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International Journal of Social Economics

Worsening income gaps and a sustainable future


Richard J. Ward,
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Richard J. Ward, (2002) "Worsening income gaps and a sustainable future", International Journal of Social
Economics, Vol. 29 Issue: 6, pp.480-490, https://doi.org/10.1108/03068290210426584
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International
Journal of Social Worsening income gaps and a
Economics
29,6
sustainable future
Richard J. Ward
480 University of Massachusetts Dartmouth, Massachussetts, USA
Keywords Income, Developing countries, Sustainable development
Abstract To resolve the wide and growing disparity of incomes within the USA and between
highly and poorly developed countries, self-empowerment of the poor while devoutly to be
encouraged and wished for will not suffice without continued and enhanced global commitments
of assistance from private, public domestic and international governments and institutions in the
tasks of educating and training of the poor for better jobs, improved health practices and viable
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democracies. The effort will require the transfer of billions of dollars to development from the
estimated $1.5 trillion currently spent on military arms worldwide and more equitable land
distribution without political and social upheaval. Human nature must be pressed to eschew
selfish materialism, indifference and political opportunism, for the common good of current and
future generations.
Income inequality, whether domestic to the USA or among nations, developed
and less developed, has the makings of an everlasting debate with no solutions.
I struggled with the issue decades ago! In one article (Ward, 1972) said:
. . . income inequality in income distribution has become a very live issue in recent years. The
two central categories of income inequality which threaten to disrupt orderly progress and
peace are: 1. the internal or intra-national income distribution spread, 2. the ever widening
gap or disparity between the more developed and less developed countries of the world.

Citing a Pearson Commission Report, a recent United Nations Report (UN,


1999) sounded the theme:
The widening gap between the developed and less developing countries has become the
central problem of our times.

The US economic welfare imbalance


The more things change, the more they stay the same. The texture and fabric of
the US and foreign economies have undergone sea changes in 30 years, yet the
equitable sharing in the enormous progress attained remains as elusive as ever.
Past research by Boulding (1975) led to his conclusion that ``the stability of
inequality is a source of distress to all sensitive egalitarians'', as his data
demonstrated that the percentage share of aggregate income of the 95th, 80th,
60th, 40th and 20th percentiles of the population remained virtually unchanged
between 1947 and 1972. The trends since then, however, have not been
favorable to the lower 20th percentile, and have certainly kicked the 80th and
95th percentiles up a notch. The vaunted ``rising tide of prosperity'' did not lift
all boats in the past, and it is not doing it now. On the contrary, as the Wellesley
International Journal of Social
Economics,
College economist Bell (1999), observing the American experience, concludes:
Vol. 29 No. 6, 2002, pp. 480-490.
# MCB UP Limited, 0306-8293
. . . the people who make up the top 5 percent of the income distribution take a larger share of
DOI 10.1108/03068290210426584 total personal income today than such people did 30 years ago, increasing from 16 percent in
Worsening
1968 to 24 percent in 1996. The share of income going to those in the middle 60 percent has
declined by almost 10 percent over the same period.
income gaps and
Those in small and mid-size cities in the USA have been hit the hardest in the the future
alleged ``strong economy'' of this past decade. They are not participating in the
boom conditions. Their inhabitants are often not in the high tech loop that fuels
the prosperity of other larger communities. Quoting a government report in
USA Today, Wolf (1999) states that in these cities: 481
many face declining populations, rising unemployment, and [thus] increased poverty rules:
. . . One in three cities have poverty rates of 20 percent or higher, which is 50 percent above
the national average . . . One in six cities hit [unemployment] rates of 6.75 percent or higher,
which is 50 percent above average. More than 5.3 million poor tenants pay more than half
their income for rent or live in substandard housing . . .
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In broader terms, the epidemic of downsizing of operations in the US has


literally created an army of worried and insecure unemployed laborers and
professionals. The list of company cutbacks is long: IBM, Digital, Levi Straus,
Procter & Gamble, BP-Amoco, Poly Gram-Universal Music, Reebok, and many,
many more indeed from across the business spectrum! The layoffs have been
worse in Europe, where, in Germany, for example, unemployment reached 11
percent in 1999. The stories of the consequent hardship as many thousands felt
the sudden shock of being unemployed over the past decade has reached the
level of folklore, as well as being intoned in popular depression culture, as
Duffy (1999) reports, by Bruce Springsteen's lyrics for the insecure: ``so you're
scared and you're thinking that maybe we ain't that young anymore''.
To blame the massive intrusion of computerized processes as the impetus
behind the dramatic increase in wage inequality in the recent past is not the
answer. According to Michael Handel, of Harvard University (cited in Margo,
1999, p. 19), his studies affirm that:
. . . there is no credible evidence that computerization has been the driving force behind the
growing gap in wages . . . [since] the widespread use of computers did not begin until after
1984, but the greatest growth in inequality came in 1981 and 1982.

