The global bank bailout is enough to end (that’s ‘end’, not just halve) world poverty for 50 years

Here are some killer facts on the global economic crisis and the response.

First the bail out: globally, as of January 2009, a calculation for Oxfam shows that banks and other financial service firms have already received or been promised at least $8.424 trillion. The breakdown is $903 billion of government capital injections; $661 billion of toxic asset purchases; $1.38 trillion of subsidized loans and more than $5.48 trillion of debt guarantees. This equates to more than $1,250 for every man, woman, and child on the planet.

OK, that’s a lot of zeroes. What to compare it with? By comparison, the annual cost of ending extreme poverty – the amount needed to lift the 1.4 billion people living on less than $1.25 a day above this threshold – is $173 billion .  That is reached basically by measuring the area of between the global income distribution curve and the $1.25 a line. I can send you the working if you want it (thanks to Martin Ravallion at the World Bank for helping with this).

Conclusion: the resources devoted to the global financial bailout are sufficient to end world poverty for half a century.

And now the caveats:
Firstly, a lot of this is in the form of guarantees rather than actual money disbursed – for a better estimate you could for example, see what proportion of guarantees were actually drawn down in previous crises. Anyone got a number?

This is a static transfer; achieving sustainable poverty reduction requires dynamic processes through which developing countries and people living in poverty can produce their way out of extreme deprivation.

Getting this money into the hands of those 1.4bn people in the right amounts is of course a monumental task and even if it were possible, would add a lot of additional costs.

Still, the contrast is I think worth making – bank bailout v make poverty (almost) history.

If you want some different comparisons, try these:

· The accumulated debt of the 49 poorest countries in the world: $375bn
· The annual amount of extra aid needed to achieve all the Millennium Development Goals on poverty, health, education etc: $150bn
· Current global aid levels: $104bn in 2007

Alternatively, Jim Bianco of Bianco Research crunched the inflation adjusted numbers on previous big budget government expenditures:

• Marshall Plan: Cost: $12.7 billion, Inflation Adjusted Cost: $115.3 billion
• Louisiana Purchase: Cost: $15 million, Inflation Adjusted Cost: $217 billion
• Race to the Moon: Cost: $36.4 billion, Inflation Adjusted Cost: $237 billion
• S&L Crisis: Cost: $153 billion, Inflation Adjusted Cost: $256 billion
• Korean War: Cost: $54 billion, Inflation Adjusted Cost: $454 billion
• The New Deal: Cost: $32 billion (Est), Inflation Adjusted Cost: $500 billion (Est)
• Invasion of Iraq: Cost: $551b, Inflation Adjusted Cost: $597 billion
• Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion
• NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billion

TOTAL: $3.92 trillion

 So the current financial bailout is over twice all of those expenditures combined. Makes you think, eh?

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2 Responses to “The global bank bailout is enough to end (that’s ‘end’, not just halve) world poverty for 50 years”
  1. Claudia


    Great post, I love these provoking side of yours, even if I don’t agree with you sometimes.

    Comparison is a powerful learning method, maybe not the most fair, but powerful.

    Anyway, besides your warnings, what is clear is that reducing poverty is not a priority and according to me will never be, no matter how much you and I defend it.

    There is a lot to the power of the rich nations that comes from keeping (or growing) some poverty down South.

    How simple is this? I always want to talk power relations: poor and powerless X rich and powerful.



  2. Miguel

    I agree that comparisons are shocking and leave us thinking. And I find them specially usefull as they can activate our citizen outrage in front of this double standard. However, I see and additional caveats when using this kind of data. Don’t they convey the implicit message that poverty is only about money, and not power and other deprivations, like self-esteem? Of course, money is important, but this might well end up enhancing wrong or limited understandings of poverty, and, consecuently, wrong ideas on how fight it (for example, leaving out the issue of redistribution)
    Thanks for your excellent blog

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