Globalization, the international poverty trap and chronic poverty in the least developed countries

This paper argues that the dollar-a-day poverty measure is pervasive and persistent in most Least Developed Countries because they are caught in an international poverty trap. It highlights the fact that poverty is perpetuated by vicious domestic circles through which the high incidence and severity of poverty constrain national economic growth, and that the current form of globalisation is tightening rather than loosening the international poverty trap. In response to this, the author states that policies underlying international development cooperation, centering on Poverty Reduction Strategy Papaers (PRSPs) have not changed sufficiently to enable countries to escape the trap and realise the opportunity for fast poverty reduction through economic growth.

Some policy recommendations include:

• at the national level, a need to shift from adjustment-oriented to development-oriented poverty reduction strategies. Such strategies should seek to double average household incomes as quickly as is feasible.
• at the international level, renewed attention has to be given to relaxing the severe financial constraints that hamper development. This entails debt relief which goes beyond the enhanced HIPC initiative with top-ups, increased aid, better technical cooperation and financial assistance to re-build state capacities and revision of policy conditionality to enable genuine domestic autonomy
• a pragmatic approach towards international commodity policy involving national and international efforts that could include a compensatory financing facility to offset the effects of commodity price shocks; and exploring institutional innovations which can enable the adoption of commodity risk management instruments in poor countries.

The author concludes that the policy challenge is to structure the relationships of both more and less advanced developing countries with developed countries in a way that enables the progress of both groups of developing countries and also the emergence of complementary synergies between the more and less advanced ones.