Information and stories about economy.

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Africa’s Rising Middle Class

Growing Middle Class in Africa
The middle class is essential for economic and democratic growth. The continent of Africa, consisting of 54 independent countries, contains the poorest countries in the world, according to the human development index created by the United Nations. However, over the last 15 years, the middle class in Africa has grown.

As the middle class expands, so does consumerism. The growth of the African middle class not only means more stability for Africa, but also more profit for American businesses. More of the African population is buying televisions, cell phones, and leisure and entertainment items, which Western companies provide.

But, how is the African middle class defined? In the U.S., there is a struggle to define the middle class. However, it is clear that those earning about $20,000 to $120,000 a year would categorize themselves as middle class. In Africa, the range is quite different. The middle class consists of those earning $2-$20 a day, or $730-$7,300 a year.

A strong and large African middle class is beneficial. The African middle class consumed approximately $680 billion in 2008, consisting of nearly a quarter of Africa’s GDP. At this rate, Africa will comprise approximately 3 percent of worldwide consumption by 2020, with about $2.2 trillion of consumer spending. The middle class will help grow the economy as they have more income to spend and can invest more of their finances in health and education. However, 60 percent of the African population continues to earn a meager $2-$4 daily.

Those in this floating class, earning $2-$4 a day, are at risk of leaving the middle class and descending into poverty. This represents 180 million people. The floating class could slip into poverty very easily; a job loss or the death of the head of household could cause the slip. Therefore, a balancing act is required to help grow the middle class while also preventing the floating class from slipping back into poverty.

Policies that focus on both human capital development and job generation will ensure the growth of the African middle class. Continued improvements in governance, better access to technology, the rapid spread of mobile telephones, and the better use of natural resources are necessary. Additionally, social changes and policies that focus on education and health will work to support those earning $2-$4 a day.

The U.S. should continue investing in Africa through aid. History demonstrates that the U.S. benefits greatly by assisting poorer countries. For instance, from 1960 to 1974 the U.S. provided South Korea with $5.6 billion in aid. In 2010, the annual U.S. export to South Korea was $38.8 billion. But this is just one example. Find more information about the benefits of reducing global poverty here.

Now is the time to increase the investment in Africa. As the middle class is beginning to grow, investment in Africa will result in a more stable economy, growth of democracy, and an increase in consumerism. Both the U.S. and Africa will benefit from building a strong middle class throughout Africa.

– Caressa Kruth

Sources: How We Made It In Africa, UN Development Program, The Borgen Project, National Geographic
Photo: Forbes India

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Pressure on Developed Nations to Contribute More Aid

Leaders have begun to discuss what will replace the Millennium Development Goals once they reach expiration in 2015. Mukhisa Kituyi, the new secretary general of UNCTAD, the UN Trade and Development body, stated that aid-flows from wealthy nations were drying up and that developing economies must contribute more in order to assist the poorer nations.

Kituyi, who took office last month, urged Brazil, China, and other emerging economies to take responsibility for the fight against extreme poverty. “From Brazil to China, while they have shown a willingness to invest in economic infrastructure – the construction of roads, railways, and ports – that capacity should also extend to the construction of social infrastructure,” he said.

There has been constant pressure on developed nations to contribute more aid in both reaching the Millennium Development Goals and ending extreme poverty; however, Kituyi’s call for action represents one of the rare voices asking the developing nations to pay tribute as well.

UNCTAD, which was formed in 1964, is seen as the intellectual counterweight to the World Bank and the IMF, urging even more liberalized trade and deregulated finance. However, in recent years, some of the organization’s staff members are increasingly concerned about Unctad’s future. Kituyi claims that he is determined to boost the organization’s reputation, and is especially concerned in taking part in the formation of what follows the Millennium Development Goals.

– Sonia Aviv

Sources: The Guardian, International Development News, News 168
Photo: The Habari Network

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Inflation and Food Shortages in Venezuela

For residents of Venezuela, food and grocery shortages have become a part of daily life. Outside of many government-subsidized grocery stores, people line up before dawn hoping to purchase what they can before supplies run out. Items such as milk, meat and toilet paper are bought up quickly. The shortages have lasted for more than a year, prompting calls for President Madura to reevaluate the economic policies of his predecessor, Hugo Chavez.

Though Venezuela is one of the most oil rich nations in the world, it is struggling to mitigate inflation and keep subsidized grocers stocked with products. Many experts say that strict price controls are to blame for the country’s economic problems, while President Maduro insists that it is all part of an effort by the opposition and CIA to destabilize the government and sabotage Venezuela’s oil industry.

