Why declining capitalism cannot lift poor nations out of poverty

The world celebrated the 2021 International Day for Poverty Eradication on October 17 under the shadow of the Covid-19 pandemic. When the pandemic is finally over, it will leave the world poorer. In 2020, the pandemic raised global extreme poverty for the first time in over 20 years. As a result, an estimated 100 million more people are living in abject poverty. Sharing knowledge, good practices and lessons learned is central to eradicating poverty.

How can countries in the global south leverage knowledge and share lessons learned and good practices in poverty eradication and sustainable development to rise from the ashes of Covid-19? This is the million-dollar question that dominated the online workshop on “South-South Cooperation on Leveraging Knowledge and Good Practice Sharing for Poverty Eradication and Sustainable Development” jointly organised by the Chinese Academy of Social Sciences (CASS) and the United Nations Office of South-South Cooperation in Beijing on October 21, 2021.

It is the African-American scholar, WEB Dubois, who famously, and rather prophetically, proclaimed in 1903 that: “The problem of the twentieth century is the problem of the colour line” — the relation of the darker to the lighter races of mankind. Over a century later, it is safe to say that “the problem of the twenty-first century is the problem of the poverty-line — the widening gap within and between populations in impoverished nations especially in the Global South. Today, over 696 million people still live in extreme poverty, surviving on less than $1.90 a day.

Two distinct narratives are driving the discourse on global poverty. The first, largely Lockean and blissful, springs from the great feats achieved by countries like China in rolling back poverty. Globally, the number of people living in extreme poverty has been on the decline for several decades. The numbers went down from 1.94 billion in 1982 to 696 million in 2017. As poverty plunged, the Earth's population rose from about 4.5 billion in 1981 to more than 7.8 billion in 2021. This historic gain was largely as a result of China’s success in lifting over 850 million people from poverty.

High poverty rates

The second narrative, largely Hobbesian is less encouraging. In recent decades, poverty has been on the rise in several countries. More than 40 percent of the people in Sub-Saharan Africa (more than 430 million) are living in extreme poverty. According to the World Bank, nine out of the 10 countries with the highest poverty rates in the world are in Africa. Countries in the global South have the lion’s share of poverty. As of 2019, over half of the world’s poor lived in just five countries: India, Nigeria, the Democratic Republic of Congo, Ethiopia and Bangladesh. 

Studies have established a clear correlation between high poverty rates and countries either at war or in political crisis. Africa’s poor countries are also trapped in civil wars, compounded by frequent natural disasters such as drought caused by environmental stresses relating to the effects of climate change. Long-term peace and stability is crucial for poverty eradication and sustainable development.

The liberal solution of choice for countries trapped in poverty is to deepen free market capitalism. Yet, although capitalism remains the most pervasive political and economic system that privileges private production of goods and services, scholars have lamented that it is in a profound crisis and on the decline globally.

While colonial capitalism left behind a trail of impoverished nations, empirical evidence exists that the system has increased poverty. In its modern-day implementation, capitalism has precipitated inequalities, perpetuated poverty among developing nations, fueled competition and conflict and impeded poverty eradication efforts.

Over the past two decades, a sizeable and credible body of knowledge, lessons learned and good practices have emerged in the global South, which can be shared to leverage poverty eradication and help achieve sustainable development.

Long-term solutions

China’s reforms and opening up provide the best lessons in poverty eradiation that can help impoverished nations roll back poverty. In 2000, around half of the Chinese people, more than 600 million, still lived below the national poverty line. Since Xi Jinping took office in 2012, China has lifted 100 million people out of poverty. On November 23, 2020, China announced that it had eliminated absolute poverty nationwide by uplifting all of its citizens beyond the poverty line. China’s path to modernisation has shown that successful poverty eradication calls for a strong state capacity and reformist leadership.

China provides practical lessons in investing in long-term solutions like infrastructure and skills development to eradicate poverty. China’s multi-trillion-dollar Belt and Road Initiative (BRI) has helped build ultra-modern infrastructure in Africa to fuel industrialisation, create jobs and reduce poverty, especially among the youth.

It was Charles Kindleberger, the intellectual architect of the Marshall Plan, who argued that America’s failure to take on Britain’s role in providing global public goods after it replaced Britain led to the collapse of the global system into depression, genocide, and world war in the 1930s. Major powers like China have to break the Kindleberger Trap by providing global public goods to pull impoverished nations out of poverty.

As China’s power grows, it is using BRI and the Forum for China Africa Cooperation (FOCAC) to provide global public goods to Africa. Over the last two decades, FOCAC has become inextricably linked to the story of “Africa Rising”. Providing public goods will involve investing in conflict resolution, peace-keeping and humanitarian intervention to combat pandemics like Ebola and Covid-19, giving the poor access to clean water, adequate food, affordable education, health care, and other needs. In the run-up to the 2021 triennial FOCAC summit in Dakar, Senegal, poverty eradication should be top on the agenda.

Prof Kagwanja is chief executive of Africa Policy Institute. This article is an excerpt from a speech delivered at an online workshop.