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Kamala Sarup: Why Poor Still Poor?

Why Poor Still Poor?

By Kamala Sarup

Much confusion here between poor and rich. I will consider the latter difference from an economist's viewpoint.

Works are symbols (abstractions) for other abstractions (e.g., Peace, War) and for tangibles, e.g. existing poor and rich. As symbols for tangibles, some works can be least abstract, i.e., the symbol for the poor now in your wallet, more abstract, i.e., the symbol for the rich located in your country. A symbol for the poor discussed in a book on the history of its use. In all of the above examples, the work "poor" is a symbol representing a tangible called "money".

The tangible, "wealth" are the goods and services that a person can command for his/her use. Your house, your factory, and the work of your gardener and your factory workers are examples of wealth. The tangible, "money" is the paper and coin that gives a person access to wealth. From an economist's viewpoint, money is not wealth. Money gives access to wealth. (In the language of the street, however, money is considered wealth too.)

I suppose it would be better to say, there has always been macroeconomic policy which is essential for economic growth. It also is essential if one is going to avoid very high rates of inflation. To a first approximation, real incomes go up approximately at the same rate across the spectrum. On the other hand, there are things in addition to simply raising real incomes that can make a difference. And, of course, there is lots we need to learn both in terms of what has been effective and what has not been effective.

Countries have to develop organized instruments to achieve their military, political, economic, social, religious, and intellectual objectives. Without a strong economic establishment a nation cannot maintain its sovereignty. Economic change must comes only through reforms. If it fails, reaction and decline will set in. To quote Quigley: "Basically man is good; that there is truth but we can come to truth only by working together; and that through faith and good works, we can have a better life in the world."

Any country has to deal with inflation and employment, big government deficits.I want to talk about the design of policy and I'll specifically talk about pro-poor growth-and the assessment of policy, which is particularly poverty impact analysis. So design and assessment, and they're obviously complementary, and they should obviously be based on evidence. So let me take policy design and particularly look at that in terms of pro-poor growth. On the other hand, special schemes to unearth black money and assets should be introduced.

The poor still number over thousands. As the economy registers an artificial boom, world's savings and investment rates decrease by three percentage points and the government's profligacy reaches new peaks.

It is true, Income growth in the rural areas, where 70 percent of people live, has sharply declined. Real wages of rural workers has also decreased. Infant mortality rates are rising. But luxury consumption is booming within the upper crust. Private sector is not more efficient. The government money has not gone into modernization, workers' retraining or the infrastructure, but into unproductive government consumption. The infrastructure is in an advanced state of decay.

In developing world, the health sector also had a lot of expectations from this budget, especially the private health sector and private insurance. While all expectations were perhaps not addressed, the budget has given the health sector a fair share of attention.

Human security mainly relates with the production, distribution and pricing of food grains and thus brings agriculture, Public Distribution System and the subsidy structure in to focus. The reform measures that predominantly affect them are reduction of fiscal deficit, reduction of subsidies, devaluation of rupee, export orientation and reduction of agricultural credit. The price rise in food-grains owing to the cuts in the food and fertiliser subsidies and consequent adjustments have particularly been harsh.

We have questions how the higher level of social consumption with relatively better distribution of incomes and wealth vastly widened the demand of those economies and facilitated more broad based development. At the same time, there is need to review these programmes, sharpen their focus, improve their delivery system and involve the poor in their implementation.

If we declare for reduction in poverty, which we do, of course, we ought to be able to assess ex ante and ex post the impact of our policies on poverty. We must be very careful, of course, to do that in a long-term, dynamic way as well as short-term. You cannot, for example, look at the impact of education on poverty and income distribution by just looking at what happens over the next couple of years. The impact of education on poverty and income distribution obviously has a very long gestation period. So that's just one of the problems.

Higher literacy and health standards were the most crucial factors in enhancing labour productivity which in turn went to facilitate significant import substitution and export promotion.

We have seen quite a bit on private consumption, but the emphasis also needs to be put on what are the adjustment implications on the provision of public goods, particularly public health,education, because these not only have immediate effects on consumption. The reaction of the public sector to the crisis can actually make the situation a little bit more manageable.

Now, if you look at some developing countries - and, again, I don't want to generalize, but at least the case of Mexico and very many other countries in Latin America - what you see is that there are multiple mechanisms for income transfers. There are tax exemptions for some basic commodities. There are sometimes price controls on telephones. There are sometimes price controls on transportation. There are food subsidies. There is sometimes free delivery of goods.

In most developing countries, there's something that I would call a missing political alliance between the poor and the non-rich. The point is that these make the majority in most developing countries.

So the point I want to make is that most people are at risk in one way or another. But we don't see any sign, oddly enough, of this missing political alliance between the poor and this huge vulnerable group of non-rich.


Kamala Sarup is an editor to

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