Seems a bit far fetched to absolve the computer on the basis of two years of
performance almost 20 years ago! Yet, his essential point about the impact of
computers deserves continuing examination, though by adding ``technology'' in
its broader context of people trained to handle electronic machinery, tools,
equipment, robotics and the like, some of the gap can undoubtedly be
rationalized on the basis of those who have received such training and those
who have not.
Whatever the causes of the worsening inequality of incomes in the USA, at
least one-third of people polled by the Pew Research Center claim that their
lives are worse, ``despite the humming economy''.
As Lester (1999) put it:
. . . accompanying the hum of computers and the roar of the economy at the end of the
twentieth century is a nagging feeling among millions of Americans that something has
been lost.
International The global arena
Journal of Social There is some logic to introducing this topic with some perspectives on the
Economics US economy, since with about 7 percent of the world's population, we
consume the lion's share of the globe's food and other resources. As an
29,6 aside, notwithstanding Handel's assertion about the passive role of the
computer in the income inequality debate, the fact that there are more
482 computers in use in the USA than in the rest of the world combined says
something about their role in creating the launching pad for new
communications and other technologies leaving more of the untrained
behind, not to mention speed in all phases of business operations in meeting
product output goals dictated by the speedy rise in effective demand.
Collectively, the top 20 percent of the more affluent industrial nations control
86 percent of global gross domestic product, while the bottom 20 percent
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control just 1 percent. In Laurea's (1999) words, ``the boom for the wealthiest of
the world's population [has been] a bust for just about everyone else''. In this
regard, the United Nation's Report (UN, 1999) lists the ten best and worst
countries to live in as follows:
. Top ten: Canada, Norway, USA, Japan, Belgium, Sweden, Australia, The
Netherlands, Iceland, UK.
. Bottom ten: Sierra Leone, Niger, Ethiopia, Burkina Faso, Burundi,
Mozambique, Guinea-Bissau, Eritrea, Mali, Central African Republic.
Stated numerically, the issue was put succinctly by Michael Renner (1997,
p. 121):
The gap between rich and poor has grown to tremendous levels, both globally and within
many individual countries (table below). Worldwide, the richest fifth of the population now
receives 60 times the income of the poorest fifth, up from 30 times in 1960. In the United
Kingdom, the ratio between the top 20 and bottom 20 percent went from 4:1 in 1977 to 7:1 in
1991. In the United States, it went from 4:1 in 1970 to 13.1 in 1993.
As Table I from this source shows, the ratios of the richest 20 percent of the
population to poorest 20 percent in selected countries varies considerably.
According to the aforementioned UN Report (UN, 1999), among 95
developing nations of Asia, Africa and the Middle East, only India and China
avoided further slowdown in 1999. The slowdown for the remaining 93
countries (UN, 1999, cited in Laurea, 1999) ``will leave 1.5 billion people, or a
quarter of the world's population, living on less than a dollar a day''. Not that
India's situation is all that sanguine. Its population is projected to reach 1.5
billion by 2050, thus adding 16 million each year, and ``there are doubts as to
whether the natural resource base will support such growth'' (UN, 1999, cited in
Laurea, 1999). Already, 52 years after its independence, as Brown and Halwell
(1999) point out, over 50 percent of India's population are undernourished and
underweight and unable to read or write.
In this scenario, the income disparity between the rich and the poor countries
can be appreciated by the finding in this UN Report that in the period
1994-1998, ``the wealthiest 200 individuals in the world more than doubled their
Country Ratio Worsening
income gaps and
South Africa 45:1 the future
Brazil 32:1
Guatemala 30:1
Senegal 17:1
Mexico 14:1 483
Malaysia 12:1
Zambia 9:1
Algeria 7:1
China 7:1 Table I.
South Korea 6:1 Ratios of the richest
20 percent of the
India 5:1
population to the
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Source: Renner (1997) poorest 20 percent

