WDR 2000 by jianghongl

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									WDR 2000/1
          What follows is a useful set of notes (with paraphrasing, quotes, and figures from
     World Bank, World Development Report, 2000/1,
Attacking Poverty which articulates an influential global orientation toward policy making
            geared toward the reduction of poverty.   OVERVIEW 1           (italics added)


      ►   “Poor people live without fundamental freedoms of action and
          choice that the better-off take for granted.”
               capabilities, rights?
      ►   Poverty is multidimensional: it includes inadequate food, shelter,
          health, education; vulnerability to disease, dislocation, disaster;
          and often mistreatment by state and society.
      ►   “The experience of multiple deprivations is intense and painful.”
          The Voices of the Poor study, which informs this report, gives a
          first-hand glimpse of poverty.
               participatory approach
      ►   “Of the world’s 6 billion people, 2.8 billion – almost half – live on
          less than $2 a day, and 1.2 billion – a fifth – live on less than $1
          a day, with 44 percent living in South Asia.”
               monetary poverty
      ►   “In rich countries,” less than 1 in 100 children die before age 5;
          while “in the poorest countries,” as many as 20% do. In rich
          countries, <5% children < 5 yrs old are malnourished; in poor
          countries, as many as 50%  ten times the percentage.
               Inequality, comparison, as definition of poverty
WDReport 2000/1. OVERVIEW 2


    ►   Global wealth increasing
        • “But the distribution of these global gains is extraordinarily
          unequal.
        • ”The average income in the richest 20 countries is 37 times
          the average in the poorest 20 – a gap that has doubled in
          the last 40 years.”

    ►   Regions of the world differ greatly.
        o “In East Asia the number of people living on less than $1 a
          day fell from 420 million to around 280 million between
          1987 and 1998 – even after the setbacks of the financial
          crisis.
        o “Yet in Latin America, South Asia, and Sub-Saharan Africa,
          the numbers of poor people have been rising.
        o “And in the countries of Europe and Central Asia in transition
          to market economies [ie: former Soviet Block], the number
          of people living on less than $1 a day rose more than
          twentyfold.”
           WDReport 2000/1. OVERVIEW 3:
International/Millennium Development Goals to reach by 2015

       1) Income
               Reduce by 50% the proportion of people living in extreme
                income poverty, on < $1/day
       2) Education
           •    Ensure universal primary education
           •    Eliminate gender disparity in primary and secondary
                education
       3) Health
            Reduce infant and child mortality by two thirds (ie in 2015
             it will be 33% level in 2000)
            Reduce maternal mortality by three-quarters (2015 level
             will be 25% 2000 level)
            Ensure universal access to reproductive health services
       4) Environment
            Implement national strategies for sustainable development
             in every country by 2005, so as to reverse the loss of
             environmental resources by 2015.
             WDReport 2000/1. OVERVIEW 4:



But how to reduce poverty in all dimensions?
   Answers have changed over time.
1. 1950s and 1960s, “large investments in physical
     capital and infrastructure”
2.   1970s, “health and education”
3.   1980s, “improving economic management and
     allowing greater play for market forces.”
4.    1990 WDR promoted labor intensive growth
     through economic openness and infrastructure and
     providing basic services
5.   1990s, “governance and institutions moved toward
     center state – as did issues of vulnerability at the
     local and national levels.”
WDReport 2000/1. OVERVIEW 5:




  ►   This report builds on cumulative learning

  ►   Proposes a strategy for attacking poverty in
      three ways, by
      1) Promoting Opportunity
      2) Facilitating Empowerment
      3) Enhancing Security
            WDReport 2000/1. OVERVIEW 6: Focus 1:
                             Promoting Opportunity


►   For poor people, material opportunities mean jobs, credit,
    roads, electricity, markets for produce, schools, water,
    sanitation, health services  note: capability + participatory approach
►   “Overall economic growth is crucial for generating opportunity.
      “So is the pattern or quality of growth. (growth = money = PCGDP)
      “Market reforms can be central in expanding opportunities for poor
       people, but reforms need to reflect local institutional and structural
       conditions.
      “And mechanisms need to be in place to create new opportunities
       and compensate the potential losers in transitions. (exclusion)
►   “In societies with high inequality, greater equity is particularly
    important for rapid progress in reducing poverty.
      “This requires action by the state to support the buildup of human,
       land, and infrastructure assets that poor people own or to which
       they have access.”
      [NOTE: high and increasing inequality AMONG national economies
       in global economic growth system is NOT part of this discussion.]
WDReport 2000/1. OVERVIEW 7: Promoting Opportunity 2




