Irving Fisher ON POVERTY & DEVELOPMENT

Transcription

1 Irving Fisher { ON POVERTY & DEVELOPMENT

2 {What is it?

3 {What is it? Poverty as defined by the United Nations: Absolute Poverty a condition characterised by severe deprivation of basic human needs, including food, safe drinking water, sanitation and health facilities, shelter, education and information. It depends not only on income but also on access to services Absolute Poverty is also living on less than US$1.25 a day as advised by the World Bank However, ultimately, poverty is powerlessness in any given society. Without this power it is exceptionally hard for change *Please note that this presentation focuses on absolute poverty

4 {The Problem Over one (1) billion people live in poverty ( < US$1.25 / day) Billions of dollars are spent annually to help end poverty International development agencies spend even more money on advancing infrastructure for developing nations.

5 {Why is there poverty? Poverty has evolved from many different roots: Exploitation Colonisation; (e.g. Africa and South America), natives as slaves and colonists in power. Essentially repatriation of profits. Debt Trap, continual debt repayments on debt that constantly increases, leaving funding gaps in education, health etc. Modernising Agriculture has left many farmers jobless. (Many poverty ridden nations were/are Agrarian). Corruption, many countries have corrupt governments that siphon money to their own account rather than benevolently. Unequal Access and Distribution of resources. Including natural and those of education, health care and employment opportunities.

6 {The Problem Billions in aid have yet to prove very successful in lowering poverty rates. However, billions of dollars in trade with China have seen significant reduction in poverty levels. It created urbanisation which in turn created more jobs. Is trade more beneficial than aid? Unemployment marks poverty in developed countries So is employment better than aid?

7 {The Problem Microcredit invest in business access to basic needs Economic Decline Depleted Workforce Low Personal Income The Poverty Cycle (Basic Needs) Disease, Malnutrition and Death Less Access to Food and Water Hunger and Poor Sanitation

8 {The Problem Economic Decline Low National Productivity Low Personal Income NGO Training, strong support of agricultural sectors. As well as strong NGO and Foreign Aid Education Programmes. Untrained Workforce or High Unemployment The Poverty Cycle (Education) Lack of Education No Funds For School

9 {Malthusian Trap Without aid money hundreds of millions would die, due to starvation and poor medical support. These are not real figures they are for demonstration purposes Malthus proposed that as population grows there will be increased shortages for all resources. This suggests that perhaps these countries need to slow their population growth. As they are already out using their available resources. Human Growth Food Production

10 Born 1867, died 1947 An Economist An advocate for eugenics Quantity Theory of Money (QTM) Race Suicide + Other economic theories

11 {Eugenics

12 {Applying Eugenics Fisher s perspective in favour of eugenics would have a simple solution Let them be, they cannot help humanity therefore we should not try and help them This sounds harsh but modern eugenics suggests: Those undesirable and unable to help humanity should not be able to breed

13 {Eugenics and poverty. A question of humanity.

14 Fisher s Economic Theories {Summary Fisher developed many economic theories His most famous work is formalising Quantity Theory of Money (QTM) This is the theory that I shall be applying to Poverty

15 Fisher s Economic Theories {Explaining QTM Quantitative Easing The Equation: M V = P T where M is the money supply (total available money in economy) where V is velocity of circulation (times money is used in transactions) where P is the average price level (the average price of goods and services) where T is the volume of transactions (the amount of transactions made) V is stable on a short term basis. This formula is able to decrease or increase the value of a currency. This in turn has the ability for economic stimulus. It is used in the hopes of increasing volume of transactions

16 Fisher s Economic Theories {Applying Fisher s Thinking: Macroeconomics Central Bank Prints More Money For economies to thrive they must be politically Value Added independent institutions, especially Central Banks Which means more productivity Supply money to banks Leading to Job Creation And trade opportunity Interest Rates Decrease \ Increases in investments by business Thus, decreasing poverty and unemployment

17 Fisher s Economic Theories {Applying Fisher s Thinking: Microcredit A Modern Solution Ideal situation for microcredit Microcredit has been highly successful in countries including India and Bangladesh. Provide impoverished people with low risk loans to enter into trade. Leads to lower interest rates Increased money supply to banks

18 Fisher s Economic Theories {A Positive Conclusion...? Fisher was also in favour of free trade. Combined with microcredit this would allow developing nations opportunities to sell their cheap products in a rich market. Concluding that trade is far better than just aid. This conclusion has been effective in China especially, in the 15 years prior to the Global Recession about 400 million people were brought out of poverty.

19 Fisher s Economic Theories {There are always problems though This method is not totally able to kick start an economy as it avoids the input of the government. For businesses to invest, leaders and governments need to help by providing clear legal and governance frameworks that minimise corruption; as well as infrastructure and policies to attract and encourage investment. Fisher s ideas are strong however, practically they are not effective and must be applied in unison with Keynesian Economics. Keynes says that just printing money will not help stimulus because banks will then lower interest rates, so people continue to hold on to their money in hope that they could drop more. People do not invest or make big purchases but rather save as saving rates increase.

20 Fisher s Economic Theories {There are always problems though Applying Fisher s equation completely without regulations has seen to prove highly dysfunctional. Zimbabwe is a perfect example of this, they printed so much money that it is almost worth nothing. This is due to corruptness located in their Central Bank. This can be combatted using more Fisherian logic: By soaking up money OR Remonetising an economy All in all Fisherian economics is not enough to end poverty put can be one part of the bigger picture.