Wednesday, August 8, 2012

Context Piece Draft

 Can find final version at:

A discussion of poverty immediately throws up the conundrum of identifying and aggregating poverty to guide policy. The multi-dimensional nature of poverty is not as obvious as intuition suggests. The more popular definitions of the concept stem from perceptible impacts such as starvation. The inability to obtain the minimum nutritional requirements to facilitate physical efficiency (Rowntree, 1991) motivates a biological approach. Albeit this is undeniably parochial- wider concepts account for income inequality, relative deprivation, epidemiological factors, education, the environment and the freedom to attain well-being. Sen’s capabilities approach is the most wholesome approach to understanding poverty, yet its characteristic ambiguity confounds statisticians. Measurement has conventionally therefore been limited to narrow definitions. Even so, effective policy response would need to transcend statistical limitations, and recognize the deep nature of the problem.
The adoption of eight Millennium Development Goals represents a global commitment to comprehensively address the problem, in a time-bound manner. The eight goals include eradicating poverty and hunger, universal primary education, gender equality, child health, maternal health, combating HIV/AIDS, environmental sustainability, and global partnership for development. The goals were arrived at through a series of summits across the 1990’s and the joint effort of UN members countries, the OECD, IMF, and World Bank, finally culminating in the Millennium Summit in 2000.
According to the World Bank, nearly 1.3 billion people on our planet live in extreme poverty, as per the US $1.25 income per day poverty line computed at PPP. The $2 a day measure of deprivation, estimates twice this number. Approximately three quarters of the world’s poor reside in Sub-Saharan Africa and South Asia. The 2011 progress report on the MDGs paints a mixed picture. The sharp reduction in poverty in East Asia (China, in particular), supplemented by gains in India have led to a substantial decline in global poverty. The 2015 global estimate of poverty is 15%, well below the 23% target. Projections for Sub-Saharan Africa are also more optimistic than before, despite the global economic slowdown augmented by food and fuel crises. Markedly, the best record for pursuing the goal of universal primary education is that of Sub-Saharan Africa (1990-2009). Joint efforts of international partners, governments, civil society, and public health workers have helped effect substantial improvement by making treatment for HIV, tuberculosis and malaria accessible to millions of patients. Access to clean drinking water and a renewed focus on maternal and child health has also helped reduce worldwide deaths attributed to disease.
However, there are pertinent concerns about the reliability of data. The variability in analytical techniques across countries, small sample sizes and vested interests make it difficult to obtain credible estimates. Income inequality continues to broaden unabashedly with the growth trajectory of developing nations. Volatility in food and fuel prices, food shortages, environmental degradation and economic shocks further obstruct development. Furthermore, there is disturbing evidence that the conditions of the poorest sections is only getting worse. The most vulnerable are disadvantaged compared to others below the poverty line where access to limited resources of sanitation, education, food rations, public health and clean drinking water are concerned. Theory suggests that the headcount ratio mode of aggregating poverty may in part be responsible for such a phenomenon. Women and children are among the worst affected, as a consequence.

The multiplicity of anti-poverty programmes oft leaves observers baffled. These programmes can be divided based on a one-size-fits-all approach versus one that is more region/institution specific. Policy need not confine itself to either approach exclusively, of course. Development aid, part of the former genre, reflects the approach of the international community to help impoverished countries escape the ‘poverty trap’. This method has met with varied results, and has consequently been the centre of a controversial academic debate (Sachs vs. Easterly). The opposing party argues that aid is ineffective, encourages perpetual dependence and undermines local institutions. Neither side has succeeded in unequivocally establishing their case.

Microfinance received international recognition after the Nobel Committee recognized Yunus for the Grameen Bank’s pioneering work in Bangladesh. These schemes helped extend organized credit to the informal sector, finding innovative ways around the traditional impediments of collateral, lack of creditworthiness, default, etc. However, it is incorrect to regard this tool as a panacea as there is little evidence that microfinance has actually helped lift people out of poverty; albeit it has facilitated greater financial freedom for its clients.

Another scale-based approach promotes ICT4D, i.e. Information and Communication Technologies for Development. This involves the use of technology to address issues in agriculture, health, banking, education, etc. Since the adoption of MDGs, cellular phones have also begun to play an important role. The successful M-PESA scheme in Kenya, for instance, has helped incorporate more than half of Kenya’s adult population within the formal banking network. However, the feasibility of replicating one-off technologically supported successes depends on the extent of institutional heterogeneity. There is an intriguing line of thought that questions the underlying premise of prioritizing technology altogether (Toyama, Boston Review).

The various solutions (not exhaustive) listed above all motivate the same query- does it work? Following this line of reasoning there has been an increasingly popular shift towards evidence-based policy in development economics, which uses statistical tools to assess the impact of policy interventions. The necessarily micro nature of this exercise, however, is a limitation for large-scale projects and grand solutions. Simply put, your questions about interventions will still receive qualified ‘yes and no’ answers. There is no single magic cure.