Asdrubal Oliveros, an economist at one of Venezuela’s leading consulting firms, told the Guardian that the current crisis is the result of several factors, which include the country’s overreliance on imports and the government price controls. Another factor is the decrease in agricultural production due to the government’s recent land expropriations. “It’s cheaper to import than it is to produce,” Oliveros said. “That’s a perverse model that kills off any productivity.”

Many economists echo Oliveros analysis, saying that the Venezuelan government is not helping the problem by fixing prices so low. When prices are set low, companies and producers are not able to make a profit—this, in turn, leads to a cessation of farming, manufacturing, and production. Originally designed to help Venezuela’s poor and working classes afford food and staples, the price-fixing program has instead led to empty shelves and long queues.

After becoming President of Venezuela, Hugo Chavez and his ministers sought to reduce the growing wealth disparity in their country. To achieve this, they implemented price controls on certain goods so as to make them cheaper for individuals and families with lower incomes. This step and increased spending on social programs, however, may be contributing to the country’s current economic crisis.

Aggravating the problem is the fact that inflation is increasing at an alarming speed. In August, 12-month interest rates rose to 45.4 percent. This is the highest since Venezuela’s hyperinflation crisis in the mid-1990s. Officials in Maduro’s government have said that they will be considering changes in the country’s economic policies in an effort to combat the rising prices and food shortages in Venezuela.

– Daniel Bonasso

Sources: The Guardian, New York Times, Wall Street Journal

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How the 10 Richest Countries Could End Poverty

Top Richest Countries International Aid Spending
At last count, there were 193 independent countries in the world. Let’s start by reviewing the top 10 richest countries. Contrary to popular belief, the U.S. is not the richest country in the world; it comes in at seventh place.

  1. Qatar, GDP per capita: $88,222
  2. Luxembourg, GDP per capita: $81,466
  3. Singapore, GPD per capita of: $56,694
  4. Norway, GDP per capita: $51,959
  5. Brunei, GDP per capita: $48,333
  6. United Arab Emirates, GDP per capita: $47,439
  7. United States of America, GDP per capita: $46,860
  8. Hong Kong, GPD per capita: $45,944
  9. Switzerland, GDP per capita: $41,959
  10. Netherlands, GDP per capita: $40,973

So, how are the wealthiest countries in the world combating global poverty?

In 2002, the world’s leaders got serious about ending world poverty. At the International Conference on Financing for Development in Monterrey, Mexico, each country agreed to dedicate 0.7 percent of its national income to international aid. If each of the 22 leading countries were to adhere to this agreement, a total of $200 billion a year would be invested in foreign aid. However, this goal has yet to be reached.

In 2005, the top richest countries in the world committed a total of $106 billion to foreign aid – $119 billion short of the 2002 target.  Each country dedicated an average of only 0.33 percent of their national income to international aid. The U.S. ranked second to last, with an investment of only 0.22 percent. The country in last place, Portugal, dedicated 0.21 percent.

However, there are five countries that have already met or surpassed the 0.7 percent goal. Starting with the largest contribution, they are:

  1. Norway at 0.93 percent
  2. Sweden at 0.92 percent
  3. Luxembourg at 0.87 percent
  4. Netherlands at 0.82 percent
  5. Denmark at 0.81 percent

What is the big deal about .07 percent?

  • This pledge was initiated in 1970 at the General Assembly Resolution, and has been recommitted several times since, the most recent being at the Monterrey conference in 2002.
  • Through this 0.7 percent commitment, world poverty can be halved within our lifetime.
  • If all 22 of the world’s leading countries met the .07 percent goal by 2015, extreme world poverty would end within a generation.
  • 16 of the 22 leading countries have already met or have agreed to meet the 0.7 percent target by no later than 2015. The U.S. is not one of them.

Why is the U.S. trailing behind the fight against global poverty?

Most Americans believe the U.S. contributes 25 percent of our gross national income (GNI) to international aid. In reality, we contribute less than 1 percent. Moreover, most Americans believe the U.S. should combat world hunger through foreign aid efforts.

Americans support investment in foreign aid. As one of the world’s wealthiest and leading countries, we can do better than second to last. It is time our values as Americans are accurately reflected in our national budget. Contact your congressional leaders today to voice your support in investing in foreign aid. Here’s a place to get started: Call Congress.

