Economic Growth, Population and Poverty Numbers

I normally don’t do numbers. But in this post, I will have to refer to numbers because wealth and poverty have to be understood quantitatively too. So let’s do the numbers.

It is an amazing fact that extreme poverty has fallen both in absolute and relative terms. The world’s population living in extreme poverty has dropped from 42% in 1981 to 11% in 2013. The world population was 4.5 billion in 1981, and 7.2 billion in 2013. Therefore in absolute numbers, extreme poverty numbers dropped from 1.9 billion to 0.8 billion. Over one billion people climbed out of extreme poverty, mostly in China. Good job, China. Continue reading “Economic Growth, Population and Poverty Numbers”

Pro-poor policies work

Pro-industrial policies promote industry, pro-health policy promote health, pro-education policies promote education. So it is natural that India’s pro-poor policies — and let’s be very clear that every single one of India’s economic policies have been pro-poor — work and promote poverty and the number of poor keeps on going up. The absolute number keeps growing. What about the percentage? It does keep improving.

So what’s the latest on poverty in India from the World Bank? It is reported that the WB released some study which talks about the changes in the recent past. Good news or bad new? Depends on who is reporting the study. Sort of like assessing beauty — which we all know lies in the eyes of the beholder. Rediff says “India has fewer poor people: World Bank“. IBNLive reads the same report and says “Number of poor in India has gone up: World Bank.” (Thanks Dr A for the links.)

How’s that for objective reporting?

Global Poverty and the Cell Phone

A magazine article in the New York Times of April 13th has the rather mistaken and misleading title “Can the Cell Phone End Global Poverty?” (Hat tip: Abhishek Sarda). The article title is misleading because it doesn’t even remotely attempt to answer that question. It is instead about what is called a “human-behavior researcher” or “user anthropologist,” in this case someone who works for Nokia and essentially tries to figure out how people actually use their phones and thus how phone companies should design phones for greater usability.
Continue reading “Global Poverty and the Cell Phone”

Reality Disconnect

There appears to be a thriving cottage industry which is primarily engaged in churning out shallow pieces of journalistic garbage. The pieces detail a particular person’s or family’s struggles and then juxtapose it in some dramatic way with perceived overall prosperity. The implicit argument is that there is an immense injustice being perpetrated against the poor, that it is all the fault of those who are not poor, and that the poor have absolutely no responsibility for the miserable state of affairs. These articles reveal a lot without intending to. They plainly state that the author did not quite learn the lesson that stared them in the face when they were investigating the story.
Continue reading “Reality Disconnect”

The Sustaining of Poverty

The Oxfam America site asks In a World of Abundance, Why Hunger? (July 8, 2002)

Poverty and hunger are the world’s greatest challenges

  • 1.2 billion people–one out of five–live on less than $1 a day.
  • More than 800 million people are hungry, including 31 million in the United States.
  • Every day, 24,000 people die from hunger and other preventable causes. One billion people do not have adequate shelter, and 2.4 billion people do not have access to proper sanitation. More than 1 billion people in developing countries lack access to safe water.
  • Yet enough food is produced in the world to feed everyone.
  • Overpopulation is not the main cause of hunger. In Japan, a densely populated country with 125 million people, hunger is rare compared to other countries. Many larger countries with fewer people, like Peru and Sudan, have much higher rates of hunger.
  • The problem is inequality in access to education, resources, and power.

I have a slightly different take on the question of poverty and hunger. I think that ultimately, without the active participation of the world’s poor, poverty cannot be sustained. I believe that we have been looking for the solution to poverty everywhere else except at the source of poverty. The source of poverty is the poor. The poor sustain poverty.

I am not absolving anyone of blame by locating the source of sustained poverty among the poor. On the contrary, the non-poor also actively participate in helping the poor sustain poverty. But in the ultimate analysis, the poor have the power to kill poverty. How to awaken them to that realization is the challenge that those who wish to see poverty eradicated face.

The National Rural Employment Guarantee Scheme

In a land where reportedly every generalization is trivially true, one generalization holds non-trivially and with overwhelming force. It is this: Indian governments are pro-poor. Every policy that any government ever espouses, fundamentally it always is pro-poor, irrespective of any minor variations such as pro-market or pro-planning or pro-industrialization or pro-globalization or pro-self sufficiency or whathaveyou.

My claim is that this pro-poor policy is not mere rhetoric. The policy works and how. I argue that all other policies have not yielded their expected results but the pro-poor policies have delivered as could be reasonably expected.

Pro-industrialization policies are expected to lead to an increase in industrialization. If India ever had such policies, they have had only marginal success because India is arguably not an industrial economy. Pro-poor policies are expected to promote the number of the poor, and there has been a monotonic increase in the number of poor in India.

The percentage of people below the poverty line is estimated to be around 25. That is, India has about 250 million people who are so unimaginably poor that they can’t cross the poverty line that is set way below what can be considered necessary for a human existence. Around 33 million were added to that role in 2001-02 alone For comparison, that is more than the entire population of Canada in 2001 (30 million).

Let’s put the number of the abjectly poor in perspective. Consider the number of people below the poverty line at the time of India’s independence. We had about 350 million people then. Assuming that 50 percent of them were below the poverty line then, there were 175 million abjectly poor people then. Now, about 57 years later, we have 250 million abjectly poor people. There has been an increase of 75 million in the ranks of the abjectly poor in the nearly six decades of pro-poor policies..

India’s pro-poor policies have succeeded in increasing the number of poor in the past and while past performance is not a guarantee of future results, the most probable outcome of current pro-poor policies can be expected to lead to increase in the number of the poor. The “Employment Guarantee Scheme” (introduced by the National Rural Employment Guarantee Bill) is pro-poor and the result will be as before.
Continue reading “The National Rural Employment Guarantee Scheme”

Culture Matters

Economists conventionally list land, labor and capital as the three factors of production. If combined appropriately using the right technology, stuff is produced. This produced stuff is then the total income. Productive efficiency is important of course for a society to be economically secure. Then there is the matter of equity. You have to distribute the stuff produced equitably. Productive efficiency and distributive equity must be part of a healthy economy. But then if sufficient factors of production exist and the technology is also available, then how does one account for the failure of some societies in overcoming poverty?

I believe that the choices that society makes depends on the cultural and institutional capital of the society. As much as land, labor, capital, and technology matter, the social capital — that is the cultural norms and values and institutions — matter fundamentally.

This line of thought was prompted by a report in the New York Times. It was the story of Shazia Khalid who was raped and then persecuted by all and sundry for her “sin.” This happened in Pakistan. The culture of that place is such that the victim is blamed. Rape is seen as a insult to the family honor which can only be restored by killing the woman who was violated.

The values of the society matter more than the availability of PCs and the ability to surf the internet and get neat stuff off the world wide web. Third world under-developed societies need a change of values desperately if they are to get out of the cycle of poverty. Unfortunately, values are endogenous and they can only change with great difficulty. They cannot be imposed externally any more than “democracy” be imposed externally as the US is ostensibly attempting to do in Iraq.

The sense of fairness and justice is, in my opinion, the major determinant of how developed a society is. And in some sense, development is the basis for economic development. Until a society has justice and fairness as its core values, it cannot get beyond a Hobbesian existence.