Poverty and development - A Vicious Circle

This theory argues that the poor are trapped in circumstances which make itdifficult for them to escape poverty. The poor have inadequate diet whichmakes for low energy and hence poor performance in school and at work.Poor diet also makes them vulnerable to illness. They have poor housing andoften have to go long distances for their work. They cannot afford or are notallowed to stay near the place of work. The circumstances combine to makethe poor continue to be in poverty. Discussing the problem of poverty in ruralareas of India a leading authority in rural development asks the question:”Doesthe policy in rural development considers integrated rural poverty?” Aspectsof which include poverty, physical weakness, vulnerability, isolation,powerlessness.

Employment and poverty

The classical definition of poverty concerns the inability of a person to achieve certain minimum basic level of consumption. The ability to consume, in a market economy, depends on the nominal expenditure and

the commodity prices. The level of expenditure depends on the purchasing power, which, to a large extent depends on the income earned. Incomes are earned if jobs are held and, hence, the relationship between employment and the incidence of poverty. It is not surprising that, in the presence of insufficient subsidies and low levels of wealth, unemployment will be correlated with high degrees of poverty. However, employment alone may not guarantee a non-poor status. This is because wages or incomes earned in jobs may not be sufficient to buy the minimum consumption basket. It is important, as a policy matter, to know whether poverty is a result of a lack of employment opportunities, or due to low wages. If the former, i.e., all employed persons get enough wages to stay above the poverty line but not all persons are employed, the

requisite approach is one of employment generating policies. If, on the other hand, people are employed but have very low productivity (and, hence, earn low incomes), then the policy prescription is one of increasingthe productivity of labour.

Globalization and poverty

Under economic globalization, many countries have opened up their economies to free flow of finance capital, technology and goods. This has de established many of the traditional industries and led to reemployment of productive resources. It has also led to the reduction in the role of the state and shift from welfare to a market friendly system of governance. In urban sector it has meant handing over the responsibility of providing certain basic amenities to the private sector under commercial framework. While this has been the case in all urban areas it can be seen more clearly in large cities. Further it has meant large-scale displacement or eviction of slums for allocating of more land for commercial and other profitable usages.

Although the process of globalization strong and often all encompassing, the local communities have continued to pursue is their own demand and agendas. In countries having a democratic polity like India, the conflicts and contradictions between the counterveiling forces are more evident. In most of the less developed countries in the world rural poverty agenda has dominated the national policy debates and urban poverty is being neglected. Unfortunately, there is not much recognition of the fact that unless the process of urban industrial development is guided within a macro-economic frame work and if urbanization cases are not well managed, the deficiencies in the basic services such as housing, water supply and sanitation, etc are likely to acquire alarming proportions, which would jeopardize the survival strategy or the coping mechanisms of the urban poor.

Experience of Latin American countries, which underwent globalization in 1980 under external compulsions, shows that in several of these countries, urban poverty increased starkly. With it came up the problems of insecurity of property and life of the elite, group violence unhygienic living conditions and epidemics. Also the social structure got reorganized and there was an increase in female-headed households in the urban areas. Increase inequalities led to higher levels of relative poverty. The process of urbanization has not been healthy and has felt to promote balanced regional development in India.

After liberalization, new industries have often been located in the villages and small towns around the big cities, due to easy availability of land, access to unorganized labour market and less stringent implementation of environmental regulation. This has resulted in what may be described as “degenerated peripheralisation” where the pollutant industries and poor migrants are obliged to locate in the hinterland that have very poor quality of living. The smaller urban centres in the country are more rooted in their regional economy and thereby experience on and average low and unstable demographic growth. The few cities of which are emerging as global centres, on the other hand, exhibit high and steady demographic growth reflecting strength of their economic base.

