity and family time. Children who spend quality time with their parents are more likely to be physically healthy and are less likely to partake in risky behaviors such as drug and alcohol abuse. Furthermore, these children are more likely to stay in school and achieve academic success, helping them secure well-paying jobs in the future. By supporting a work-life balance, labor unions ensure that households have a pathway out of poverty.

In these ways, labor unions play a vital role in reducing poverty. By increasing wages, strengthening the middle class, providing healthcare access and facilitating quality family time, labor unions can help people break cycles of poverty.

– Haylee Ann Ramsey-Code
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