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The Financial Express

In and out of poverty

| Updated: October 23, 2017 04:42:06


In and out of poverty
Poverty can both be persistent or short-lived adducible to structural or temporary factors respectively. Persistent or long-term poverty implies a state of poverty that persists for a longer period of time. It is mainly fuelled by structural problems. On the other hand, short-lived or transient poverty is related to the swings in socio-political and economic environment in any given society. It is relatively short-lived and mostly derived from shocks - natural or man-made and domestic or international. However, we can say that households have to live with poverty due to structural factors. The question is: what is the time dimension of persistence poverty? Some economists presume that the time could span up to generations and 13-15 years could be considered the minimum.  
On an average, 30 per cent of rural households could be identified as poor in a longitudinal survey spanning two decades. If we look at the issue, short-run poverty stands also at 30 per cent. This means for a short or long term, roughly 30 per cent of rural households continue to remain poor. Unfortunately for them, there is no light at the end of the tunnel to pull them out of poverty. Maybe, the existing various socio-economic, demographic, and even political elements created a wall to constrict the capacity to demolish or topple it to come out. 
A quarter of rural households are reported to have crossed the poverty line in the long-run. This implies that despite facing severely repeated shocks, these households have never fallen to poverty. Maybe, through thick and thin, fortune favoured them in accessing land, education or institutions. All said, it is clear that 40 per cent of the rural households remain transient poor, walking up and down the ladder of poverty. The main reasons for ups and downs are not related to structural constraints, but to short-run random shocks like natural calamity, health problem, and risk in business etc.
The observations presented above can be compared with those of earlier researchers.  They report that 31 per cent of rural households in Bangladesh are chronically poor. And it is almost exactly the figure we arrived at. Again, the researchers have argued that a quarter of the rural households are chronically non-poor. In between, 45 per cent are led by luck - 26 per cent moving up and 19 per cent moving down. The eloquent exposition of the researchers is worth noting and we paraphrase it for our readers:  to slip in and out, poverty (in or outside) does not occur through a random path. The possibility of staying away from poverty is sensitive to primary asset endowments (such as owned land). Those who have come out of the poverty cave - and we can call it exit ratio - are mostly asset owners. In other words, roughly two-thirds of them were vastly endowed with primary assets, about half of them having modest assets, and 40 per cent having no satisfactory assets.
What are then the reasons for a descent or slip into poverty? We observe that households facing deterioration in economic conditions are severely constrained by demographic elements. Most of them have large household size and small number of earning members. For this reason, these households are left with little surplus to put in productive pursuits. Second, they have no human capital and increasingly they face erosion of their natural and financial resource base. And finally, these households often face random shocks, such as early flood, flash flood, crop failure due to severe drought or death of the earning member.
To get out of poverty, rural households adopt a number of strategies. We can identify them as unsuccessful and successful strategies for livelihoods. Among the unsuccessful strategies, we want to highlight occupational mobility (a) from farm to non-farm sector and (b) agricultural labour to farming and agricultural labour to non-farming. However, among successful strategies, we can mention geographic mobility, increase in earning members, raising education status of the earning members, cultivation of modern paddy, and increased access to electricity. 
By and large, the following observations seem to be important from policy point of view: (a) market-driven occupational mobility brings about peripheral changes in the economic status of the poor; (b) shift to non-farm sector cannot be expected to resolve the underemployment problem; and (c) emancipation of the poor through livelihood migration to off-farm activities is conditional on enhancement of human capital and better access to technology and infrastructure
At this stage, the role of economic growth in poverty reduction needs to be explained. It is true that we have observed a decline in rural poverty in tandem with a 'satisfactory' rate of economic growth over time. And possibly for this reason, there is a scope to crown growth as the pinnacle of poverty reduction strategy. It should equally be argued that proper distribution of wealth should always matter along with growth. This is because distribution not only helps poverty reduction, but also facilitates economic growth. One specific example is the inability of a person to be engaged in productive activities in the wake of shortage of capital and the lack of access to credit that not only deprives a person but also the nation is being deprived of additional output. So, proper distribution, poverty reduction and growth can run hand in hand. Unfortunately in our society, the message of the distribution is not as widely propagated as it is for only growth. Again, only a pro-growth policy cannot be the magic lamp for poverty reduction. To conclude with Professor SR Osmani's (of Ulster University) cogent comment:
"The pervasive presence of growth-devotees in all fronts needs to be contained. But that should never imply that growth has to be ignored or undermined - as it used to be often the argument in the 1960s. For the sake of poverty reduction, importance should be attached to growth. But it has to be remembered that attaching importance is one thing and, without other considerations, placing altarage at the altar of growth is another thing" (translated).
Abdul Bayes is a Professor 
of Economics at 
Jahangirnagar University. [email protected]
 

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