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Spectre of inequalities

FROM POVERTY TO POWER — How Active Citizens and Effective States Can Change the World: Duncan Green; Oxfam International, United Kingdom & Academic Foundation, 4772-73/ 23, Bharat Ram Road (23 Ansari Road), Daryaganj, New Delhi-110002. Rs.995.

At a time when there is a plethora of writings on poverty this volume may be described as unusual because it deals with the interplay of individual, familial, local, national and global factors that generate and sustain poverty. It also points out that poverty is not a matter of income and wealth alone, but is related to health, physical safety, education, meaningful work, connection to the community, power and decision-making processes, and much more. And it deals with ef forts required at different levels and spheres to eradicate such multi-dimensional poverty.

There is danger in trying to deal with such a vast theme and its diverse manifestations — the almost inevitable tendency to be sketchy and vague. But this volume, compiled on the basis of studies, research and interactions by the international voluntary agency, Oxfam, largely avoids this danger by being matter of fact in analysis and specific in terms of recommendations.

From the vast and varied material contained in the volume I shall select a few inter-related discussions mainly to communicate the essence of the treatment. The relationship between poverty and inequality is a major theme engaging the attention of analysts and policy-makers. The facts are fairly well known. Over the past two or three decades poverty has been reduced, but inequality of income and wealth has sharply increased. This is true globally and in diverse countries such as the U.S., China, India and many more. At the global level, a U.N. study pointed out a few years ago that the income gap between the top 20 per cent and the bottom 20 per cent which was 30 to 1 in 1960 had increased to 60 to 1 in 1991 and to 75 to 1 by the end of the century. In this volume it is pointed out that the income of the world’s 500 billionaires exceeds that of its poorest 416 million people.

And so? A standard answer that many analysts provide (frequently with a lot of rigorous mathematics thrown in to appear profound) is that this is what growth does “in the short run”, but that “in the long run” everyone will benefit by growth, and that, therefore, it is best to put up with inequality as long as poverty is getting reduced. Duncan Green’s approach to the problem is different. He points out that there is no set relationship between growth, inequality and poverty. It depends on many factors such as the nature of growth — what is being produced (things that are used mainly by the rich or the poor), how things are produced (with emphasis on employment so that large numbers of people come to have earnings, or with emphasis on profit which goes to the rich). Other factors are the educational status and health conditions of the population, especially women workers, and consequently the nature of public policy relating to these aspects. On the basis of an inter-country comparison it is shown that the more equal initial land distribution, the higher is likely to be growth and more satisfactory the distribution of income. The nature of public policy in general also has a significant bearing on the impact of growth on vulnerable sections of the population. Kyrgyzstan which was once a part of the Soviet Union had only a per capita GDP of $ 319 in 2005, but at a cost of just 3 per cent of GDP it was possible to have a social protection system that provided a small cash assistance to those below the poverty line, an old age and disability pension, and health insurance to the working people.

As for the impact of growth on poverty eradication the observation is as follows: “… global growth is becoming less effective at reducing poverty. In the 1990s it took $166 of global economic growth with all the associated environmental costs, to achieve just $ 1 of progress in reducing poverty, while in the 1980s this figure was $ 85. Moreover, by exacerbating climate change and other environmental problems the $165 that the poor do not receive imposes a significant toll on their prospects.” Another theme in the volume is the effect of international institutions, especially the World Bank, the International Monetary Fund (IMF) and the World Trade Organisation (WTO) on reducing poverty. Green notes that it is strange that the World Bank and the IMF, created initially to step in when global currency markets failed, have now become agents to propagate free markets within national economies. As for their operational record, particularly in Africa where they got several countries to fall in line with their structural adjustment programmes, the comment is: “If structural adjustment were a medicine, it would long ago have been banned due to its adverse side effects!” And, Oxfam’s studies in 22 countries showed that the Poverty Reduction and Growth Facility programme of the Bank and the Fund was undermining both citizens’ organisations and the efforts to strengthen institutions such as parliaments and political parties.

Green also points out the rigged rules and double standards of the international trading system. For instance, the value of subsidies and other support to agriculture in the rich countries now runs at $ 268 billion a year, more than double the value of global aid they provide! One reason for this sort of situation is the role that private giant multinational corporations from the rich countries were allowed to play in the negotiations leading to the formation of the WTO and the power that they continue to exert within that body. The poor countries also give greater consideration to agencies dealing with foreign trade than to the producers, often small farmers and small industrial producers.

This is not to give the impression that Green’s compilation is primarily negative. It has many examples of successful initiatives taken by national governments and interested groups in their own localities to improve the conditions of the poorer sections. In Ethiopia, small producers of millets established a ‘cereal bank’ into which they deposited their produce at harvest time and from which they drew when they needed the cereal. In Colombia small producers of locally used brown sugarloaf protected their livelihood by preventing an attempt to set up a sugar mill. In Albania producers of mountain herbs improved their living conditions considerably by setting up an Herb Association to improve the quality of their produce. And, of course, examples of microfinance groups from many parts of the world are also cited.

The message of the book is that radical redistribution of opportunities, assets and power is necessary to break the cycle of poverty and inequality for which politics that brings together active citizens and effective states is absolutely necessary.

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