Oxford Martin School

The third seminar in the 21School seminar series on "Global Zero" was given by Professor Tony Venables, Director of Oxford Centre for the Analysis of Resource Rich Economies and Professor of Economics University of Oxford. In the spirit of the theme of the seminar series, Professor Venables talked about the prospects for global poverty elimination - what are the means, mechanisms and obstacles for rapid and radical poverty reduction.

While achieving an end state of zero in terms of poverty may be an impossible goal, Venables started his seminar with a review of the different concepts and measurements for poverty. Is poverty a relative or absolute concept? Should it be measured in monetary values (the so-called $1/day threshold identified by the World Bank) or by outcome indicators, such as health, nutrition and attainment? Certainly, any monetary measures would need to be complemented by outcome indicators to develop a picture of a nation's poverty levels, but should we worry also about lifetime poverty - the increase or decrease in wealth attainment during individuals' lives - rather than capturing an instantaneous picture in a "slice of time"?

Venables continued by showing an optimistic starting point for assessing the state of global poverty levels. Under practically all major development indicators, there has been an unprecedented rate of world poverty reduction over the past 20 years. Venables identified the main driver of poverty reduction as economic growth - i.e. it is through economic growth that human development outcomes will be achieved.

But what drives rapid economic growth? Venables identified five main characteristics, gained by examining the success of fast-growing economies:

• Openness to the world economy
• Macroeconomic stability
• Future orientation (investment)
• Market allocation (prices guide)
• Leadership and governance

However, there are some major obstacles to developing effectively these criteria. These include: the "poverty trap" - breaking the cycle of low income > low saving > slow growth > low income geography; the need for adequate legal and political systems to provide incentives to invest; and the provision of public goods to support investments. And there are also other obstacles to consider, such as geography (how can a country integrate into the world economy if it is remote, landlocked and with bad infrastructure?) and resources/endowments (the trouble of "Dutch disease", when resource exports dominate at the expense of more diverse - and stable - markets). There is also the sheer size of the task to consider, to convert vicious circles of stagnation into virtuous circles of growth, and the issue of governance, building the limited capacity of governments into leadership and long-term commitment to growth.

Despite all the obstacles to growth, Venables ended as he started, on a positive note. Noting that there were 500 million fewer poor in 2005 than in 1981 despite a population increase, Venables believes the future will continue on the current trajectory of growth. Rapid poverty reduction in Asia will be ongoing and there will continue to be marked improvements in the quality of policy and performance in many African countries. The progress will be uneven, but it will continue.

A lively date followed the presentation, with such questions as:

• Are free trade agreements the best method to pursue in encouraging the integration of developing countries?
• What is the role of democracy in economic performance?
• What has been the impact of the financial crisis? Doesn't it seem to indicate that it has fundamentally changed the trajectory of growth?
• Is there a role for redistribution of wealth and resources to eliminate poverty - not just encouraging economic growth as a driver?

You can listen to a podcast of this lecture here. Please continue the discussions and add your comments below.