Investment Insight Say a little prayer...

8 October 2015

As I have noted previously, some of the most insightful and

interesting business and economic comments of the past few

years seem to have come from faith leaders rather than

business leaders. Not all politicians and policymakers find

these messages palatable, but they have to acknowledge that

they resonate with many of the people that they govern.

Continuing on this trend, during his recent visit to the United

States, Pope Francis stopped off at the World Bank to keep a

papal eye on its list of “Global goals for sustainable

development – to rescue humanity.” These are aims it shares

with the UN and range from “ending hunger” to “eradicating

extreme poverty.”

On the face of it, we should be encouraged that poverty – if we

subscribe to the World Bank’s definition – has halved in the

last few decades. Furthermore, it reckons that extreme poverty

has fallen by a quarter since 2012, and that 130 million fewer

people living in extreme poverty than previously thought.

While the charity of governments and individuals alike has

surely helped, a more important factor is likely to have been

global economic growth – specifically the explosive growth

experienced by China and Brazil.

Furthermore, some doubt may be cast on the veracity of the

statistics. The World Bank’s number crunchers have revised the

definition of "extreme poverty" from one of an income of

US$1.25 per day to US$1.90 per day.

At the same time, although it has updated its figures on relative

purchasing power of local currencies. This latter change has a

massive effect on the figures. It may come as a bit of a surprise

to many millions of India’s underclass that they are no longer

classified as poor, given the relative strength of the rupee.

Putting this (not insignificant) quibble to one side, though, it is

clear that the World Bank sees economic growth as crucial for

the alleviation of poverty. The fact that recent figures indicate

there is a little less of it about should concern both the policy

makers and churchmen who wrestle with these issues.

Another World Bank statistic notes that war-torn failed states

are home to 400 million of the world's poor. That is a figure

which has remained unchanged for 25 years. By 2030 the

World Bank expects 90% of the world's poor to live in what

they describe as ‘fragile states’. Indeed, that forecast may be

understated, given that it uses data pre-dating the current

misery afflicting Syria and Iraq.

Most of the world's poor depend on agriculture for their

US$1.90 per day. Accordingly, the recent sharp falls in the

prices of global soft commodities (generally those that are

grown rather than mined) will have had a massive impact on

the world's poorest households. Whatever ends up driving

these prices – regulations pertaining to climate change,

perhaps – will have huge implications for the world's poor.

As ever, these are complex issues. Everyone has a view – be

they churchmen, economists, policymakers or the general

public. Many actions have been taken over the past decade

both helpful and unhelpful. That so many have been lifted out

of poverty over the past decades must be one of the great

successes of a global economic structure has seen much

criticism of late. Those remaining in poverty, however that is

defined, will be hoping for similar results in the years ahead.

Richard Dunbar

Investment Solutions

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