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Why poor still poor?
Added: (Mon Dec 12 2005)
Why poor still poor?
Kamala Sarup
Much confusion here between poor and rich. I will consider the
latter difference from an economist's viewpoint.
Works are symbols (abstractions) for other abstractions (e.g., Peace,
War) and for tangibles, e.g. existing poor and rich. As symbols for
tangibles, some works can be least abstract, i.e., the symbol for the
poor now in your wallet, more abstract, i.e., the symbol for the rich
located in your country. A symbol for the poor discussed in a book on
the history of its use. In all of the above examples, the work "poor"
is a symbol representing a tangible called "money".
The tangible, "wealth" are the goods and services that a person can
command for his/her use. Your house, your factory, and the work of
your gardener and your factory workers are examples of wealth. The
tangible, "money" is the paper and coin that gives a person access to
wealth. From an economist's viewpoint, money is not wealth. Money
gives access to wealth. (In the language of the street, however,
money is considered wealth too.)
I suppose it would be better to say, there has always been
macroeconomic policy which is essential for economic growth. It also
is essential if one is going to avoid very high rates of inflation. To
a first approximation, real incomes go up approximately at the same
rate across the spectrum. On the other hand, there are things in
addition to simply raising real incomes that can make a difference.
And, of course, there is lots we need to learn both in terms of what
has been effective and what has not been effective.
Countries have to develop organized instruments to achieve their
military, political, economic, social, religious, and intellectual
objectives. Without a strong economic establishment a nation cannot
maintain its sovereignty. Economic change must comes only through
reforms. If it fails, reaction and decline will set in. To quote
Quigley: "Basically man is good; that there is truth but we can come
to truth only by working together; and that through faith and good
works, we can have a better life in the world."
Any country has to deal with inflation and employment, big government
deficits.I want to talk about the design of policy and I'll
specifically talk about pro-poor growth-and the assessment of policy,
which is particularly poverty impact analysis. So design and
assessment, and they're obviously complementary, and they should
obviously be based on evidence. So let me take policy design and
particularly look at that in terms of pro-poor growth. On the other
hand, special schemes to unearth black money and assets should be
introduced.
The poor still number over thousands. As the economy registers an
artificial boom, world's savings and investment rates decrease by
three percentage points and the government's profligacy reaches new
peaks.
It is true, Income growth in the rural areas, where 70 percent of
people live, has sharply declined. Real wages of rural workers has
also decreased. Infant mortality rates are rising. But luxury
consumption is booming within the upper crust. Private sector is not
more efficient. The government money has not gone into modernization,
workers' retraining or the infrastructure, but into unproductive
government consumption. The infrastructure is in an advanced state of
decay.
In developing world, the health sector also had a lot of expectations
from this budget, especially the private health sector and private
insurance. While all expectations were perhaps not addressed, the
budget has given the health sector a fair share of attention.
Human security mainly relates with the production, distribution and
pricing of food grains and thus brings agriculture, Public
Distribution System and the subsidy structure in to focus. The reform
measures that predominantly affect them are reduction of fiscal
deficit, reduction of subsidies, devaluation of rupee, export
orientation and reduction of agricultural credit. The price rise in
food-grains owing to the cuts in the food and fertiliser subsidies and
consequent adjustments have particularly been harsh.
We have questions how the higher level of social consumption with
relatively better distribution of incomes and wealth vastly widened
the demand of those economies and facilitated more broad based
development. At the same time, there is need to review these
programmes, sharpen their focus, improve their delivery system and
involve the poor in their implementation.
If we declare for reduction in poverty, which we do, of course, we
ought to be able to assess ex ante and ex post the impact of our
policies on poverty. We must be very careful, of course, to do that in
a long-term, dynamic way as well as short-term. You cannot, for
example, look at the impact of education on poverty and income
distribution by just looking at what happens over the next couple of
years. The impact of education on poverty and income distribution
obviously has a very long gestation period. So that's just one of the
problems.
Higher literacy and health standards were the most crucial factors in
enhancing labour productivity which in turn went to facilitate
significant import substitution and export promotion.
We have seen quite a bit on private consumption, but the emphasis also
needs to be put on what are the adjustment implications on the
provision of public goods, particularly public health,education,
because these not only have immediate effects on consumption. The
reaction of the public sector to the crisis can actually make the
situation a little bit more manageable.
Now, if you look at some developing countries - and, again, I don't
want to generalize, but at least the case of Mexico and very many
other countries in Latin America - what you see is that there are
multiple mechanisms for income transfers. There are tax exemptions for
some basic commodities. There are sometimes price controls on
telephones. There are sometimes price controls on transportation.
There are food subsidies. There is sometimes free delivery of goods.
In most developing countries, there's something that I would call a
missing political alliance between the poor and the non-rich. The
point is that these make the majority in most developing countries.
So the point I want to make is that most people are at risk in one way
or another. But we don't see any sign, oddly enough, of this missing
political alliance between the poor and this huge vulnerable group of
non-rich.
Kamala Sarup is an editor to peacejournalism.com