    ► Core  policies and institutions for creating
       more opportunity involve complementary
       actions

           to stimulate economic growth,
           make markets work for poor people,
           and build their assets –
           including addressing deep-seated inequalities in
            the distribution of such endowments as education”
WDReport 2000/1. OVERVIEW 8: Promoting Opportunity 3

►   Growth requires encouraging effective private investment.
      Investment and technological innovation are the main drivers of growth in jobs
       and labor incomes

►   Fostering investment requires reducing risk for private investors:
        with stable fiscal and monetary policies,
        in stable investment regimes,
        with sound financial systems,
        and a clear and transparent business environment.
        It also involves ensuring the rule of law and taking measures to fight corruption

►   Special measures are frequently required to ensure that small and micro-
    enterprises participate effectively in markets.
      credit (financial deepening),
      lowering transactions costs of reaching consumers by expanding access to
       Internet technology,
      promoting trade at fairs, etc.;
      improving transportation in disadvantaged localities
WDR 2000/1, discussion




   ►   The next set of slides presents figures from WDR
       2000/1, chapter 3, on “opportunity,”
         The chapter stresses the productive role of overall
          economic growth in poverty reduction.
         It also indicates how various national economies
          have channeled additional wealth (acquired
          through economic growth) into poverty alleviation
WDR 2000/1, discussion



► The  WDR does argue that aggregate (or general)
  economic growth (increasing total national
  wealth/capita) facilitates poverty reduction.
► But does economic growth CAUSE poverty reduction?
► Is increasing wealth a necessary or sufficient
  condition for poverty reduction?
► Keep in mind the multidimensional character of
  poverty: growth might reduce poverty in some
  dimensions (e.g. income) more than others
WDR 2000/1, discussion




  ►   The WDR does not argue that increasing wealth is a
      necessary, let alone sufficient, condition for poverty
      reduction
        Interpreting WDR figures below indicates why

  ►   We can explore the relationship between data and
      arguments by looking closely at these figures
        The are excellent examples of data revealing more on
         close examination than first meets the eye.
Note the statement atop this figure
presents a correlation, a statistical
pattern; it ALSO implies causality:
 more wealth means less poverty.
 Thus policies to increase wealth
 might tend “in general” to reduce
       policy. (note sample)

    Q1: National wealth data and
income poverty are measured quite
 differently. What is the difference?
    Does it matter for interpreting
              these data?

  Q2: These two graphs can be
   interpreted to mean that on
  average, poorer people live in
 poorer countries. Do these data
      suggest anything else?
A1: National wealth data derive from national
    accounts. X axis values are percapita
consumption = (GDP - inventory – savings –
    exports + imports)/ total population

    Poverty data and hence quintiles of
consumption cost (y axis values) derive from
           sample survey data.

 Hence some incommensurability appears in
             each data point.

More serious problems arise for cross country
                comparisons.

PPP = purchasing power parity. A calculation
  designed to compensate for variations in
   value of money and cost of goods and
         services across countries.

PPP figures reduce problems of cross country
  comparisons to acceptable level for such
                  analysis.
     Reading trick:

interpret the three oval
 and three rectangular
        clusters

ovals: richer and poorer
  societies have similar
 consumption levels for
      poorest 20%

  rectangles: societies
   with the same total
 wealth have lower and
  higher consumption
levels for poorest 20%;
and range of variation is
   smallest in poorest
        societies.
   Thus, the “in general”
  statement is true (blue
        trend line)

But data ALSO point in other
          directions:
(1: ovals) more wealth does
   not always mean more
  consumption for poorest
          20%; and
 (2: rectangles) the poorest
20% have higher and lower
    consumption levels in
   societies with the same
      percapita wealth.

Red line indicates an axis of
 national wealth increase
with decline in poorest 20%
       consumption.
    Interpret in words

(1) the clustering of these
data points around 0:0 and

 (2) statistical differences
    among countries in

    (a) each quadrant
     separately, and

    (b) each quadrant
      comparatively.
 What can you
      say
 comparatively
about countries,
 based on this
    figure?


   (see next slide)
    General statement:

Health performance varies
 greatly among countries
   with similar PCGDP.

