Chapter 4

Contrast the difference between poverty in the United States and poverty in developing countries.

Defining global poverty in the context of American standards would classify most people in the developing world as poor. Using the World Bank standard for poverty ($2 or less per day) or extreme poverty ($1 or less per day), U.S. poverty would be negligible. Yet, in many developing countries, a substantial percentage of the population is below the World Bank standards. Consider the following percentages of poor U.S. households owning the following in 2001: house (46%), motor vehicle (73%), air conditioner (76%), microwave (73%), color television (97%). Possession of these items would be unfathomable for the poor in developing countries

How important is economic growth in reducing global poverty? Has this been effective in India and China?

Economic growth offers far more promise for reducing global poverty. China and India are excellent examples of countries where high growth has had a major impact on income and poverty

A $1 standard of 1985 is worth about $2.50 in today's dollars.

False

A tripling of foreign aid would come close to curing global poverty.

False

African countries contain a third of the world's population and over half of the world's extreme poverty.

False

Many of the world's poorest nations have Gini coefficients lower than in the U.S.

False

The United States is the only country that currently meets the Millennium Goal standard of providing 0.7% of GDP to foreign aid.

False

The potential for redistribution cannot be exaggerated

False

The reduction in global poverty between 1990 and 2006 is almost entirely due to the decline in poverty in India.

False

Unequal outcomes are inherently unfair.

False

Distinguish between the concepts of "inequity" and "inequality".

Inequality involves an unequal distribution of income and/or wealth. Inequity means "not fair". If there is status mobility, then inequalities are not necessarily unfair

Can more foreign aid be a key factor in reducing global poverty?

More foreign aid might help. However, tripling aid from current levels would generate only about $100 a year for those people now in global poverty

Is redistribution the quickest route to eliminate global poverty? Are there risks involved?

The potential impact of redistribution in poor countries can be limited. There are so many poor that taking money from the relatively few who are well off will just not make much of a difference. This could also reduce production incentives for the rich and shrink the economic pie

Discuss the World Bank thresholds for measuring global poverty and how they change over time

The standards were set in 1985 at $2 per day for poverty and $1 per day for extreme poverty. They are adjusted annually for inflation and on occasion to reflect changing consumption patterns.

Defining global poverty in the context of American standards would classify most people in the developing world as poor

True

Even limited deregulation can spur business growth and reduce poverty.

True

In many poor nations, the minimum standard of living is set so low that relatively few people get counted as poor

True

The Gini coefficients for land ownership inequality are often substantially higher than the Ginis for household incomes in low income countries.

True

The United Nations set a "Millennium Goal" to cut the incidence of global poverty in half between 2000 and 2015.

True

The World Bank uses two thresholds for assessing global poverty: either $1 or $2 per day, based on 1985 prices.

True

There is anecdotal evidence to suggest that global inequalities are often rooted in inequities.

True