Poverty & Marginalized group

Though there are several causes of poverty, the common one is structural. 'The ownership of assets particularly land, is a primary reason for poverty in rural areas. In most cases it is observed that poverty in a household stems out either from unemployment or unproductive employment. Social discrimination, apart from lack of asset base is another cause of poverty. In India, caste division leads to restrictions on occupational mobility of people, thus they are forced to earn their livelihood from their traditional occupations. Eden in a developed nation such as the US, for example, the Blacks are found to earn less than the whites in similar jobs. It is observed that there are specific groups of population where poverty is endemic. The level and pattern of poverty depends on the level of per capita income and the unequal distribution of the prevailing level of income. Under such circumstances, it is important for policy makers to study the spread of population which is poor.

Gender and Poverty

Women make a substantial proportion of poor people. Studies have shown that women headed household in rural areas are the poorest. The income disparity between men and women is evident due to vast differentials in wages paid to men and women. Women are increasingly employed in the unorganized sector as unskilled labour. They are also engaged in home-based work where they get piece wages. Female-headed households are often poor, as women do not get jobs or credit to set up their own businesses. In recent years, the term 'feminisation of poverty' is used to denote the specific characteristics of poverty where women are directly affected adversely as a result of development process.

Rural Poor

In most of the developing world, large proportion of population work in rural areas and are engaged in low wage agriculture or allied activities. Though most often, the governments of these countries are aware of the imminent rural poverty, the path of development followed by them is in favour of urban areas. This bias in favour of urban areas in terms of healthcare facilities, educational institutions, housing and other infrastructure has put the rural population further into poverty.

Caste and Poverty

In India, specifically, caste hierarchy has often been closely associated with poverty. There are a number of castes, which have stayed at the lowest rung of economic hierarchy for generations as they are associated with low paying menial tasks. There has been a clear example of social and economic exclusion of these sections from the fruits of the development process in the country.

Ethnic Minorities and Indigenous Population

In several countries and in India as well, large segments of indigenous population (known as adivasis in India) are poorer than the rest of the population. The scheduled tribes in India largely inhabit in their natural surroundings and engage themselves in traditional occupations. They have been displaced from their natural habitat without being settled in other places or vocations.

Poverty & Nutrition

The basic requirement for survival is sufficient nutrition which not only enables a person to live a healthy life but also enables him/her to participate actively in improving his economic and social well being. Chronic diseases due to malnourishment put a heavy toll on creative abilities of people. In particular, childhood malnutrition hampers proper growth of children, which finally becomes an impediment to their physical, intellectual and emotional development.

Poverty & Social Conflict

The rise in inequality and the stark variation in living standards of the rich and the poor globally have led to an increase in social tensions in societies. As a result, a large number of the poor are getting attracted to political movements, which in their perception and understanding can improve their economic condition. In India, it has been observed that large territories are under the control of Naxalites who are organizing people for achieving economic equality with the rest of the society. This is further made complex due to caste differentiation where economic and social mobility is restricted in our social system.

Poverty and Vulnerability

It has been observed that poor people are vulnerable to a number of discrimination. Vulnerability creates impediment in the implementation of various development programmes. Some groups may be at risk of becoming poor because of inherent vulnerabilities (i.e., different types of discrimination based on class, gender, caste, ethnicity, or factors such as disability, region of residence and family configuration). Furthermore, certain combinations of vulnerability may be strongly correlated with poverty, such as female-headed households or families living in remote and isolated mountainous regions or some castes from specific occupational background. Such correlations between vulnerabilities and poverty make it necessary to pay special attention to these segments of population.

Poverty and Exclusion

The issue of exclusion is varied as there can be social exclusion as well as economic exclusion. In several situations, the two types of exclusion are also directly interrelated. Exclusion based on caste, whatever economic group you belong to, would imply social exclusion. More specifically, social exclusion refers to issues of participation, empowerment and social rights. However, the inter-related nature of economic and social exclusion in India would mean that some castes are both economically and socially excluded from the procebs of development. Because of a vast range of deprivations, certain castes have been restricted to their traditional occupations or to other low wage unskilled work. For policy makers, it is important to go beyond the narrow definition of poverty based on income indicators only and take note of social exclusion too.