      Provide details.

            Q:

 Where on this chart is the
poorest country with health
 performance comparable
     to rich countries?
The winner
 Compare

(1) South Asia
   and Sub-
Saharan Africa

(2) China and
   Thailand
         Note the two timescales.
What is their implication for current trends?
Interpret the distribution of countries in this figure.
                                     Drawing concentric circles might help.
  If this
 general
statement
  applies
  inside
countries,
 might it
also apply
  across
countries?
Q1: What does the ratio in
  this figure indicate?

 Q2: What does a ratio
     >100 mean?

    Q3: Does this data
 indicate literacy levels?

Q3: What are other useful
 interpretations of this
         data?

  Consider the range of
 ratios among countries
   with $1,000 PCGPD

  Consider the PCGDP
 range among countries
   with and full gender
equality in literacy rates.
WDR 2000/1 summary, continued

►   WB national strategy has three parts
    1. Promoting Opportunity (Chapters 3-5)
    2. Facilitating Empowerment (Chapters 6-7)
    3. Enhancing Security (Chapters 8-9)
►   National strategy supplemented by
    International Action (Chapters 10-11)
       1. Promoting Opportunity
► Chapter   3 summary last week
     Focus:
     the primacy of economic growth
     Growth and inequality
     Income growth and nonincome poverty
                  WDR 2000/1
Chap 4: Making Markets Work Better for Poor People
                 THE IMPACT OF INFLATION
                      An Extreme Cast:
Collapse in Real Wage (entitlement to food) caused starvation
                 in The Great Bengal Famine
                         Indexes of Food Supplies and Prices in Bengal, 1939-44

                   450


                   400


                   350


                   300        Wage Index

                              Foodgrains price index
    index values




                   250
                              Index of exchange rate

                              total grain
                   200
                              grain per cap

                   150


                   100


                   50


                    0
                           1939-40             1940-41   1941-42   1942-43   1st half 1943-4
                                                         years
                            Wage and price trends affect income groups differently
                              Transition to (A) Destitution and (B) Destitution or Husking Paddy for Different
                                                         Occupations (Sen Table 6.7)

                       5                                                                       35


                      4.5
                                                                                               30
                       4
                                                                                                                        Peasant cultivation and share-cropping
                                                                                               25                       Part peasant, part labour
                      3.5
                                                                                                                        Non-cultivating owners
% for column series




                                                                                                    % for line series
                                                                                                                        Profession and services
                       3
                                                                                               20                       Trade
                                                                                                                        Craft
                      2.5
                                                                                                                        Non-agricultural labour
                                                                                               15                       Other productive occupations
                       2
                                                                                                                        Agricultural labour
                                                                                                                        Transport
                      1.5                                                                      10                       Fishing
                                                                                                                        Husking paddy
                       1
                                                                                               5
                      0.5


                       0                                                                       0
                             %A 1/39 - 1/43   %B 1/39-1/43       %A 1/43-5/44   %B 1/43-5/44
                                                   periods of transition
                                               Current Trends in Bangladesh
                                                            (from Daily Star 16 July 2005)
                                                                                                   Note
                                                                                                    Rice accounts for 60-70%
                                                                                                     of inflation rate
                                                                                                    Female Daily Agr Wage is
                      Rice Price and Agr Wages in Bangladesh                                         75% male wage

             35%
             30%
                                                                                                     Inflation Rate in Bangladesh, 2001-2005
% increase




             25%
             20%
             15%                                                                              8
             10%
              5%                                                                              6
              0%
                   Agr Labor Daily Wage Avg Rice Price top range Avg Rice Price increase in   4
                      Increase 2001-4      increase 2001-4                2005
                                                                                              2

                                                                                              0
                                                                                                  2001 Jan   2002 Jan   2003 Feb   2004 Mar   2005 May
Wage trends favor skilled workers and
 industry in general over agriculture