– Caressa Kruth

Sources: Forbes, United Nations Department of Economic and Social Affairs Division for Sustainable Development, Borgen Project
Photo: The Why of Development

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New Report Finds 1.3 Million Living in Poverty in Hong Kong

Hong Kong 1.3 Million in Poverty
The recently released Hong Kong Poverty Situation Report 2012 found, to the surprise of many, that over one-fifth of the population is living below the poverty line. This translates to 1.3 million people, or roughly 19.6 percent of the total population who are living in poverty in Hong Kong. One of the reasons that the figures are so surprising is that such measurements have never before been readily available. With this report, the government of Hong Kong has instituted a poverty threshold for the first time.

The threshold represents 50 percent of the median household income before tax or welfare benefits. For a one-person household this stands at US$464, $993 for a two-person household, $1,483 for a three-person household, and $1,844 for a four-person household. Hong Kong’s Commission on Poverty says that, because of these constraints, the actual number of individuals living in poverty may be lower.  They believe that if welfare benefits were to be taken into account, the rate would decline to 15.2 percent.

Nevertheless, the fact remains that there is a staggeringly huge wealth disparity within Hong Kong. Marked by skyscrapers, malls, and other such signs of affluence and modernity, the city is home to some of the wealthiest individuals in the world. This disparity is one of the contributing factors to the relatively high Gini coefficient cited by the report.

According to the World Bank, the Gini index “measures the extent to which the distribution of income or consumption expenditure among individuals or households within an economy deviates from a perfectly equal distribution.” Any coefficient above 0.4 is indicative of a possibility of social unrest; Hong Kong’s coefficient as of 2011 stands at 0.537.

The city is particularly susceptible to such unrest because of its precarious political situation. Although it has its own government and legal system, Hong Kong has remained under the auspices of China since its cession from Britain in 1997.  In fact, the city’s official name is the Hong Kong Special Administrative Region of the People’s Republic of China. Largely due to a difference in ideologies between the two governments, several popular movements among Hong Kong’s population are calling for autonomy or outright independence from China.

Because of the report’s findings, Hong Kong’s leader, Leung Chun-ying, has pledged to introduce measures early next year to help the country’s impoverished. According to Matthew Cheung, the city’s secretary for Labor and Welfare, the introduction of a poverty line has been an important step in alleviating widespread inequality.

He says of the government’s continued efforts to reduce wealth disparity and help struggling individuals and families, “We want to build a more caring, compassionate and inclusive society here.”

– Rebecca Beyer
Feature Writer

Sources: CNN, Hong Kong Commission on Poverty, World Bank
Photo: Flickr

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What is the OECD?

OECD_policies_
What is the OECD?

In short: OECD stands for Organization for Economic Co-operation and Development. It is an international economic organization whose mission is to “promote policies that will improve the economic and social well-being of people around the world.”

A little more detail: In the beginning, the OECD was actually named the OEEC – the Organization for European Economic Co-operation. It was founded in April of 1948, with 18 original European participants. The first and original principles of the OEEC were as follows: “Promote cooperation between participating countries and their national production programs for the reconstruction of Europe; Develop intra-European trade by reducing tariffs and other barriers to the expansion of trade; Study the feasibility of creating a customs union or free trade area; Study multi-lateralization of payments; and Achieve conditions for better utilization of labor.”

In 1961, the OEEC became the OECD, and membership was extended to non-European countries. Most OECD members are regarded as “developed countries” with a high human development index. To this day, according to Pierre Tristam at about.com, the OECD remains one of the most cited sources for “economic data and information” because the organization keeps vast databases and “conducts some of the world’s most authoritative analyses and studies on the world economy.”

The OECD said that it provides a forum in which countries can work together to “seek solutions to common problems.” The organization aims to identify good practices and to coordinate “domestic and international policies.” It is committed to democracy and a sustainable market economy. Some of these good practices include taxes and social security, leisure time, school systems and “pension systems” that look after country’s elderly citizens, since the OECD tries to look at issues “that directly affect the lives of ordinary people.”

Its reach extends to the environment, the economy and social issues. The OECD is committed to helping the lives of ordinary people, thus making life harder for those “whose actions undermine a fair and open society,” such as terrorists, unethical businessmen and tax evaders.

The OECD promotes policies designed:

“To achieve the highest sustainable economic growth and employment and a rising standard of living in Member countries, while maintaining financial stability, and thus to contribute to the development of the world economy; to contribute to sound economic expansion in Member as well as nonmember countries in the process of economic development; and to contribute to the expansion of world trade on a multilateral, nondiscriminatory basis in accordance with international obligations.”

