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

That elusive goal may now be in sight. The statistics coming out of Bangladesh make the point. In spite of dysfunctional politics, the country’s poor are finding a way out.

Income per capita has more than tripled in the last 20 years. Over the same period life expectancy has grown from 59 to 69 years, now four years ahead of its wealthier neighbors India and Pakistan. Infant mortality has plummeted, while female literacy rates, for a long time among the lowest in the region, at 77% now exceed both India (74%) and Pakistan (61%).

Empowering women, giving them control of their fertility as well as family finances, are the factors attributed for the remarkable turnaround of a country that Henry Kissinger once called a development “basket case”.

This success strategy is borne out in research conducted by Esther Duflo, the co-author of “Poor Economics”, in Bangladesh and other parts of the world.

There are a group of developing countries, including some of the poorest, that share the “demographic dividend” that is a part of Bangladesh’s potential. The median age, at 23.3 years, is low. Declining fertility rates mean that people in the workforce of the future will far exceed dependents at both ends of the age spectrum. The window of opportunity is a relatively short one. It’s realization is dependent on whether equal opportunity exists. The best, regardless of background, should be allowed to achieve their potential, especially for education.

China, the current economic growth champion, with its hukou system that discriminates against rural migrants is exposed.

More at:
Fighting for privilege
The path through the fields
Out of the basket
The real deal

Poor people

There are more than one billion people living on less than $1 dollar per day. Anyone interested in knowing what that’s like should read Katherine Boo’s compelling book “Behind the Beautiful Forevers”.

It follows the daily life of a group of slum dwellers surviving in the shadow of the extravagant five star hotels that have risen alongside Mumbai’s international airport. Through the eyes of children it shows how hope, the most powerful escape from the poverty trap, is demolished by deceit and corruption.

There is a great deal of academic literature trying to explain why the rich world’s efforts to provide aid to the poor have failed. The story of these peoples’ lives provides a better answer.

Another author, also one who has spent years living with the poorest of the poor, Esther Duflo provides academic insights in her book “Poor Economics” coauthored with Abhijit V. Banerjee. She agrees that hope is the key ingredient to defeating the poverty trap.

And that hope is what politicians, in many countries, abuse to get themselves elected.

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