                              Wage Rate Ratios in Bangladesh
             Ratio %
             400
                                                      2001            2004
             300
             200
             100
               0
                    Skilled/Unskilled Top/Bottom Range Top/Bottom Range Unskilled Indust       Skilled Indust
                   Industrial Workers Skilled Industrial Unskilled Industrial workers Bottom    Workers Top
                                           Workers           Workers          Range/Agr Labor Range/Agr Labor
     Economic Growth and Overall Increase in National Wealth includes
                 Upward shift in commodity value/prices
                          (Daily Star 19 July 2005)
►   Higher Value Labor
     19% decrease in labor exports from Bangladesh in Jan-May
      2005 compared to same period in 2004
     19% increase in receipts remitted from export labor
     Reason: increasing demand abroad for skilled labor; declining
      demand for unskilled labor; hence lower numbers, higher wages
►   High Value Agriculture. IFPRI research
     Per capita grain consumption declining or growing at less than
      1% per year in eight Asian countries (Bangladesh, Pakistan,
      India, Indonesia, Philippines, Thailand, Vietnam, and China)
     Per capita consumption of HVA (fruits and vegetables) increasing
      at 2-10% per year
     In Thailand and Philippines, >50% of all food is sold in
      supermarkets
     In Dhaka city, about 15% of food sold passes through
      supermarkets
     Market-connections-finance direct links between retailers and
      producers through supply systems generate specialized
      production-consumption commodity chains (e.g. BRAC in
      Chandina, where 30% poor farmer income is in vegetables.)
Chap 5: Expanding Poor People’s Participation
  Joint forest
 management
  brings poor
  people into
process of state
  control over
     forest
   resources
2. Empowerment

Chap 6: Making State Institutions More Responsive
to Poor People
Localizing Governance
  Chap 7:
 Removing
   Social
Barriers and
  Building
   Social
Institutions
Public investment
CHT in Bangladesh

UNICEF/BRAC/BBS 2004
lbw anemia study:

LBW (<250g) Bdesh = 33.7%

urban children (6-59 mo)= 56%
CHT children = 62%
CHT infants (6-11 mo) = 90%

Anemia
urban adolescent girls = 29%
urban adolescent boys = 17%
(lowest of all groups)

CHT adolescent boys = 40%
CHT adolescent girls = 50%
3. Enhancing Security
Chap 8: Helping Poor People Manage Risk
Dealing with Types of Risk (previous slide): Means of
        Reduction, Mitigation, Coping (note )
Non-State, non-market asset transfers
   for dealing with risk and crisis
Social Program Expenditure
Using communities to allocate benefits
Creative examples
Chap 9: Managing Economic Crises and Natural Disasters
Crisis impact on HDI indicators
 The burden of disasters greatest where
national assets for coping, prevention, and
             mitigation lowest
Dealing with catastrophe
             3. International Action
Chap 10: Harnessing Global Forces for Poor People
Privatisation of
  intellectual
property rights
has transferred
     assets
 produced by
 public funds
   into profit
     sector
Chap 11: Reforming Development Cooperation to
                Attack Poverty
World Bank initiatives 1
World Bank initiatives 2
NGO growth.   National Debt Burden
   Concessional (aid) transfers and
nonconcessional (market rate) transfers
Debt relief and poverty reduction
Some critical considerations of WB approach
            to poverty reduction

FOCUS:
  The Market-led-growth-first orientation to
  poverty reduction

   It is based on the DEBATABLE IDEA that aggregate
    national wealth increase helps to reduce and can be
    relied upon to eliminate poverty, when combined with
    supportive state and private policies to make growth
    “pro-poor”
   Its concept of poverty, measures of poverty, ideas
    about causation, and policies follow from and support
    this basic orientation
Does economic growth reduce poverty?

► Note:   the WB argues only that growth
  facilitates poverty reduction.
► A 2004 DFID study of 14 countries in E.Europe,
  Africa, and Asia (including Bangladesh) argues
  more strongly that “growth reduces poverty.”
   “on average a 1 percent increase in income
    percapita reduced poverty by 1.7 percent” during
    1993 – 2002, according to DFID study
   Causal connection made very forcefully, based on
    correlations: growth and poverty headcount.
                      Empirical Complications.
                        Other explanations.

