Getting team India to win again – poverty

People living on less than $1.25 per day are below the poverty line. India is home to 250 million, a quarter of the global total.

In the a recent paper Martin Ravallion points out that the eradication of poverty was not always considered to be good policy. Between the 16th and 18th centuries, Europeans believed that poverty kept the economic engine humming by ensuring the availability of plentiful cheap labour. That led to laws that were palliative, keeping the poor in place. The subsidies of energy, rail fares and diesel, and meal subsidies in India are part of this same legacy. The politicians value these as tools to win favor with voters, and so are loath to get rid of them. But the economic distortions they create make the potential of the country unreachable.

An example is the rail subsidy. Fares are heavily subsidised, and the cost apportioned to the goods that are carried by rail. Shipping companies have calculated that it’s cheaper to move goods by road. Heavy goods vehicles are destroying the new highways. Traveling from one city to another by road is a surreal experience, with the passengers in small road cars, regularly dwarfed by 18 wheel pantechnicons, hoping that their vehicle’s horn has been heard above the cacophony.

When politicians try to remove any of the subsidies, the poor object with such vehemence that the idea is quickly scrapped1. The poor make up a big part of the vote.

Poverty is not just a problem for the politicians and the poor. It is a challenge that the whole country must solve.

It would be unfair to leave the impression that the intent of politicians is to keep the poor in penury. The Right of Children to Free and Compulsory Education Act enacted in 2009, which came into force on 1 April 2010 is intended to address poor levels of eduction among the poor. Some of the states are experimenting with conditional cash transfer (CCT) schemes to encourage attendance. The central government has introduced school meals with the same intention.

Even with these positive ideas the challenges are huge. With almost 300 million children of school going age, recruiting and training the teachers, designing the curricula, building schools, and ensuring standards of education are established and maintained is a mammoth undertaking.

The CCT and free meals encourage the students to attend, but that does not guarantee the attendance of teachers, who are poorly paid. Indian parents, both rich and poor, have been shifting their children out of government-run schools in search of the better education in private schools2.

The more innovative states are finding solutions to these challenges, and the competition between the states drives the others to emulate those successes.

But it will take time, and the clock is already running on India’s demographic dividend. If the youth becoming available to power India’s future economy do not find jobs, they will become disenchanted. India can’t afford that.

More at:
Getting team India to win again
Getting team India to win again – infrastructure
Getting team India to win again – The 1991 financial crisis
Getting team India to win again – fiscal consolidation
Getting team India to win again – the plan
A mess of pottage
Express or stopping?
Feast and famine
How Long Will It Take to Lift One Billion People Out of Poverty?
Lessons from Palanpur
Not always with us
Penury portrait
The Idea of Antipoverty Policy
The Future of Global Poverty in a Multi-Speed World: New Estimates of Scale, Location and Cost
Where Do The World’s Poor Live?
Where will the world’s poor live?

  1. Will India Be The First BRIC Fallen Angel? pg3 []
  2. Will India Be The First BRIC Fallen Angel? pg10 []

Escaping the poverty trap

South African politics has a bizarre arrangement that is a legacy of the apartheid era. The ANC, the federation of trade unions (COSATU), and the South African Communist Party (SACP) have an alliance born out of the battle that they fought to overcome the former regime.

Zwelinzima Vavi, the head of COSATU, is quoted as saying that the education system is keeping apartheid alive. He’s right to attack the education system, but he adds nothing constructive to the discussion.

The poverty trap, including poor education standards affects countries round the world, developing and developed. It’s part of the poverty trap, and escaping it is challenging. Esther Duflo, the joint author of Poor Economics is the foremost expert on the subject. In the book she describes how poor parents are forced to decide which child has the best prospect of being the success in the family, and the whole family places its bets on the early developer. The other children are relegated to menial labour. Those not picked eventually succumb to the belief that they are inferior. Paradoxically, scientific studies prove that the best prospect is often not the child the family elected.

Ms Duflo has also come to the conclusion that hope, believing that escape from poverty is possible, is the most influential determinant to making the escape possible.

In other research there are signs that the charter school system can improve education for the poor. The results are promising.

Perhaps everyone would benefit if Mr Vavi spent a little more time reading and a lot less time talking.

More at:
A 20-year lesson
Unions – part of the solution or not
Hope springs a trap
The audacity of hope
SA education: The poorest choice
Vavi: Dysfunctional education system keeps apartheid alive

The wealth of nations

The way that nations present their accounts is badly flawed. The balance sheet figures, which are critical to the understanding of the health of an country, are not are readily available.

In a recent report, the UN has taken an interesting approach in valuing the assets of 20 countries. In addition to the assets normally appearing on the balance sheet, each country’s human capital and natural resources are included. This makes for interesting reading. It gives one a better idea of whether politicians are investing the country’s natural wealth into its people.

The data reflects the position in 2008. At the head of the table in aggregate wealth is the U.S. at about 10 times its GDP at the time. Japan, with its limited natural resources, has invested heavily in it’s people, and so heads the list in per capita wealth.

Let’s hope our leaders take note.

More at:
Inclusive Wealth Report 2012
National balance-sheets
The real wealth of nations
Current-Cost Net Stock of Fixed Assets and Consumer Durable Goods