Published in The Financial Express on Monday, 3 August 2015.
Inclusive development a must for poverty reduction
We have developed over the last decade in more ways than one. Digital technology and the use of cyber space have erased frontiers and helped spur economic development throughout the world. The international community due to the use of electronic and social media is also more aware of the scourge of poverty. We are now confronted in real time with tales of prevailing inequity, discrimination and corruption that might have facilitated the growth of underdevelopment or misuse of scarce resources.
We introduced the global initiative to reduce poverty through the Millennium Development Goals (MDGs) and prepared many poverty reduction strategy papers. They have helped and taken us forward. The problem has, however, remained in a large scale in several areas in South Asia and in Africa.
Efforts have been made to introduce poverty reduction programmes by policymakers. Economists have also tried to identify the structural sources of the various challenges that help perpetuate poverty. Different dimensions have been examined and strategies discussed at length. This has been done to come to an understanding as to what institutional interventions may be required depending on the country, sub-region or region. There has been especial focus on South Asia, with its population of nearly 1.5 billion which includes about 400 million living below the recognised poverty line.
Some measure poverty as a form of income deprivation and try to identify changes in the level of poverty through the index related to the rise and fall in the income of poorer people “above and below the poverty line”. According to this equation, if the income of the poorer people improves marginally, sufficiently enough to carry them over a pre-determined poverty line, it is then recognised as a form of poverty reduction.
The problem with this precept lies in the continuity of vulnerability with such people who still exist on the margins. For example, slight movements upwards and gains, as is evidenced by people living in the coastal areas in the south-west of Bangladesh, could easily be wiped out with one single natural disaster. The ball game can consequently change very fast and in many cases, the improving population moves back to square one.
Such continuing challenges have persuaded economists to redefine poverty as a process and try to understand it as a format that might be excluding sections of the population from participating within the economic process on equitable terms in terms of opportunities, either because of discrimination or politicisation or mis-governance. They are also monitoring if efforts for further improvement of living standards and making them permanent is being held back due to absence of scope of credit extension to such marginal communities.
Analysts, in general, now appear to be in agreement that realistic policies for poverty reduction should also identify the difficulties and then help create opportunity structures for the excluded segment of the population. They stress in this context the need to initiate measures that will enable the neglected sections of the population to avail of work, healthcare, education and also credit facilities that will assist in the generation of micro-entrepreneurship. It is felt that if such structural facility can be assured, market forces will then move the wheel forward.
It is generally believed that such an approach based on structuralist perspective of poverty reduction eventually creates the momentum that generates a larger and wider number of assets in the form of human resources and also removes existing unequal capacity. This, in turn, promotes the possibility among the ‘excluded’ to participate not only on an equal basis in both domestic and global terms but also to be able to stand up to any misgovernance arising out of abuse of political power. This also enhances culpability and accountability. Such a matrix, in turn, has a multiplier effect and can considerably reduce transaction costs. Relevant institutional structures can then take this forward.
It is at this point that one also needs to examine the entire concept of poverty reduction against the perspective of political economy which is so closely involved with the manifold structural features of society. We need to remember here that examination of poverty-infested areas in South Asia or in different parts of Africa, both in the rural and urban perspective, reveal that poverty generally emerges among populations, in most cases, due to unjust nature within the social order which, in turn, produces social injustice. This generates an endemic form of poverty, which one comes across particularly in different parts of South Asia.
Consequently, if one analyses the socio-economic matrix from this point of view, one can attribute structural injustice as being related to certain decisive factors that create opportunities – productive assets, markets, prospective possibilities for human development and governance – or hampers in their evolution. Any asymmetry within these factors affects eradication of poverty in the affected population.
Professor Rehman Sobhan, eminent economist, has worked in the arena of eradication of poverty for many years and has contributed to a better understanding of this factor. His publications have quite correctly underlined that areas where evidence of poverty exists, reveal that ‘inequitable access to wealth and knowledge des-empower the excluded from participating competitively in the marketplace’. In this context, one has to understand that asset poverty is then translated into an important source of income poverty. Several surveys carried out by civil society in Bangladesh have, consistent with this presumption, revealed that rural poverty tends to originate from insufficient access to land, water and water bodies. Within this scenario, the landless or land poor have to access to such resource under ‘exploitative tenancy arrangements’. This is also true in the case of the urban poor without sufficient access to corporate assets. This dynamics perpetuates poverty.
Land ownership, for example, in a densely populated country like Bangladesh, both in its urban and rural areas, has also another connotation. It not only has income generating potential but also unfortunately becomes a measure of reflected power and position within the social hierarchy. It also sits as a buffer for garnering credit from financial institutions when required.
It is consequentially generally agreed that ‘inequitable access to productive assets’, particularly in South Asia’s rural economy, has affected the region’s agricultural performance. This has resulted in it being below its productive potential. This has also impeded those without land from being able to come out of the rural poverty trap.
Lately, however, there has been a new development where small and subsistence farmers have been focusing on stimulating secondary activity in the rural economy. This has contributed significantly to the growth of non-traditional farm economy. This is contributing to the reduction of income poverty. Excellent examples of this have been poultry farming and cultivation of high-end fruits like strawberries for eventual marketing in urban areas. Some others in the south-western parts of Bangladesh have also got involved in flower cultivation as a cash crop. These new areas are slowly gaining social legitimacy and also attracting credit facilitation from financial institutions.
It would be important here to refer to another aspect that is playing an inclusive role in promoting the economic prospects of the rural poor. It is happening because of digitalisation and mobile phone technology. The unfair advantage enjoyed by unscrupulous middlemen in the marketing of products has been reduced. The rural producer is now able to ascertain the potential retail price in urban markets and that impact on the profit margin of the middlemen. That, in turn, is promoting rural income generation. This is particularly noticeable in the context of agro-processing and pisciculture.
Meanwhile, micro-credit facility has originated as a riposte to the failure of the formal credit market. In practical terms it may have helped to meet the subsistence needs of a section of the excluded but it definitely does not appear to have empowered its clients sufficiently to be able to participate in the context of the macro-economy. As a result, its clients have remained, according to Rehman Sobhan, “impounded in the ghetto of the micro-economy” with its limited potential.
It would be necessary to refer here also to the fact that low productivity (within the context of poverty) is an important factor associated with income poverty. This, in turn, affects access to higher levels of education and technology at affordable price. It is this which makes it imperative for the political authorities to spend more on providing education and vocational training in an inclusive manner. This will build the human resource base that is essential to emerge from poverty.
Fortunately, for us in South Asia, some countries, including Bangladesh, has introduced the vital process of Right to Information. This is assisting in the process of accessing to vital information by the disadvantaged and sections of the minority community. It is also promoting gender empowerment, good governance and accountability through transparency. These are vital elements for economic development in an inclusive manner and for the reduction of disparity and poverty. Use of digitalisation in the media – print, electronic, broadcasting and the social media – is also ensuring that agencies of law enforcement remain under public scrutiny and that they are responsive when required.
We need to understand that any form of poverty is unacceptable and needs to be removed through correction of the factors that might have caused it. We need to intervene in a coordinated and meaningful manner that is inclusive, collective and able to rise above political frontiers. Removing impoverishment is consistent with democratic values that maintain that we are all equal and that some are not more equal than others.
The writer, a former Ambassador, is an analyst specialised in foreign affairs, right to information and good governance. email@example.com