►   DFID conclusions based on headcount poverty reductions

►   DFID findings of poverty reduction during growth are
    compatible with the argument that
     (1) factors other than growth reduced poverty during economic
      growth and
     (2) that lower headcount poverty resulted from a trend increase
      in inequality around the poverty line,
        ► which  raised barely-poor people above the line,
        ► left poverty gap and severity intact (or perhaps increased both)
        ► and also raised non-poor incomes disproportionately


►   It is therefore possible to interpret the claim that growth
    reduces poverty as a moral and political justification for
    the increasing inequality that accompanies market-led
    economic growth
 Counter-Market policies may be reducing poverty
during economic growth and might thus be making
           growth appear to “pro-poor”

► Vietnam   is strongest case for “pro poor growth”
  causal connection in the DFID study
► Vietnam also country with strong social programs
  organizing market operations particularly in rural
  areas
► The state provides broadly egalitarian education,
  health care, market access, production cost
  control, etc. all through non-market mechanisms
► The case could thus be made here that an
  effective socialist state makes the market work
  best for the poor
        Challenging Trends

Several empirical trends challenge the idea
  that market-led economic growth and the
      aggregate wealth increase which it
 facilitates are effective means for reducing
   poverty substantially in the foreseeable
                     future.
Trends that challenge the market-growth-first policy model of

                     poverty alleviation

► Broad increases in inequality separating rich and
  poor countries more and more dramatically during
  recent rapid growth (especially 1990s)
► Growth in poor countries concentrates in growth
  sectors tied to world markets
    Generating higher value commodities (wealth) [e.g.
     vegetables, skilled labor, and education] for wealthier
     segments of the population.
► Raising incomes and living standards most among
  the non-poor and least among the poorest, inside
  and across national economies
► Regional rich-poor differentiation: e.g. India and
  China; urban-rural divide generally.
Inequality is dynamic force allocating growth
  benefits: Where does the new wealth go?
    Share of Global Income Going to Richest 20% and
            Poorest 20% of World Population



          Share of    Share of
  Year      Richest     Poorest     Ratio of Richest to Poorest
             20%         20%
  1960     70.2%       2.3%                   30 to 1
  1970     73.9%       2.3%                   32 to 1
  1980     76.3%       1.7%                   45 to 1
                                              59 to 1
  1989     82.7%       1.4%       Source: United Nations, Human
                                     Development Report, 1992.
           US Income Disparities


                                              Percent    Percent                    Average
                                                                    Average After
                                              Share of   Share of                   After Tax
             Household Groups                                        Tax Income
                                                all        all                       Income
                                                                       ($000)
                                              Income     Income                      ($000)
                                               1977       1999          1977          1999


                bottom 20%                      5.7        4.2           10            8.8
             second lowest 20%                 11.5        9.7          22.1           20
                middle 20%                     16.4       14.7          32.4          31.4
            second highest 20%                 22.8       21.3          42.6          45.1
                highest 20%                    44.2       50.4           74          102.3
                 highest 1%                     7.3       12.9         234.7         515.6


note: percentages do not add to 100 due to
rounding
Source: New York Times Sunday Sept 5, 1999.
National Section p.16,
based on Congressional Budget Office data
analyzed by Center on Budget and Policy
Priorities
                     Winners and losers
                        Apr 26th 2001
                From The Economist print edition

  The global distribution of income is becoming ever more
unequal. That should be a matter of greater concern than it is,
                    argues Robert Wade
WADE continued
CHARTS MISSING – WILL BE ADDED
Chart 1 (above) shows the distribution of the worlds population by average
income of each country (using compatible data from 1993, the most recent
year available). Income is measured in terms of purchasing power over
comparable bundles of goods and services, or purchasing-power parity
(PPP), rather than in terms of actual exchange rates. China and India, with
between them almost 40% of world population, are each divided into
urban and rural sectors and treated as four separate countries.

The distribution has two poles. One, at the bottom end, is at an average
income of less than $1,500 a year. It contains the populations of most of
Africa, India, Indonesia and rural China. At the other pole, with average
PPP incomes of more than $11,500, are the United States, Japan,
Germany, France, Britain and Italy. Some of the space between $1,500 and
$11,500 is occupied by countries such as urban China, Russia and Mexico.

But notice the strange missing middle: relatively few people live in
countries with average PPP incomes that fall between $5,000 and $11,500.
If incomes were measured using actual exchange rates, the range from

poorest to richest would be much larger   .
WADE continued

Having ignored world income distribution for decades, international economics has lately
seen a burst of interest. But the statistical difficulties are so formidable that the debate
has so far revolved around questions of econometric technique. Standing back from the
fray, we can see that much of the controversy concerns how to compare income in
different countries.
The answer to what is happening to world income distribution turns out to depend
heavily on whether countries are weighted by population, and whether income in
different countries is measured in PPP terms or by using actual exchange rates. These
two criteria can be set out in a matrix of four cells, with countries treated equally or
weighted by population on one axis, and income measured in current exchange rates or
in PPP terms on the other. Table 2 summarises the findings of the existing literature,