net worth to $1 trillion, which is more than the gross domestic products of
Canada, Belgium, Spain, South Korea, Brazil or Russia''! (UN, 1999, cited in
Laurea, 1999). Also, each of the top global corporations General Motors, Ford,
Mitsui & Co., Mitsubishi, Exxon, Wal-Mart, Royal Dutch Shell, for example
had sales totaling more than the GDPs of many countries of Asia, Africa and
Latin America (UN, 1999, p. 32).
The message here is clear: the widening gap within the wealthiest nations
and between the wealthiest and the poorest is alarming, exacerbated by the
recent collapse of the Asian high flyers Indonesia, Japan, Korea, Thailand.
The slow and still hesitant policy moves by Japanese leadership to revive its
economy, cope with its aging population and workforce, recharge its
entrepreneurial flair for innovation and creative exports, while allowing
foreign access to its markets, will be essential to the long term health of all
of the Asian economies. There are signs of progress in Japan, and, indeed, in
Asia generally, but far less than hoped for or needed. In another part of the
world, economic drag also prevails: the uncertainties of Latin America's
effectiveness in meeting the global competitive challenges adds to the lag in
world economic revival.
All of these ambiguities contribute to the postponement by central
governments and other policymakers of rigorous strategies for addressing the
injustices of the income inequality phenomenon per se, though effective policies
to address serious unemployment, credit and other domestic and international
monetary crises would dramatically contribute to alleviating recession and
hence unemployment and loss of personal income.

Remedies for a sustainable world


From the above, one might conclude that solving either the domestic or
global income gaps seem all but impossible. This perception is partly due to
the inequalities inherent to life on this planet, such as nature's inequalities
in the earth's economic geography with respect to natural resources,
International climate, terrain, the uneven bestowal of native intelligence, the uneven pace
Journal of Social of progress impelled or inhibited by cultural, racial, ethnic and political
Economics orientations of peoples, the happenstance of place and birth, the advantages
of ``first come, first served'' development. All of these lead to unequal gains
29,6 from effort and from trade for citizens everywhere, a phenomenon ably
covered by Landes' (1998) comprehensive research, from which he offers
484 this broad assessment:
. . . convergence is the watchword of the day, the promise of eventual equality, of the
generalization of prosperity, health, and happiness. That, at any rate, is what economic theory
tells us, assuming the mobility of the factors of production. Experience is another matter. The
numbers for the small set of advanced industrial countries seems to confirm convergence
the narrowing of income gaps but individual countries do not always stay with the pack.
Will Japan continue to pull ahead? (not in 1998, 1999).Will the UK continue to fall behind, or is
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this decade's good news the promise of tomorrow? Will this be the East Asian century? (now
in doubt).
What about the USA? Americans should remember the refusal of the British to face up to
their troubles, before they too let themselves be soothed by optimistic prognoses. That is the
weakness of futurism: the soothsayers do not hang around to take responsibility for their
errors. Even if they do, no one notices them any more; and they themselves remember only
the good guesses . . .
Meanwhile advanced and backward, rich and poor do not seem to be growing closer.
Optimistic number-crunchers point to overall mini-convergence, but they put Asia with the
poor, and only the special success of East Asia (seemingly aborted temporarily, at least, in the
late 1990s) yields this optical illusion. Africa and the Middle East are still going nowhere.
Latin America is doing a mixed job, mixed over time and space. The former Socialist bloc is in
transition: some countries are doing well; others, particularly the former Soviet Union, swing
in high uncertainty (Landes, 1998, p. 518).

For Landes to have arrived at this rather, opaque generalization after pages of
analysis, valid though much of it may be, can hardly be taken as an
encouraging view toward man's ability to affect all those ``natural inequalities''
to some positive degree. Moreover, Landes (1998) seems to suggest that the
poor must pull themselves out of a depressing world environment when he
concludes that ``self-empowerment is essential for the poor. And what of the
poor themselves?'' he asks rhetorically.
History tells us that the most successful cures for poverty come from within. Foreign aid can
help, but like windfall wealth, can also hurt. It can discourage effort and plant a crippling
sense of incapacity. As the African saying has it, ``the hand that receives is always under the
one that gives''. No, what counts is work, thrift, honesty, patience, tenacity. To people haunted
by misery and hunger, that may add up to selfish indifference. But at bottom, no
empowerment is so effective as self-empowerment (Landes, 1998, p. 523).

