6 years ago

When growth matters

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The incidence of income poverty is being discussed from different angles. The conclusion is that (a) poverty level declined in Bangladesh between 1988 and 2014, and (b) particularly income poverty also declined during this period. This has been established by quantitative as well as qualitative indicators. 
However, the whole process of assessment has been put to serious question in recent times. The allegation is that studying income poverty does not tell the full story of poverty-led miseries. It is being argued that people should not be deprived of access to some basic social services. John Rawls, an American political philosopher, identified these as 'primary commodities'. If access of the poor can be increased in these respects, their non-income poverty - such as lives, capability and welfare - can tremendously be influenced. And more importantly, such access would definitely contribute to human capital formation for their future generation, and thus leave perceptible influence on reduction of inter-generational poverty crisis.
We observe from 62-village panel data that non-income poverty declined in the country to a large extent in 2014. In this case, special attention should be given to the access of the people to food as food is the most basic element for survival. We assumed that households not reporting three satisfactory meals a day (assessment of household members) would be considered to be in hunger. Under this assumption, the proportion of such 'unsatisfied' households faced a dramatic reduction in recent years - only about 2 in 100 members of such households cannot get three satisfactory meals a day. Although roughly 10 million people are estimated to be deprived of the food needed to keep them fit for productive pursuits, we can conclude that the syndrome of 'silent famine' is decreasing day by day. The increase in life expectancy gives evidence of reduced number of the hungry. 
However, apart from success in food access, although access to education above primary level improved quite satisfactorily, there is much debate about quality of education. Still, 7 in every 100 rural households do not send their boys and girls (aged 6-15 years) to schools. All this is happening when we continue to espouse that education is the magic lamp for poverty alleviation; falling far behind in education, no nation could succeed in their fight against poverty.
What are then the causes of an improvement in hunger-like situation that we have just narrated above? A panoply of factors - either in isolation or in combination - could have caused somewhat improvement, but we present some of them very briefly. The causes are partly market-driven and partly driven by commitments from the state. Among the market-driven forces, adoption of new technology in paddy production is at the top of the list. This has helped increase food production, provide incentives to farmers and exert a downward pressure in food prices. In consequence, even the extreme poor could access food. Basically, the poor have benefited from this new technology on several counts. First, labour-intensive as these are, modern varieties (MVs) absorb more labour per unit to pave ways for employment opportunities for the poor. Their entitlements have thus increased to ensure food security. Second, infrastructural development and growth of non-farm activities have tightened the labour market, and raised wage levels to the benefit of the poor. Third, increased access to tenancy market associated with changes in tenurial terms has favoured the poor to increase income and food security. Finally, some state-sponsored programmes such as safety nets, VGF (Vulnerable Group Feeding) and food for education, etc. have also helped households avert hunger. By and large, following reduction in income poverty, scopes on the part of the households for spending on non-food items have further widened. 
But the basic question is: who are these hungry households and what are their features? We need to know about them if we want to draw up policies to address poverty and hunger. First, we observe that the largest proportion of these households have no homestead lands. An inverse relationship exists between land ownership and hunger condition, where owning more lands mean less hunger. As per farm size, the largest share of the hunger-driven households comprises non-farm households, although we observe remarkable improvement on this score over time.  Finally, households where the heads have no formal education seem to be easy prey to hunger compared to their counterparts. That is, education has an association with hunger: more education means less hunger. But as land is hard to transfer, expansion of education remains to be the heart of anti-hunger programmes.
We thus observe that there is not much difference between determinants of income and non-income poverty. In fact, both are influenced mainly by per capita income. This suggests that it is very difficult to conceive poverty reduction without raising income. But who fails to raise income? From the available data, we have already mentioned that small land size and lack of education affect increased income. But since socio-political imperatives have been cited as serious constraints to drastic land reforms in the near future, we are left with three alternatives for policy consideration. First comes the need for increasing access of the poor to education; second, enabling the poor households to benefit from  necessary reforms in the tenancy market, expansion of infrastructural and credit facilities etc., and third, distribution of 'khas' lands among the landless households. The first and the third options predominantly lie in the hands of the state, as it is the constitutional obligation of the state to enhance access to basic education. Again, freeing khas lands from occupation of the influential persons is also the responsibility of the state. The second option could be materialised by both state and market. The partnership of the public and the private sectors will play a pivotal role in building physical infrastructure, providing credit and expanding of non-farm activities. All these will then pull labour out of agriculture. 
As regards the role of economic growth in poverty reduction, 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. Eminent economist S.R. Osmani moves a step further to argue 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 used by him is the inability of a person to engage in productive activities in the wake of shortage of capital and lack of access to credit. It is not that the person himself is only deprived. 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 distribution is not as widely propagated as it is for growth. Again, only a pro-growth policy cannot be the magic lamp for poverty reduction. To conclude with Osmani's cogent comment: 
"The pervasive presence of growth-devotees on 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 it at the altar of growth is another thing".
The writer, a former Professor of Economics at Jahangirnagar University, is Chair of the Department of Economics and Social Science (ESS), BRAC University. [email protected]
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