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Debunking Economic Myths: Are the world’s poorest countries catching up?

Debunking Economic Myths:  Are the world’s poorest countries catching up?

IMF data from April 2024 reveals that the countries identified as the poorest a decade ago in 2015, based on GDP per capita, remain largely the same today. Despite increases in their GDP per capita, these nations have not managed to escape the ranks of the world’s poorest, still contending for the undesirable title.

The year 2000 is often considered a pivotal point in the contemporary phase of globalisation, marked by significant technological, economic, and political developments.

Experts claim that globalisation drivers, such as trade liberalisation and advanced technology, are expected to benefit both poor and rich nations by sharing resources, boosting markets, and increasing productivity.

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Regrettably, a sad but harsh reality emerged! The world has the wealth and resources to ensure that the human race enjoys at least an average or decent standard of living, but unfortunately, countries like Burundi, South Sudan, the Central African Republic, Afghanistan, Syria, and Malawi are contenders for the undesirable title of the poorest country—a sobering thought but an unfortunate reality.

This raises a pressing question: Are the world’s poorest countries catching up? The answer to this question requires a deeper examination.

From Europe to Asia and America, poverty remains a pervasive issue that governments worldwide are contending with. While some countries in America and Asia are making strides towards prosperity, many African countries are still ensnared in poverty. Africa is the poorest continent, with 22 of the 26 low-income economies, according to World Bank data.

In a similar article titled “Are the Poorest Catching Up?” authored by James Cust, Paul Collier, and Alexis Rivera-Ballesteros, it was highlighted that Sub-Saharan Africa has long grappled with economic challenges, as evidenced by its meagre annual growth rate of just 0.8 percent in per capita income. This figure pales in comparison to the double-digit growth rates experienced globally over the same period, particularly in regions like East Asia, where per capita growth rates exceeded 6 percent annually.

This sluggish growth trajectory has resulted in African economies and other lower-income countries falling further behind the rest of the world in terms of income. Concurrently, the number of Africans living below the global poverty line has swelled by tens of millions since 1990. In contrast, countries such as China have achieved remarkable per capita growth, averaging around 7.6 percent, lifting over 750 million people out of poverty.

 “While some nations are thriving, others are struggling to provide basic necessities for their populations. This disparity is often rooted in historical, political, and economic factors that are deeply entrenched and challenging to overcome.”

Burundi, ranking as the poorest country not only in Africa but also in the world, underscores the severity of poverty in the region. With a dismal GDP per capita of $259.03, Burundi depicts profound levels of poverty and precarious living conditions (World Bank, 2023).

Afghanistan, burdened by ongoing conflict, corruption, and inequality, consistently ranks as the poorest country in Asia by nearly any measure. Despite the Asian continent housing two of the largest countries—India and China—and one of the two top economies, it still has many poor countries. Afghanistan is plagued by ongoing armed conflict, government corruption, and prolific income inequality. After the United States and United Nations withdrew their troops in mid-2021, the Taliban retook control of the country’s government. The long-term impact of this change on Afghanistan’s economic situation has yet to be seen.

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However, the Taliban’s ongoing conflicts with ISIL, its forcible shuttering of female-owned businesses, and its refusal to allow girls to attend school are widely viewed as conditions unlikely to lead to a more robust and stable economy. As of 2021, the country has a staggering GDP per capita of $355.78, indicating a poor standard of living and entrenched impoverishment (IMF, 2022).

North America is home to the United States, whose 2020 GDP of approximately 21 trillion USD ranked as the largest economy in the world and constituted roughly one-fourth of the total global economy, yet Haiti remains the poorest in the region. Haiti’s economic and social development continues to be hindered by political instability, increasing violence, and unprecedented levels of insecurity, which exacerbate its fragility.

According to the World Bank, Haiti remains the poorest country in the Latin America and the Caribbean (LAC) region and among the poorest countries in the world. In 2021, Haiti had a GDP per capita of $1,748.26 and a GINI index of 41.1. The country’s Human Development Index (HDI) value for 2022 is 0.552, placing it in the medium human development category and positioning it at 158 out of 193 countries (UNDP, 2023).