No doubt, there is much to be said for self-empowerment. Yet, this quality,


lacking resources from other than those striving for self-empowerment, has
limited chance for success. Therefore, jumpstarting self-empowerment calls for
collective or regional strategies. This pertains particularly to the urban poor
referred to earlier. Otherwise, experience demonstrates, as one social scientist
(Powell, 1999, p. 13) put it: ``concentrated poverty in the cities or declining
suburbs [becomes] a method of isolation and containment and should be
opposed''. In other words, where ethnic or racial enclaves of poverty exist, there Worsening
is a tendency by people to resist or reject the influx of diverse populations i.e. income gaps and
white or multi-racial mid or upper income business opportunists, or other the future
enterprising entities. This author concludes that to gain convergence of
incomes for those inner city enclaves with surrounding higher income areas,
changes in attitudes are required to accept these outside influxes which create
opportunities for those in the enclaves: 485
If the ultimate goal is to provide low-income people of color access to the opportunity
structures from which they have been excluded then communities should seek to build stable
mixed-income, racially integrated communities with access to opportunities (Powell,
1999, p. 13).
Thus, access to opportunities, due to an influx of enterprise opportunists (read,
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if you will, ``entrepreneurs''), becomes the catalyst for action toward


ameliorating the income gap between urban poor and the surrounding higher
income perimeters and suburbs of cities.
Another source of significant resources to be reallocated to sustainable
development, whether in cities or elsewhere, can be derived from the current
accesses spent on defense. Inadequate notice is allotted in the Landes research
to the drain of military spending from more development oriented uses. Some
studies (for example, Landes, 1998) refer to the historical facts of diversion of
country budgets to armaments in various historical struggles for political
hegemony, country security or peace from perceived enemies, but does not
focus on the enormity of contemporary military budgets and the opportunity
cost of this drain to economic development. In the 1990s, for the USA alone,
over $3 trillion has been spent on defense, a fair portion of which in a less
violent and fractious world could have been allocated to address income
inequality issues. One consequence in the USA has been a ballooning of
the national debt, which was less than $1 trillion in 1980 to over $5.7 trillion
in 1999 a burden of more than $1,200 annually for each US citizen
(Sivard, 1991).
Globally, the figure for annual arms expenditure is estimated to be $1.5
trillion, equivalent to the annual incomes of about 3 billion people in the 45
poorest nations encompassing half of the world's population. What could be
more outrageous for the human race on this finite planet when, in what
UNICEF, the UN's children's organization, calls the ``decade of despair'',
``average incomes of the world's poorest dropped by 10 to 25 percent . . .
spending on health was reduced by 50 percent and on education by 25 percent''
and, shockingly, ``close to 1 billion people live in absolute poverty, 780 million
are undernourished, 850 million are illiterate . . . one billion are inadequately
housed'' (Sivard, 1991).
So, the world's addiction to violence and consequent military expenditure is
one area of potential remedy. For example, many of the world's distinguished
economists, including Nobel Laureates Oscar Arias, Kenneth Arrow, Lawrence
Klein, Wassily, Leontief, Franco Modigliani, Douglass North, Amartya Sen,
Robert Solow, Jan Tinbergen, and James Tobin through the organization,
International Economists Allied for Arms Reduction (ECAAR), have been writing and
Journal of Social lobbying around the world on this problem for a decade. They have engaged
Economics American, Russian, Japanese, South African and other countries' economists
and politicians in serious dialogues on steps to reduce spending on military
29,6 arms and with some success. Many proposals affecting arms reduction have
been assessed in articles in the organization's newsletter, News Network, and
486 journal (see, for example, Harris, 1997; Dalmau, 1997). Admittedly, such
reduction in spending on arms would seem to require reduction in human
conflict first, raising the proverbial chicken and egg issue of which of these
leads the way to more peaceful relations among peoples or nations. The answer
is that the efforts must continue on both fronts.
Another inequality is in the area of land distribution, which illustrates the
income gap issue in a basic and stark contrast reflected in land ownership in
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Table II.
Decade after decade, the growth of population forces people off the land into
the cities and joblessness. Renner (1997, p. 121) concludes that:
Together with population growth, which forces peasants to subdivide plots into smaller and
smaller parcels from one generation to the next, unequal land tenure is causing increasing
landlessness.