As of 2013, the OECD has 34 active member countries, including the United States, and “is in accession talks with the Russian Federation.”

– Alycia Rock

Sources: OECD: About, OECD: Report 2013, Middle East About, OECD
Photo: CIB

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What is the G-20?

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G-20 stands for “Group of 20 [nations]” that come together every year in a different place to discuss solutions to global issues, mainly economic issues. The 20 nations included in the G-20 summit are: Australia, Japan, South Africa, France, Turkey, the USA, Saudi Arabia, Russia, Mexico, Korea, China, Canada, Italy, Indonesia, India, the EU, Germany, the UK, Brazil, and Argentina.

At their summit once a year, these nations discuss various problems whose solutions can only be reached with international cooperation. The first G-20 session (conducted in Washington D.C., USA) dealt with the economic crisis of the time.  Ever since then, the G20 has taken the responsibility of preventing further economic meltdowns with international cooperative measures. The G20 summit is also a great place to address poverty. Helping stabilize the economy and encouraging growth will result in a better economy even in poorer nations. It would help improve infrastructure, and allow smaller nations to build their nation and economy.

This year, the G20 summit, hosted by Russia, will again tackle financial and economic problems. Russia has organized its main priorities for growth in three main categories: Regulation; Jobs and Investment; and Trust and Transparency. One of the main recommendations to ensure economic growth is to confront corruption. Corruption effectively holds back progress. Especially in smaller nations, or nations where aid is necessary to build infrastructure and economy, corruption prevents funds from reaching their destination. The G-20 committee will address the issue of corruption in October. In a solution to, and an active fight against, corruption, lies the future of the fight against global poverty.

Solving economic problems will directly impact poverty; fighting poverty will result in a stronger global economy. Attempting to address economic issues with this in mind will help the international economy, and the national ones as well. The G-20 summit, which meets mainly to address these economic issues, has the potential to greatly impact the fight against global poverty.

– Aalekhya Malladi

Sources: G20, U.S. Department of State
Photo: Radio Netherlands Worldwide

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Government Shutdown Threatens Foreign Aid

Government Shutdown Brinksmanship Foreign Aid Cuts
Even to those who display the most passive attention to the news, it is clear that politics in Washington D.C. has reached a fever pitch. Without any doubt, the implications of what is being discussed are, in fact, no hyperbole. Beholden to special interests, factions within the Republican Party have resolved to agree on a continuing resolution to fund the government – absent defunding of the Affordable Care Act (ACA). Short of passing the continued resolution, a government shutdown has taken effect. Yet, while the detractors of the ACA site economic concerns over the law, it is in our interests to consider the victims of even a short-term government shutdown.

While The Borgen Project is a non-partisan group, the implications of a government shutdown are serious and will have great effect on foreign aid and all government programs moving forward.

To put this argument into perspective, we should take an objective stance. By turning our attention towards the Congressional Budget Office (CBO), we can keep our feet rooted in the ground rather than in the clouds of ideological waffling. In their estimation, the CBO found the ACA would grant health coverage to 32 million people and raise government spending by almost one trillion dollars. While the specter of raising spending tickles the ire of republican ideologues, the CBO also found that revenues and savings would exceed this amount, effectively reducing the deficit over time.

With the non-partisan CBO stating the ACA would, in fact, benefit our economy, we must direct our attention to the victims of a government shutdown.

First and foremost, hundreds and thousands of government employees will effectively lose their jobs for the period of the shutdown. From many Pentagon employees, to park rangers, pockets will be squeezed tightly as they will not be receiving income for the period of the shutdown. Despite this, members of Congress will continue to be paid. The only bright side seems to have been President Obama’s decision to sign a bill in the midnight hour that would allow members of the military or any civilians working for the Pentagon who provide “direct support to the military” to be paid during the shutdown.

Secondly, the health of our economy is on the line. Looking back to August, 2011, our economy was dealt a blow when, for the first time in history, a credit rating agency, Standard and Poor, downgraded our rating from AAA to AA+. Dealing with confidence in markets, the mere fact that we were having the discussion we are having now was enough to reduce confidence in our economy. An actual government shutdown will have far wider and much deeper consequences.

While this is strictly political at the moment, the economic consequences will be difficult to assess until we are in the muck of it. Yet, as Obama addressed a crowd in Maryland early on Thursday, he sited the fact that even a short government shutdown will affect worse economic consequences than the proclaimed economic consequences of the ACA.