dividing the studies among the four cells .
“…. new studies differ from the others in being based solely on
  household income and expenditure surveys. The earlier ones
    either used average GDP, ignoring inequality within each
  country, or used indirect methods to estimate within-country
 inequality, including production surveys and revenue surveys,
    which typically miss important components of household
  incomes. Branko Milanovic at the World Bank assembled the
  database, using the Banks formidable statistical organisation
 to obtain household survey data from just about all the Banks
    members, covering 85% of the worlds population, for the
 years 1988 and 1993. The result is probably the most reliable
              data set on world income distribution.”
Then Mr Milanovic computed the Gini coefficient for world income
distribution, combining within-country inequality and between-country
inequality, and measuring it in PPP terms. (The Gini coefficient is a
commonly used measure of inequality: 0 signifies perfect equality, 100
means that one person holds all the income.) The results are startling.
World inequality increased from a Gini coefficient of 62.5 in 1988 to 66.0
in 1993. This is a faster rate of increase of inequality than that
experienced within the United States and Britain during the 1980s. By
1993 an American on the average income of the poorest 10% of the
population was better off than two-thirds of the worlds people.
WADE article. Concluded.
The other new study, by Yuri Dikhanov and Michael Ward, uses the same data
set with a different methodology. It confirms that world income distribution
became markedly more unequal between 1988 and 1993. Like the Milanovic
study, it finds that the Gini coefficient increased by about 6%. It finds, further,
that the share of world income going to the poorest 10% of the worlds
population fell by over a quarter, whereas the share of the richest 10% rose
by 8%. The richest 10% pulled away from the median, while the poorest 10%
fell away from the median, falling absolutely by a large amount. In short, we
have to revise cell 4. World PPP income distribution with countries weighted
by population (and China and India split into urban and rural) became much
more unequal between 1988 and 1993 (see table 3).
Growth Raises overall cost of living. Current Trends in Bangladesh
indicate that price and wage rate trends favor populations in
“growth sectors”                                    (from Daily Star 16 July 2005)
                                                                                                             Note
                                                                                                              Rice accounts for 60-70%
                                                                                                               of inflation rate
                                                                                                              Female Daily Agr Wage is
                      Rice Price and Agr Wages in Bangladesh                                                   75% male wage

             35%
             30%
                                                                                                     Inflation Rate in Bangladesh, 2001-2005
% increase




             25%
             20%
             15%                                                                              8
             10%
              5%                                                                              6
              0%
                   Agr Labor Daily Wage Avg Rice Price top range Avg Rice Price increase in   4
                      Increase 2001-4      increase 2001-4                2005
                                                                                              2

                                                                                              0
                                                                                                  2001 Jan     2002 Jan   2003 Feb   2004 Mar   2005 May
Wage trends favor skilled workers and
 industry in general over agriculture


                              Wage Rate Ratios in Bangladesh
             Ratio %
             400
                                                      2001            2004
             300
             200
             100
               0
                    Skilled/Unskilled Top/Bottom Range Top/Bottom Range Unskilled Indust       Skilled Indust
                   Industrial Workers Skilled Industrial Unskilled Industrial workers Bottom    Workers Top
                                           Workers           Workers          Range/Agr Labor Range/Agr Labor
      Upward shift in commodity price values with economic growth
                         (Daily Star 19 July 2005)

