Friday, December 17, 2010

Generalizing poverty and inequality, and even general policy recommendations!

A new report by UNRISD (Combating Poverty and Inequality: Structural Change, Social Policies and Politics) explores the causes, dynamics and persistence of poverty; examines what works and what has gone wrong in international policy thinking and practice; and lays out a range of policies and institutional measures that countries can adopt to alleviate poverty. The main point of the report is that the existing approaches to poverty often ignore its root causes, and do not follow through the causal sequence. The report argues, “persistent poverty in some regions, and growing inequalities worldwide, are stark reminders that economic globalization and liberalization have not created an environment conducive to sustainable and equitable social development.”

It advocates a pattern of growth and structural change that can generate and sustain jobs that are adequately remunerated and accessible to all-- regardless of income or class status, gender, ethnicity or location. It calls for comprehensive social policies that are grounded in universal rights and that support structural change, social cohesion and democratic politics.

It argues that civic rights, activism and political arrangements should be in place to ensure that states are responsive to the needs of citizens and that the poor have influence over the policies that are intended for their welfare.

Basically, it is criticizing the poverty reduction approaches led by the IMF and the WB (Poverty Reduction Strategy Papers (PRSPs)), some of the social protection programs, and the MDGs. It assets that these approaches push for “discrete social policies that are often weakly related to a country’s system of production and macroeconomic policies.”

Major points about poverty and inequality and policy recommendations:

  • Poverty reduction requires growth and structural change that generate productive employment. This can be done by instituting selective and well-managed industrial and agricultural policies that connect agricultural sector more productively to industry and other sectors of the economy; stimulating and maintaining and adequate level of labor demand by expanding domestic demand; investing in infrastructure, education, research, productivity, and mobility of labor; and adopting a macroeconomic framework that avoids pro-cyclical policies or restrictive monetary and fiscal policies during periods of slow growth.
  • Comprehensive social policies are essential for successful poverty reduction. This can be done by reinforcing redistributive effects of economic policy; protecting people from income loss and costs associated with unemployment, pregnancy, sickness, chronic illness or disability, and old age; enhancing productive capacities of individuals and communities; and reducing burden of growth and reproduction of society, including care-related work usually unfairly borne by women.
  • High levels of inequality are an obstacle to poverty reduction. Redistributive policies can include providing the poor with greater access to productive assets such as land; investing in social infrastructure to reduce drudgery of domestic work; pursuing affirmative action policies for disadvantaged groups; stimulating investment in rural infrastructure, creating PWPs and increasing access to credits; pursuing fiscal reforms that improve tax administration; and creating a stable global economic environment that responds to the needs of low-income countries.
  • Poverty reduction requires effective state action. Building state capacity can be done by crafting of political coalitions needed to set and carry out policy; mobilizing resources with which to implement development objectives; and allocating resources to productive and welfare-enhancing sectors and enforcing rules governing their use.
  • Politics matters for poverty reduction. Poverty reduction requires ensuing rights for citizens to organize and contest public policies as autonomous actors; including the active participation of poor, women and other disadvantaged groups; bargaining regimes or social pacts to give group voice and influence in holding corporations; and sufficiently competitive to create uncertainties in electoral outcomes, allow for periodic changes in power and prevent ruling parties from becoming complacent.
  • There are many paths to poverty reduction. Following heterodox policies is one of them.
  • Poverty is reduced when economic and social policies, institutions and political arrangements are mutually supportive.

Although there are specific recommendations and discussions, some of the points are as general (and vague) as they can get. These are easier said than done. There are contradictions as well. For instance, periodic change in power has been seen as one of the political tools to reduce poverty. It assumes that the change in power would bring more pro-poor poverty reduction policies. However, without change in power, there have been so many instances of drastic change in poverty levels (e.g. Japan ruled by LDP for over fifty years, China under one-party rule and Vietnam under similar condition, Singapore evolving similarly after the British left them in the 1970s). Implementing all the poverty-reducing policy recommendations of this report is simply out of the reach of the developing countries due to institutional and resource constraints. Not a really enlightening report as most of the points were already floated out in other papers. What could have been interesting is the near-precise process of attaining the goals set in the policy recommendations. This is missing in literature on poverty and inequality. This report also misses this crucial aspect.