Hence the migration to cities. This phenomenon is occurring all over Asia,
Africa and Latin America, creating an area of both potential disaster as well as
opportunity for remedy.
Most of these and other inequality of income issues require heroic policy
approaches by national governments. The commitment to such remedial
policies calls for enormous resolve really sea changes in political and cultural
tides that are so powerfully established and inherent in the historic rhythms of
life in these countries.

Country Observation

Brazil Top 5 percent of landowners control at least 70 percent of the arable


land; the bottom 80 percent have only 13 percent of the cultivable area
Peru Three-quarters of the rural population are landless or near landless
Guatemala A total of 2 percent of farmers control 80 percent of all arable land
Honduras The top 5 percent occupy 60 percent of the land
El Salvador The top 2 percent own 60 percent, and almost two-thirds of the farmers
are landless
Costa Rica The top 3 percent have 54 percent of the arable land
India A total of 40 percent of rural households are landless or near landless; the
25 million landless households in 1980 are expected to reach 44 million by
2000
Table II. The Philippines A total of 3 percent of landowners control one-quarter of the land;
Land distribution and 60 percent of rural families have no or too little land
landlessness, selected
countries or regions Source: Renner (1997, p. 122)
In sum, inherent or natural inequalities, the resource obstacles to self- Worsening
empowerment by the poor themselves, the horrendous waste in military income gaps and
spending the world over, the resistance to openness to opportunity rooted in the future
racial and ethnic ghetto attitudes, the cruel phenomenon of land fragmentation
inflicted by population growth, combined with entrenched political resistance
on the part of landowners to divestiture of land for the common good these
seeming ineluctables thwart and discourage the type of sweeping changes that 487
are required to break the vicious cycle of poverty that, like the ever present
swirls of global winds and storms, engulf the earth and its inhabitants.
Yet, those are some of the fundamental areas of resolution that must be
tackled forthrightly if significant progress is to be made on convergence of
living standards home and abroad.
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Conclusions
What, then, can we do? Note that the issue of sustainable growth had slipped
away from the above discourse. Sadly, the poorest nations in the world are too
preoccupied with survival even to care about it, let alone deal with it. In this,
they will need the help of the more affluent nations and the international
organizations they largely support. While the policies of the IMF and the World
Bank have been roundly criticized in the last decade as to their effectiveness in
bringing about even monetary or financial stability in critical areas or the
world, let alone addressing the income inequality issue by stabilizing monetary
and financial policies and institutions and promoting market incentives and
trade practices, the IMF and World Bank reason that such measures promote
responsible and opportunistic economics destined for a role in the free trade of
the nations. In fact, it often appears, as in the Indonesian and Russian cases,
that such policies exacerbated the problems and the process, and certainly left
behind an environment in which the poorest became drastically poorer than
they were five years ago.
For its part, the UN (1999, pp. 95, 104) offers a number of generalized policy
and action proposals:
. to ensure the generation of pro-poor growth'' and ``for reducing income
inequality'';
. restore full employment and expansion of opportunities as high priority;
. remove anti-poor bias in macroeconomic frameworks;
. invest in capabilities of poor people by restructuring public
expenditures and taxation toward increased access of poor to education;
. increase productivity of small-scale agriculture;
. promote micro enterprises and the informal sector (private start-ups,
shops, distribution outlets, easier credit sources);
. emphasized labor intensive industrialization to expand employment;
International . make public provision for safe water, health services, housing, financial
Journal of Social assets and resource flows to poor people to create productive job
Economics opportunities;
29,6 . provide income transfers during social or economic adjustments and
crises;
488 . remove constraints on poor countries in trade, investment and
technology;
. accelerate debt relief for the highly indebted poor countries.
Easy to list such measures, but difficult to muster the global cooperation and
commitments in the complex and controversial political environment in which
the world's nations struggle to cooperate with effective results.
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The paradox here is that addressing the income inequality issue with
policies such as proposed by the UN to enhance growth via value added GDP
growth does not necessarily yield environmentally sustainable societies nor
progress. Much of the productivity induced economic job creating growth is, in
one way or another, harmful to the environment hence to people, yet is fostered
by governments through tax write offs or outright subsidies. To quote one
economist (Roodman, l999), ``Worldwide, subsidies worth at least $650 billion
equivalent to 9 percent of all government revenues to support logging,
mining, oil drilling, livestock grazing, fishing, energy use and driving [a
car] . . .'', free electricity to farmers in India ``who use it to pump water out of
underground aquifers faster than rain is recharging them. That amount far
exceeds what is spent on environmentally protective subsidies'' i.e. on soil,
forest or water conservation. US industrial style support of agriculture
supports the use of pesticides which contribute to soil erosion and water
pollution. On the other hand, worldwide, many countries are raising taxes on
environmentally damaging pollutants and other practices. A spectacular
success in this regard was the 1987 Montreal Protocol or Treaty on Depletion of
the Ozone Layer, where nations were required to cut emissions and used taxes,
regulations. subsidies and education plans to comply.
Educating our youth in sustainable development principles of conserving
resources and avoiding wasteful production processes must become a high
priority. ``To become ecologically literate,'' an Oberlin Professor reminds us,
``students need to experience education less as an exercise in taking dictation
than as an ongoing dialogue, in which ideas are formulated, tested against
everyday experience, and revised, as they shape the world economy and
geopolitics'' (Roodman, 1999, p. 186).
Beyond the obvious and well known efforts by Western nations and
institutions to promote convergence of incomes around the world while
addressing vital sustainable growth issues, which this paper obviously did not
discover but only reiterate there is more and more questioning of the resolve
of affluent Western or industrialized nations to mount a genuine assault on
either its own or the world's income inequality or environmental dilemmas.
Questions abound of greed, indifference, unwillingness to live with less, to curb Worsening
appetites, to curb the frenzy for more wealth, more material conveniences and income gaps and
excesses, more food, more everything but self sacrifice for the good of the the future
many, or for the desperately poor or the world. We spend more on pet foods and
on animal health care in the USA than on the starving children of Africa, Asia
or Latin America combined. We are also a nation of gun addicts and far too
much violent entertainment. Our frivolous spending exceeds our annual budget 489
for national defense! What we waste in this throw-away society could, when
reconstituted, amply supply a goodly number of the poorest of the world.
Getting at the income disparity issue means getting at the imperfections in our
minds and souls that lead to the indifference to world poverty indifference to
one half of the world's population living on $2 a day and the dire
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consequences to civilized living conditions and hopeful human development.