Amid the lingering political and institutional crisis, high vulnerability to natural hazards, and violent gangs vying for control over business districts, the economy contracted for five consecutive years: by 1.7 percent in 2019, 3.3 percent in 2020, 1.8 percent in 2021, 1.7 percent in 2022, and 1.9 percent in 2023, data from the World Bank shows.

Tax revenue collection improved in 2023, thanks to tighter controls at customs and increased oil tax revenue. However, the tax-to-GDP ratio remains low at 6.3 percent (World Bank, 2023).

According to the 2020 Human Capital Index, a child born today in Haiti will grow up to be only 45 percent as productive as they could be if he or she had enjoyed full access to quality education and healthcare. Over one-fifth of children are at risk of cognitive and physical limitations, and only 78 percent of 15-year-olds will survive to age 60 (World Bank, 2023).

Bolivia is the poorest nation in South America, with a GDP per capita of $3,600.12. High unemployment and underemployment are rampant in the country, and more than 80 percent of the nation’s population lives in poverty.

However, Bolivia is improving. In 2006, 38.2 percent of the population was considered to be living in extreme poverty, in contrast to 15.2 percent as of 2019. Bolivia’s overall poverty rate is already lower than that of Mexico, data from the World Population Review showed.

The nation has also achieved the highest economic growth, fiscal stability, and foreign reserves in all of Latin America over the past years. As a result of these trends, there exists a reasonable expectation that the country will one day give up its last-place status (World Bank, 2022).

In a broader context, the persistent poverty in these countries is a testament to the stark inequality in global wealth distribution. While some nations are thriving, others are struggling to provide basic necessities for their populations. This disparity is often rooted in historical, political, and economic factors that are deeply entrenched and challenging to overcome.

One key issue is the lack of access to quality education and healthcare, which are fundamental to breaking the cycle of poverty. In many of the world’s poorest countries, children grow up without the necessary resources to reach their full potential, resulting in a workforce that is ill-equipped to compete in a globalised economy.

For example, in Haiti, a significant portion of the population lacks access to basic education and healthcare services, which hinders human capital development and economic growth.

Another contributing factor is political instability and corruption, which can deter investment and disrupt economic activities. In Afghanistan, for instance, ongoing conflicts and government corruption have stymied economic progress and perpetuated poverty. The withdrawal of international troops and the resurgence of the Taliban have further complicated the situation, making it difficult to establish a stable and prosperous economy.

Additionally, many of these countries are highly vulnerable to natural disasters, which can have devastating impacts on their economies. Haiti, for example, is frequently hit by hurricanes and earthquakes, which cause widespread destruction and hinder development efforts. The lack of infrastructure and preparedness exacerbates the impact of these disasters, leaving the population more vulnerable and perpetuating the cycle of poverty.

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International aid and development efforts have made some progress in addressing these challenges, but much more needs to be done. It is essential for the global community to continue supporting these countries through financial aid, technical assistance, and policy support.

Efforts should focus on improving education and healthcare systems, fostering political stability, and building resilient infrastructure to reduce vulnerability to natural disasters.

While the world has the wealth and resources to ensure a decent standard of living for all, significant disparities remain. Countries like South Sudan, Burundi, the Central African Republic, Afghanistan, Syria, and Malawi continue to struggle with deep-seated poverty.

Thus, considering the data published by the IMF in 2024 showing the top ten poorest nations a decade ago are still largely among the top ten poorest countries, it is evident that the world’s poorest countries are not catching up with their counterparts on the global landscape.

Addressing these issues requires a multifaceted approach that tackles the root causes of poverty and promotes sustainable development. Only through concerted global efforts can we hope to bridge the gap and ensure a more equitable distribution of wealth and resources.

 

Oluwatobi Ojabello, senior economic analyst at BusinessDay, holds a BSc and an MSc in Economics as well as a PhD (in view) in Economics (Covenant, Ota).

Wasiu Alli is a business and finance journalist at BusinessDay who writes about the economy, business trends, and politics. He holds a BA. Ed. and M. Ed. in English Language and Education.