►   Higher Value Labor
     19% decrease in labor exports from Bangladesh in Jan-May 2005
      compared to same period in 2004
     19% increase in receipts remitted from export labor
     Reason: increasing demand abroad for skilled labor; declining
      demand for unskilled labor; hence lower numbers, higher wages
►   High Value Agriculture. IFPRI research
     Per capita grain consumption declining or growing at less than
      1% per year in eight Asian countries (Bangladesh, Pakistan,
      India, Indonesia, Philippines, Thailand, Vietnam, and China)
     Per capita consumption of HVA (fruits and vegetables) increasing
      at 2-10% per year
     In Thailand and Philippines, >50% of all food is sold in
      supermarkets
     In Dhaka city, about 15% of food sold passes through
      supermarkets
     Market-connections-finance direct links between retailers and
      producers through supply systems generate specialized
      production-consumption commodity chains (e.g. BRAC in
      Chandina, where 30% poor farmer income is in vegetables.)
                           Education
►   Consider where the new seats in higher education are being
    created in Bangladesh today.
►   They appear to be increasing disproportionately in private
    universities with high tuition, English medium, oriented to
    higher income professional employment
►   This may also to be true for primary and secondary
    education in urban areas generally
►   This represents another shift up the commodity value chain
    associated with economic growth:
     NEW opportunities/capacities seem to be created disproportionately
      in more expensive, more productive, more profitable, and higher
      wage-rate seeking educational institutions
     ALL this consistent with increase in rate of aggregate national wealth
      increase
      Energy prices and “oil tax”
► Petroleum prices have just been raised in Bangaldesh
  because of increasing world prices, hence import costs,
  and declining Taka value in relation to the US dollar, which
  is still the dominant world currency
► Paying for oil with dollars demands more and more Takas,
  spent in Bangladesh to buy imported oil.
► Who pays this additional “oil tax” and where does it go?
► Resulting price increases will spread across the economy
  with additional energy costs.
► Income increases will not follow quickly for most people,
  and least of all for the poor.
Non-market means are required – even with high economic
  growth -- to expand participation, reduce barriers, and
                deliver services for the poor
►   Policies targeting the poor appear to be “swimming upstream,” or
    against the logical force of new asset allocations in the global
    market economy as it operates inside Bangladesh
►   Numerous figures in WDR 2001 can be read as indications that
    current conditions in poor countries mitigate against additional
    capital investment (see next slide)
►   High growth rate regions that show substantial reductions in
    poverty may not typify trends in many countries (e.g. in East Asia),
    where internal inequalities are more entrenched and conditions for
    global investment are less attractive
►   Ethnic and political forces may underlie economic growth. East Asia
    in particular has benefited from very high rates of FDI from
    expatriate nationals (especially Chinese, but also Koreans), and also
    from strong and favorable bilateral ties with US economy.
►   State delivery of goods and services to the poor are hampered in
    poor countries not only by functional weaknesses but also by
    financial weaknesses in the international economy (e.g. debt,
    exchange rates, unfavorable trade balances, etc.)
The argument that “in general”
increasing wealth correlates with
poverty reduction is true (blue
trend line)

But ovals show more wealth does
not always increase
consumption for poorest 20%.

Rectangles show the poorest
20% have higher and lower
consumption levels in societies
with the same percapita wealth.

The red line show an axis of
national wealth increase with
lower conusmption in poorest
20%.

The Vietnam case indicates that
the “in general” correlation may
not indicate actual causation.
To repeat:
these are current trends that challenge the market-growth-first
policy model of poverty alleviation
 ► Broad increases in inequality separating rich and
   poor countries more and more dramatically during
   recent rapid growth (especially 1990s)
 ► Growth in poor countries concentrates in growth
   sectors tied to world markets
      Generating higher value commodities (wealth) [e.g.
       vegetables, skilled labor, and education] for wealthier
       segments of the population.
 ► Raising incomes and living standards most among
   the non-poor and least among the poorest, inside
   and across national economies
 ► Regional rich-poor differentiation: e.g. India and
   China; urban-rural divide generally.
         The relationship between economic growth,
       inequality, and poverty reduction: three images

►   Economic growth, led by free market forces, is the engine that generates
    more wealth for whole societies, including the poor, whose disadvantages
    amidst inequality need special policy attention to insure that growth is
    directed specifically toward poverty reduction, to make growth optimally
    “pro-poor.”

►   Reducing poverty is swimming upstream in the strong currents of free-
    market-led growth first development policies that now prevail under
    globalization of the  strong state commitments to poverty reduction and
    strong national economies make it more feasible to succeed, but globally
    and nationally, market currents pull wealth to richer sectors, regions, and
    populations

►   The rising tide of economic growth lifts all the boats  but richer sectors
    rise faster and higher; “poverty reduction” occurs only at the margins of the
    market-growth mainstream, though it does occur.
           Globalization and Poverty:
          two debatable propositions

► Globalization  is the universal spread of market
  institutions and thus the progressive inclusion of
  everyone in the world in the creative wealth-
  producing vitality of the market economy. The result
  is the eventual elimination of poverty.
► Globalization is the spread of wealth and investment
  among productively profitable social segments and
  sectors of national economies around the world,
  leaving “high risk – low yield” places, people, and
  sectors out of the circuit. The result is the perpetual
  reproduction of poverty.

								
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