War Against Poverty

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In a world that could provide for all its people, extreme poverty and hunger are the daily lot of millions. Of the world’s more than six billion people, 2.8 billion—almost half—live on less than $2 a day, and 1.2 billion—a fifth—live on less than $1 a day, with 44 per cent living in South Asia. In rich countries, fewer than one child in 100 does not reach its fifth birthday, while in the poorest countries as many as a fifth of children do not.

Over two million childhood deaths occur annually due to vaccine-preventable diseases; hunger daily stalks nearly 800 million people in the developing world. Every day, 31,000 people die from preventable causes, half of them hunger-related. UNICEF says that some 1,400 girls and women die each day from causes related to child-birth, 99 per cent of them in developing countries. About 1.1 billion people still lack access to clean drinking water. More than 40 million people are living with HIV/AIDS, and there are 14 million AIDS orphans under the age of 14.

This destitution persists even though human conditions have improved more in the past century than in the rest of history—global wealth, global connections, and technological capabilities have never been greater. But the distribution of these global gains is extraordinarily unequal. The average income in the richest 20 countries is 37 times the average in the poorest 20—a gap that has doubled in the past 40 years.

The global economic crisis has wiped out developing Asia’s recent gains in poverty eradication as the meltdown is expected to have driven more than 21 million people in the region into poverty. A joint report by the United Nations and the Asian Development Bank shows that the global economic slowdown slackened trade, slashed export and tourism receipts and raised unemployment levels. This makes it difficult for the region to achieve its Millennium Development Goals (MDGs), which range from halving extreme poverty to halting the spread of HIV and AIDS and providing universal primary education, all by the target date of 2015. The latest data suggests that the Millennium Summit target will be reached only in 2030.

Understanding & Responding to Poverty
The right to development and the right to a life free from poverty are basic human rights. The UN Charter, the Universal Declaration of Human Rights, the World Summit on Social Development and many other multilateral declarations and conferences have recognized and reconfirmed economic, social, political, civil, and cultural rights with the goal of eradicating poverty and its consequences. Among these rights are an adequate standard of living, food, housing, education, health, work, social security and a share in the benefits of social progress.

Traditionally, poverty has been defined in terms of shortfalls of consumption or income. Income poverty lines are set against the cost of a basic diet for a group and/or the combination of dietary needs and a few non-food essential items. One commonly used income poverty definition is subsisting on US$1 per day or less.
UNDP addresses poverty as a denial of human rights. Good health, adequate nutrition, literacy and employment are not favours or acts of charity to be bestowed on the poor by governments and international agencies. They are human rights, as valid today as they were 50 years ago when the Universal Declaration of Human Rights was adopted. UNDP defines poverty from a sustainable human development perspective. Poverty is the denial of various choices and opportunities basic to human development. These include the ability to lead a long, creative and healthy life, to acquire knowledge, to have freedom, dignity, self-respect and respect for others, and to have access to the resources needed for a decent standard of living.

Nature and Determinants of Poverty
Under-nutrition and hunger are the hallmarks of poverty. Poverty goes beyond lack of income. It is multi-dimensional, encompassing economic, social and governance perspectives. Economically, the poor are not only deprived of income and resources, but of opportunities. Markets and jobs are often difficult to access, because of low capabilities and geographical and social exclusion. Limited education affects their ability to get jobs and to access information that could improve the quality of their lives. Poor health, due to inadequate nutrition and health services, further limits their prospects for work and from realizing their mental and physical potential. This fragile position is exacerbated by insecurity.

Not surprisingly, the poor generally fare the worst in terms of social indicators, such as illiteracy, malnutrition, ill health (incidence of communicable diseases such as tuberculosis and HIV/AIDS), and mortality and morbidity rates. Among this group, women and girls are often the most severely disadvantaged, as evidenced by low school enrolment rates and higher incidence of maternal mortality rates.

Strategies for poverty reduction
The approach to reducing poverty has evolved over the past 50 years in response to deepening understanding of the complexity of development. In the 1950s and 1960s, many viewed large investments in physical capital and infrastructure as the primary means of development. In the 1970s, awareness grew that physical capital was not enough, and that at least as important were health and education. World Development Report, 1980, articulated this understanding and argued that improvements in health and education were important, not only in their own right but also to promote growth in the incomes of poor people.

The 1980s saw another shift of emphasis following the debt crisis and global recession and the contrasting experiences of East Asia and Latin America, South Asia, and Sub-Saharan Africa. Emphasis was placed on improving economic management and allowing greater play for market forces. World Development Report, 1990, proposed a two-part strategy: promoting labour-intensive growth through economic openness and investment in infrastructure and providing basic services to poor people in health and education. In the 1990s, governance and institutions moved towards centre stage—as did issues of vulnerability at the local and national levels.

Actions at the country level
The lives of poor people are most affected by actions at the country-level. Countries need to get on a path of sustainable, pro-poor growth that provides opportunities for all, a voice in decision-making and protection from shocks.

The World Development Report, 2000, proposed a strategy for attacking poverty in three ways: promoting opportunity, facilitating empowerment, and enhancing security.

