Feb 12, 2009

Political economy of poverty reduction

Poverty reduction has been a major official development objective for most developing countries since the 1970s, when it dethroned growth from the high pedestal of development policy.In Pakistan, the economic discourse on poverty did not receive serious attention until much later, although it entered the political discourse with the populist politics in the wake of the backlash against Ayub Khan’s growth-centred and elitist policies, which were partly responsible for Pakistan’s dismemberment in 1971. The PPP’s “roti, kapra, makan”, echoing the “gharibi hatao” slogan of Indra Gandhi in India, brought poverty to the fore of the political agenda. However, the issue did not enter the academic and research mainstream until much later, save a few pioneering efforts to focus on a subject which – along with other issues of distributive justice – was largely considered a taboo to discourage distraction from more fundamental development issues, centred around the neoclassical shibboleth of economic efficiency.The political discourse on poverty, however, remained confined largely to rhetoric and as a means for putting down political rivals in electoral politics – occasions for which were few and far between in the case of Pakistan. Politics remained dominated by powerful groups, including the large landlords, the emerging capitalists, the influential bureaucrats and, increasingly, the upper echelons of the military – none of whom had an intrinsic interest in the removal of poverty, except of those who were close to them in economic or social terms.It was, therefore, even harder for poverty removal to be considered as a serious political issue than it was for it to be meriting attention as an economic and social objective. Its main access to the corridors of power and policy making was principally through the foreign donors – who, in the pursuit of their own global vision of development, found poverty reduction as a necessary sweetener for swallowing the bitter pill they had designed to cure under-development.Once again, poverty reduction has been catapulted to the forefront of development policy through a confluence of domestic and global factors which have made it an urgent and non-deferrable item on the development agenda. External shocks have often caused massive increases in global poverty. The first oil shock of the 1970s, the debt crisis of the 1980s, the dismantling of the social security system in the former Soviet Union in the early 1990s and the East Asian financial crisis of the late 1990s were among the most cataclysmic episodes which caused enormous increase in poverty incidence in various parts of the globe.The third oil shock, whose full force has yet to be unleashed, along with the steep rise in the price of food grains and other essential items consumed by the poor, is going to cause a much more severe increase in poverty, jeopardising the achievement of the already threatened defaults in the upbeat MDG programme aimed at halving poverty by 2015, launched at the beginning of the new century at the initiative of the Bush administration. The new US President will have a job on his hands if he wants to fulfil the promise of perhaps the only laudable global initiative of the outgoing administration.Nearer home, the debate on poverty has been re-ignited with the return to democracy and the return to competitive populist politics in which each party (including the king’s) claims to be doing more for poverty reduction than the rest. This has elevated the status of poverty research from a cottage industry in the past to that of rocket science (no fun intended) involving a bureaucratic rat-race in which numbers are constantly churned out to show which party’s regime had performed better in terms of poverty alleviation. Since the political situation itself is fluid, the numbers are often used with a view to climbing the bureaucratic hierarchy through manipulating them in favour of those who are likely to be important in the ultimate contest for power.A particularly eerie situation seems to have developed in the Planning Commission – which has been a rudderless ship with an inept crew at the helm for almost a decade and the recent changes are hardly uplifting – where earlier a Chief Economist was fired reportedly for producing poverty numbers which were too high to make the claim of strident growth in the economy less than credible. More recently, the author of the poverty chapter of the government’s Economic Survey, published just before the new budget, was fired by the Planning Commission for reporting too low a poverty number, which the government has since disowned. In both cases, the abrupt administrative actions seem to have been the result of in-fighting about jobs and seniority, in which substantive or methodological issues have been used as a smoke screen.However, there seems to be more than meets the eye and the events seem to be connected with a World Bank loan of $4.5 billion with substantial policy conditionalities which would become more palatable if poverty incidence was seen to be falling – which was the main conclusion of the poverty chapter in the Economic Survey. Such a conclusion, despite its usefulness attracting substantial foreign