Challenge 21

The great battle of the 19th century was against slavery. In the 20th century, the fight was against totalitarianism (left and right wing). A recent report published on human development by the United Nations illustrates that, in the 21st century, the war will be against poverty.

There are 1,242 million people in the world today (124 times the population of Portugal) who live with less than one dollar per day – 488 million in India and South East Asia, 222 million in China, 57 million in both the Far East and Latin America, six million in North Africa and the Middle East, an amazing 97 million in Central and Eastern Europe and 315 million living in Sub-Saharan Africa. Worse than this, although most countries have been making progress (China, India, Ghana, Vietnam, and so on), 54 countries saw their income per capita fall. These include 20 in sub-Saharan Africa, 17 in eastern Europe, six each in Latin America and the Far East, and five in the rest of the world. Meanwhile, hunger has increased in 21 countries and the childhood death rate, before the age of five, has risen in 14 countries.

What can we infer about this? At the present rate of progress, we will not reach the year 2015’s objectives of the United Nations Millennium Statement, which is to decrease poverty and childhood mortality by two thirds.

What does this mean? It does not mean that globalisation is increasing poverty, because the percentage of the population with less than one dollar per day, in 1990, was 30 per cent and, by 1999, this figure had dropped to 23 per cent. What it does mean is that eliminating poverty is more difficult than we thought and that, despite the general, global trend, there are some countries where the situation is getting worse.

How can this be solved? First, one should note that macroeconomic instruments are decreasing in importance. In an increasingly global world, the margins in monetary and political manoeuvring are decreasing. Budgetary freedom is also limited within the world’s economies (e.g. there is the eurozone growth and stability pact, which limits budget deficits to three per cent in Europe).

So, other policies, such as education, health, direct aid, the fight against corruption, the creation of open societies, democracy, free press and independent courts, emerge as fundamental. There is also the need for more free trade (to put an end to the barriers against the importation of agricultural products from the third world to OECD countries).

Most importantly, we need management, not as an end in itself but as a means. As Schumpeter noted, more, and better, businesspeople are needed in order to improve growth through innovation and produce cheaper quality products through more efficient companies.

In other words, we need better management today (in the 21st century), so that our children can dedicate themselves to maths, chemistry and physics, and our grandchildren to music, sculpture and painting.