Opportunity: Expanding economic opportunity for poor people by stimulating economic growth, making markets work better for poor people, and working for their inclusion, particularly by building up their assets, such as land and education.
Although economic growth is crucial for generating opportunity, poverty remains intractable despite economic growth in many countries, partly because of income inequality within countries. In societies with high inequality, greater equity is particularly important for rapid progress in reducing poverty. This requires action by the State to support the build-up of human, land, and infrastructure assets that poor people own or to which they have access. Investments in the physical and financial assets of poor people are, thus, necessary—adequate schooling and skill development, secured nutrition, preventive health care, rural infrastructure and credit.

And, there is a two-way relationship between poverty and growth. Rapid growth is a necessary—but not a sufficient—condition for poverty reduction. What is too seldom mentioned, however, is that persistent poverty and inequality reduce growth rates and undermine economic stability and security. Vigorous and comprehensive investments in reducing poverty, in other words, is a necessary component of long-term growth.

In addition to achieving faster growth rates, it is essential that economic growth be broad-based to maximize its impact on reducing poverty. Economic growth also needs to be labour absorbing, providing jobs and economic opportunities for self-employment—a challenging task, because industries need to be internationally competitive as well. This requires diversified industrial and service sectors and the networking of international and local enterprises of different sizes, to enhance synergism between different economic segments.

Market reforms and the expanding to international markets can be central in expanding opportunities for poor people, but reforms need to reflect local institutional and structural conditions. And mechanisms need to be in place to create new opportunities and compensate the potential losers in transitions.
Policies that promote low inflation, realistic and stable exchange rates, reasonable fiscal deficits, effective integration into the global economy, and private sector activity, are all needed.

Empowerment: Strengthening the ability of poor people to shape decisions that affect their lives and removing discrimination based on gender, race, ethnicity, and social status.

The potential for economic growth and poverty reduction is heavily influenced by State and social institutions. Action to improve the functioning of State and social institutions improves both growth and equity, by reducing bureaucratic and social constraints to economic action and upward mobility. The importance of good governance for economic growth and poverty reduction is now generally accepted. Participatory democratic systems and the rule of law are essential to ensure that leaders are held accountable to the people and that open and transparent systems exist for the management of public resources.

Good governance also has a direct bearing on poverty, for poor people are often direct victims of bad governance. Due to their lack of representation, they tend to be left out of public expenditure programmes, especially those related to access to productive assets and the delivery of social services.

Social structures and institutions form the framework for economic and political relations and shape many of the dynamics that create and sustain poverty—or alleviate it. Social structures that are exclusionary and inequitable, such as class stratification or gender divisions, are major obstacles to the upward mobility of poor people. Governments can help by fostering debate over exclusionary practices or areas of stigma and by supporting the engagement and participation of groups representing the socially excluded. Groups facing active discrimination can be helped by selective affirmative action policies. Other actions could include removing ethnic, racial, and gender bias in legislation and the operation of legal systems and encouraging the representation and voice of women and disadvantaged ethnic and racial groups in community and national organizations.
The promotion of gender equality is expected to contribute to the achievement of several goals at the same time. Accordingly, a general policy framework is required to reduce the marginalization of women, helping them participate effectively in economic, political, and social life and increasing their involvement in the development of policies that affect their lives. Achieving this requires conscious allocations of public resources in favour of women and of production areas where women are most concentrated. In short: gender-sensitive budgeting.

Security: The poor are often the most severely affected by adverse shocks of macro and micro-economic origin, so mechanisms to reduce the incidence of shocks, and help the poor cope with them are essential. These mechanisms should guarantee minimum consumption levels and access to basic services, protect investments in human capital during crises, and reduce the risk exposure faced by the poor in their productive choices. Such mechanisms range from making fiscal policy counter-cyclical and improving management of natural disaster risks, to instruments that help the poor cope with illness, crop failure, unemployment and old age. These include subsidies targeted to the poor, public works and “food for work” programmes, sustainable, well-designed pension, unemployment and social assistance programmes, and severance payments to those laid off during civil service retrenchment or public enterprise reform.

Special measures are also needed to ensure that spending on programmes important to poor people—social programmes and targeted transfers—does not fall during a recession, especially relative to the rising need.

To manage the risk of financial and terms of trade shocks, sound macro-economic policy and robust financial systems are fundamental. But they have to be complemented by prudent management of the opening of the capital account, to reduce the risk of volatile short-run flows.

Thus, reducing poverty calls for a three-pronged approach: promoting pro-poor growth, securing social development, and ensuring good governance. The three are inter-related and complementary. Pro-poor growth stimulates employment and other economic opportunities, and generates revenues, which can be directed, through good governance, at providing services needed by the poor and vulnerable groups.

Globalization and Poverty Reduction
Appropriately structured and sequenced, trade liberalization can be an engine of development and poverty reduction. Countries that participate in the global economy, show higher economic growth than those that maintain closed trade regimes. This is because of incentives created by export opportunities and import competition, and the doors it opens for productive domestic-foreign partnerships.
Increased openness to trade creates opportunities for new investments and jobs, and promotes more efficient use of resources and higher productivity. The liberalization of capital flows permits greater access to the external resources, needed to finance such investments, and foreign direct investment can also encourage the transfer of technology, managerial expertise and skills. But, relatively few developing countries have benefited from trade liberalisation.