Perhaps this is why it has been virtually impossible to alter the tell-tale
ratios we have elaborated above.
The problem is, basically, human nature. The problem is philosophical. The
problem is in the lack of commitment to our religious beliefs that instructs us to
deny self for the common good. The problem for most of the world's poor is
simply that of day-to-day survival, often in the midst and in spite of being
engulfed in surroundings of filth and disease.
I was struck by the last paragraph in David Landes' exhaustively researched
book of 524 pages (excluding 110 pages of notes) on The Wealth and Poverty of
Nations, which intones:
The one lesson that emerges is the need to keep trying. No miracles. No perfection. No
millennium. No apocalypse. We must cultivate a skeptical faith, avoid dogma, listen and
watch well, try to clarify and define ends, the better to choose means (Landes, 1998, p. 524).

There is both a sense of defeatism and hope in this statement, perhaps


reflecting the many decades of struggling at times successfully, but withal
still adequately with the widening income and standard of living gap
between the haves and have nots of our planet.
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Brown, L. and Halwell, B. (1999), ``Danger ahead for India'', The Boston Globe, 15 August, p. F7.0.
Dalmau, J.C. (1997), ``Efficient voting on taxation for military purposes'', Peace Economics, Pence
Science and Public Policy, Spring.
Duffy, T. (1999), ``Springsteen shows us the darkness on the edge of boomtown'', The Boston
Globe, 31 July, p. A 17.
Harris, G. (1997), ``The implications of military expenditures in developing countries: future
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Landes, D.S. (1998), The Wealth and Poverty of Nations, W.W. Norton & Co., New York, NY,
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