Poverty and Inequality

Before proceeding further we will touch upon a related issue that is the difference betweenpoverty and inequality. Do they impact each other? With the advent of globalisation, since thebeginning of 1980s, one often comes across a phrase – the rich are getting richer and the poorare getting poorer. It precisely indicates gap between the rich and poor is widening and thatthe economic inequality or inequality of income and expenditure is expanding. However,poverty and inequality are two different things but they are closely related too. Economicinequality, usually of income or of expenditure over a period of time such as a year or month,refers to the manner in which that item is distributed among members of a group, frequentlya country. Inequality in wealth, at a given point in time, also refers to its distribution. Sincedistribution, in this sense, is share, it is a matter of comparison. A standard procedure that economists use is to compare the (percentage) share of the top 10 per cent and the bottom10 per cent households in the country. These shares can also be expressed as ratio. Inequality,then, is relative.

The measurements of poverty are quite different. To measure it, it is necessary to agree upona norm. The norm could be physical such as requirement of certain calories a day per person,as was done in the 1960s and 1970s in Asian and African countries, or could be a monetaryfigure, such as earnings or expenditure (a day, a month etc.) Physical norms, of course, canbe converted into monetary equivalents provided appropriate goods yielding the physicalquantity can be located and their prices too can be agreed upon. Poverty line such a figurecommonly is accepted (US dollar a day, for instance) with those below it considered poor.In nutshell, inequality is expressed as a ratio and the poverty line as an absolute sum.

However,neither the measurement of inequality or of poverty can be foolproof, mainly because theassumptions about economic conditions / factors keep changing frequently within the householdas well as at the national level. Similarly there cannot be uniform prices of the goods andservices for a long period which is mostly taken as a measure of consumption expenditure.Therefore, we find differences among economists about the extent of poverty and economicinequality.

Growth, Poverty and Inequality

It is mostly presumed that (economic) growth reduces poverty and inequality. However, theempirical studies carried over a period of time in developed, developing and the least developedcountries give a different picture. Undoubtedly growth can impact poverty and inequality; butone cannot determine the course of its impact. Growth can reduce poverty and inequality;growth can reduce poverty and increase inequality; growth can increase both poverty andinequality. These diverse patterns are possible because growth is not a uniform numericaladdition. It is a process of change that affects not only the volume of output, but the compositionof that output, the number of production, the relative values of particular goods, the participationof different sections of the population in productive activities, the purchasing power of differentsections and so on. How these impact on poverty and inequality will have to be empiricallyexamined. Again empirical results of one country cannot be applied to other countries,nevertheless certain inferences can be drawn from such studies which can be tested in differentsituations. For example, if there is an increase in the cereal production achieved by labourdisplacing methods of production, and if the increased output is largely exported, it can leadto an increase both in poverty and in inequality. On the contrary, if the increase in output leadsto a fall in cereal prices, a reduction in poverty is possible.

Various empirical studies that were carried out in the US in the 1990s show that between1970s and 1980s the gap between US rich and poor has widened although the US economygrew rapidly and expanded substantially during the period. According to one authentic studybetween 1977 and 1990 the average income of the poorest fifth of America declined by 5per cent, while the richest fifth became about 9 per cent wealthier. That left the poorest fifthof Americans by 1990 with 3.7 per cent of the nation’s total income, down from 5.5 percentin 1950s and 1960s. And it left the richest fifth with a bit over half of the national income.

In US the top 5 percent command 26 percent of the nation’s total income. These changes ininequality had a similar effect on the livelihood of many ordinary Americans. Many were employed but their emoluments were insufficient to provide them minimum living standards.This led to rise in poverty. Such findings establish the relationship between inequality andpoverty.