The lesson? If trade is to contribute all it can to development and poverty reduction, the poorest countries must be able to participate more fully in its benefits. For these countries, agricultural trade liberalization is critical. They depend far more heavily than the better-off developing countries on agriculture for their GDP and exports.

Although developing countries have been constantly lectured, pushed and pressured to open their markets, reduce tariffs and remove subsidies by developed countries, yet, markets in developed countries and in the US are increasingly closed to them, as new and additional subsidies and protectionist measures are being implemented. Increasingly, these are for products that are critical to the majority of the population in poor countries.

For example, Africa accounts for less than 1% of world exports. Both the European Union and the US have promised action to tackle marginalisation. What have they done? Continued business as usual, including the business of damaging African agriculture through farm subsidies.

The challenge for developing countries is to enact domestic policies that attract more foreign direct investments of a relatively long term and stable nature, as well as adopting structural reforms to enable domestic adjustment when necessary.

Aid Effectiveness and Debt Relief
Donor countries could strengthen developing countries’ ability to pursue poverty reduction by increasing aid flows to countries with a sound policy environment, supportive of poverty reduction.

Aid should be delivered in ways that ensure greater ownership by recipient countries and effectively helps poor countries help themselves.

In fact, the “rethinking development” has led the World Bank, in partnership with the IMF, to begin intensive work on a new, more sharply focused approach to supporting member countries’ poverty reduction strategies. Indeed, it has already started to work with selected countries on “Poverty Reduction Strategy Papers” (PRSPs).

The PRSP emphasizes on two fundamental changes. First, poverty reduction strategies will no longer be drafted in Washington by the IMF and World Bank and presented to national authorities as a fait accompli. Rather, concessional support will be based on the strategy developed by national authorities, with the broad participation of local civil society, especially the voices of the poor. Second, the PRSP forces much closer co-operation between the two institutions, which should lead, at least, to better analysis. Extraordinary as it seems, there has in the past been little connection between the IMF’s macroeconomic analysis and the World Bank’s work on poverty. The strategy will benefit from the intellectual contributions of all providers of external support—and will provide a single, transparent direction for the future.

Supporting country-owned poverty reduction strategies will, hopefully, go some way to achieving greater poverty reduction than in the past, but will not be sufficient if more aid is not made available.

The real value of aid to developing countries is down about 8 per cent in the past decade. Recent studies show that achieving the MDGs would require doubling present ODA flows.

Security and Conflict
The incidence of poverty can worsen substantially in conflict situations and may not be reversed for a prolonged period after the conflict has ended. The international community should seek to stem armed conflict—which affects poor people the most—by taking measures to reduce the international arms trade, promote peace, and support physical and social reconstruction after conflicts ends. Donors also need to avoid any gap between the provision of humanitarian and reconstruction assistance, so that both contribute in a mutually reinforcing way to an early restoration of durable peace. This calls for substantial technical and financial assistance for demilitarization, demobilization, and rehabilitation, and the restoration of domestic institutional capacity. The industrial countries further need to ensure greater coherence and transparency in their own policies on arms sales.

Just as conflict can lead to poverty, the scourge of poverty can lead to unrest, rebellion and terrorism The forces unleashed will not recognise national borders. That is why poverty should be at the heart of the international security agenda.

The lack of consensus on poverty alleviation has itself proved unhelpful by pulling countries in different directions. Most of the large bilateral government donors tread a middle path. They increasingly downplay governance issues whilst promoting the concept of inclusive growth with pro-poor institutional capacity building and the provision of social safety nets to protect the poorest. The L’Aquila Food Security Initiative announced at the 2009 G8 summit in Italy suggests a new priority of investment in agriculture.

There is justifiable concern that these attempts to fine-tune solutions to global poverty may be overwhelmed by the pace of events. The failure of politicians to respond to signals of climate and economic breakdown has almost certainly provoked an inexorable rise in global poverty with unpredictable consequences. A fundamental reordering of priorities is the only available remedy for the poor. It may also prove to be the critical first step on the road to a sustainable future for us all.

UN Millennium Development Goals For 2015

• Eradicate extreme poverty and hunger. Halve the proportion of people with less than one dollar a day. Halve the proportion of people who suffer from hunger.
• Achieve universal primary education. Ensure that boys and girls alike complete primary schooling.
• Promote gender equality and empower women. Eliminate gender disparity at all levels of education.
• Reduce child mortality. Reduce by two thirds the under-five mortality rate.
• Improve maternal health. Reduce by three quarters the maternal mortality ratio.
• Combat HIV/AIDS, malaria and other diseases. Reverse the spread of HIV/AIDS.
• Ensure environmental sustainability. Integrate sustainable development into country policies and reverse loss of environmental resources. Halve the proportion of people without access to potable water. Significantly improve the lives of at least 100 million slum dwellers.
• Develop a global partnership for development. Raise official development assistance.