capital inflow, however, is in conflict with the ground reality of high inflation of essential food and fuel items, which is pushing millions of people below the poverty line. The new mandarins in the Planning Commission are not ready to lose their shirts so early in the game and have settled on making the author of the report a scapegoat.These recent incidents need to be viewed in the context of the chequered history of the political arithmetic of poverty and its role in the economic discourse and management. The poverty incidence, along with growth performance, which in Pakistan’s case have tended to move in opposite directions, have often been juxtaposed with the dichotomous periods of civilian or military rule which the country has experienced in the last six decades. Admittedly, any such analysis is likely to be broad-brush in character and does not stand detailed scrutiny. Nonetheless, the temptation to use these numbers in a political debate will remain as long as the political environment is heavily charged.The stylised facts about poverty reduction are generally well-documented and by now there is a high degree of consensus about the broad pattern along with sharp differences on details, even though there is discontinuity in the household data series, which makes inter-temporal comparisons problematic.It is generally recognised that people living in the areas that now constitute Pakistan benefited a great deal from the partition in terms of rise in per capita incomes and decline in poverty incidence – more by default than by design – in the first two decades of a united Pakistan, although those living in areas which are now part of Bangladesh shared this experience to a much lesser extent.Despite the absence of detailed studies on growth, income distribution and poverty incidence for the period before 1971, it is generally surmised that in areas which now form Pakistan poverty decreased quite rapidly in the 1950s, despite high population growth. It was in 1960s, when Ayub Khan’s aggressive industrialisation strategy, with substantial aid from the US, was carried out that problems of poverty and income distribution arose, both within West Pakistan, as well as between East and West Pakistan. Most narratives of poverty reduction in the 1970s and 1980s agree on a substantial reduction in poverty, although the causes and extent of such reduction differ.The 1990s and 2000s are periods where the greatest controversies about poverty reduction are located. While space limitations do not permit a detailed evaluation, it needs to be pointed out that official sensitivity about the poverty numbers increased in this period as a result of two major factors.First, despite strong official commitment to the goal of poverty reduction objective, there was an increasing realisation that its pursuit was inevitable for political survival and public perception of the achievement of this goal played an important part in gaining public approval and legitimacy.Second, the foreign donors/lenders, while espousing the cause of poverty reduction, were much more sanguine about carrying out their agenda of economic reforms and were often willing to sacrifice the former objective at the latter’s altar. This increased the temptation to interfere with the production and dissemination of poverty data and analysis. The World Bank, with its vast resources and experience in this area, continued parallel research on Pakistan’s poverty situation, whose results were often at variance with those of the government.In an apparent attempt to meet the criticism against such official interference and to give some semblance of respectability and credibility to official figures, the government established, with the help of UNDP and other donors, a Centre for Research in Poverty and Income Distribution (CRPID) in the Planning Commission in 2002. However, the result has been almost the opposite and, in effect, it has “nationalised” the poverty research industry.From the outset, the centre was turned into a handmaiden of the Planning Commission’s officialdom, defeating the very purpose of conducting “independent research” for which it was created. Its first director was a retired Chief of the Nutrition and Health Section, with little expertise in poverty analysis. His successor, was a macroeconomist, with little familiarity of detailed analysis of statistical data.The centre lacks enough resources and competent staff to do the kind of comprehensive research needed for understanding and remedying the complex problem of poverty reduction.. Much more than all this, the centre lacked the environment in which basic and independent research could be undertaken, such as a university or a research institute. It would have been much better if the centre had played a co-ordinating role to provide research facilities to various institutions engaged in poverty research and help them draw a comprehensive and continuing agenda of research, including periodic reporting on the current poverty situation.It is unlikely, however, that such radical changes will take place unless the new government can put its act together in mapping out a comprehensive long-term strategy for economic and social development.

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