This form of brinkmanship will carry with it ramifications in all areas. If we cannot afford a cost-effective health care law in our own land, the fate of allotments for foreign aid will be the next bit of meat on the chopping block. While we call our representatives to advocate for the poor, let them know that political brinkmanship will only hurt humanity.

– Thomas van der List

Sources: MIT, NPR, ABC News, Politico
Photo: CNN Money

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How Diseases Lead to Poverty

How Diseases Lead to Poverty

What causes poverty? When looking at the factors that can lead to poverty in a region, there are many things that could be highlighted. One can look at the government, at conflict, at the lack of natural resources, or at the shortage of quality education in a region. However, poverty in a region is not only caused by conflict or inadequate education, but also by diseases. Increasing health in a region can significantly reduce global poverty, in effective and unexpected ways.

People in developing countries face challenges due to diseases that those in developed nations do not. For instance, in a developing country, someone who gets sick may have to sell their possessions to pay for medicine. Parents, not expecting their children to survive, have more children and spend less on education. Tropical diseases, and other health risks specific to a region limit tourism and foreign direct investment, affecting the potential prosperity of a nation.

According to research done in 2011 by The Foundation for AIDS Research (amfAR), more than two-thirds of all people living with AIDS (23 million) lived in sub-Saharan Africa. An estimated 1.2 million people died from the disease, accounting for 71 percent of all the AIDS related deaths in the world. Not surprisingly, sub-Saharan Africa is also one of the poorest regions in the world.

But while the problem of AIDS – and the poverty it causes – might seem insurmountable, it only takes around $100 a year to save one AIDS victim.  To put this amount in perspective: the United States spends roughly $600 billion annually on its military, nearly twice as much as the second highest spender, China.  How different would the world be if the United States decided to trim the amount it spends on its military, and use that to help other countries eradicate diseases?

People from poor countries need help to get healthier. Unfortunately, most developing countries simply do not have the resources to provide healthcare for their people. The richer nations need to make an involved effort in helping these countries eradicate diseases such as AIDS and malaria. By increasing the amount of aid that the United States and other developed nations give to combat diseases, the world will see a decrease in death from preventable diseases, and, as a result, a decrease in global poverty.

– Travis Whinery

Sources: WHO, UN AIDS, Economist
Photo: China Daily

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Thousands of Migrant Workers Expected to Die in Qatar

Qatar FIFA 2022 World Cup Migrant Workers Exploited
The 2022 FIFA World Cup will be hosted in Qatar and the construction on hotels and stadiums has already begun. This internationally-renowned sporting event will boost Qatari infrastructure, economy, and national spirit. However, groups like the International Trade Union Confederation (ITUC) claim that thousands of migrant workers will die before construction is finished, and have called for policies that will prevent the exploitation of these workers.

Many migrant workers from countries like India, Nepal and Sri Lanka have been entering Qatar for employment, joining the already 1.2 million migrant workers present in this country. Although many migrant workers are needed to prepare Qatar for the World Cup, the current system of employment may mean that many of these workers will never return home.

Unless reforms are made, 600 migrant workers a year could die on building sites due to harsh working conditions and lack of safety protocols.

Recently, 30 migrant workers fled to the Nepalese Embassy in Doha, Qatar to escape these conditions. They reported having their passports withheld in order to prevent them from fleeing, being denied water and a salary, and being forced to work in intolerable heat. Some equated such hardships with modern-day slavery. In addition, workers have been found living in unsanitary and crowded conditions, resulting in illness.

Employees that complain are often fired, with no means of returning home or finding more work. With passports and salary withheld, most migrant workers have no choice but to continue to work in such conditions.

Nepalese migrant workers aren’t the only workers turning to their embassy for help. Thousands more have complained to the Indian embassy in Qatar. According to the Indian ambassador, more than 700 Indian workers have already lost their lives in these deleterious working conditions.

The ITUC stresses the need for significant changes in workplace sanitation and safety. Otherwise, the organization estimates that at least 4,000 migrant workers will lose their lives by the 2022 World Cup.

These working conditions come as a surprise to many, as Qatar is the world’s richest nation in regards to income per capita. The country is expected to spend over $100 billion on infrastructure, hotels, and other facilities for the World Cup alone.

The ITUC has also commented on the need for FIFA to send a strong message to the Qatari government on how this system of modern-day slavery is unacceptable.

– Rahul Shah

Sources: Middle East Online, Opposing Views, The Guardian
Photo: BBC