Special Article
The grave problem of mass poverty
By Sartaj Aziz
Former Finance Minister of Pakistan

Poverty has moved, once again to the top of the global agenda and for the first time, the international community has accepted a specific target for property reduction. The Copenhagen Summit on Social Development, held in March 1995, adopted the target of a 50% reduction in the proportion of people living in extreme poverty by the year 2015. This target has been endorsed by the Development Assistance Committee of the OECD and by the World Food Summit in 1996, and more recently by the United Nations Millennium Summit in September 2000.

The enormity of this task can be seen readily, if we recall some of the basic dimensions of poverty in the world today:

* Nearly 3 billion people, or half the world total population are poor and live on less than $2 a day;

* About 40 percent of these, or 1.2 billion people are extremely poor and have to subsist on less than $ 1 a day. Two thirds of these very poor people i.e. 800 million suffer from chronic hunger.

* The dividing line between the chronically poor, subsisting on $ 1 a day and those living on $ 2 a day is very thin. Chronic poverty can be reduced only through sustained efforts over a longer period of time, but poor people in the income range of $ 1 to 2 per day can benefit very quickly if rapid economic growth, say at twice the rate of population growth, can be sustained for a period of 5 to 7 years. But this very group, as we saw in South East Asia recently, can fall below the poverty line of $ 1 a day, if there is a drastic slowdown in the rate of economic growth.

* The causes of chronic poverty are deep seated and structural and rooted in the basic social structures of the society with its inequitable distribution of land and a feudal, ethnic or tribal system which further accentuate inequalities of various kinds. These structural causes are often compounded by man made or policy induced factors like urban and industrial bias in macro-economic policies, adverse terms of trade for agriculture, civil wars and local conflicts.

* The globalisation phenomenon has made it more difficult for poor countries to reduce poverty. Most developing countries have experienced negative or slow growth rates in the past 10 years with stagnant exports and declining living standards. In fact, by accelerating the pace of growth in developed economies but not in the developing world, the process of globalisation has further widened the income, technological and digital divide in the world. Foreign capital is not going to countries or regions with a large proportion of poor people, like sub-Sahara Africa, and is in any case accompanied by a lot of volatility, which has been the main cause of growing poverty in South East Asia.

Traditionally, poverty was defined only on the basis of household income and the resultant access to a basket of goods and services. But now the concept of poverty has been broadened to include: (i) opportunities as reflected in household income, which is partly dependent on the asset or natural resource base of the family and partly on their ability to market their produce or services; (ii) household capability or human capital which in turn is dependent on the level of health and education; (iii) security which depends partly on mechanism for sharing consumption within the household and partly on ecological vulnerability.

The large majority of chronically poor people are poor because they are forced to subsist on environmentally degraded resources - saline or eroded soils, hilly terraces, swamps or flood prone river beds. As the population pressure increases, this resource base is further degraded, range lands are overgrazed, forests are over-exploited and the limited water resources are over-fished. Similarly, poor people subsisting on marginal resources are much more vulnerable to natural calamities like drought or floods and in the absence of effective safety nets, can be easily pushed into starvation or migration. Improving the income generating assets of poor people through projects and programmes and legal and policy measures that confirm their legal property rights and thus their ability to borrow capital, can be extremely important for the twin objectives of reducing poverty and improving the environment.

Of equal, if not greater importance are projects and programmes that reduce pollution. A large number of studies carried out in the past few years have shown that environmental factors account for at least one fifth of all cases of ill health. The factors include contaminated drinking water, poor sanitation, indoor air pollution, agro-chemical pollution and urban air pollution. At least one billion people do not have access to clean drinking water and two billion do not have adequate sanitation facilities. Respiratory diseases and water borne diarrheal diseases are the two biggest causes of death (13 and 11 per cent respectively) among the poorest 20 percent of the world population. These proportions are much higher for children. Even where these diseases do not lead to mortality, they seriously affect the income earning capacity of the poor, through chronic ill health. That is why the urban poor bear a disproportionate share of the burden of ill health.

Any meaningful poverty reduction programmes will require a series of programmes to build rural infrastructure, to expand education and health facilities and to provide micro credit on a large scale. Social safety nets will require subsidised foods or public works programmes to generate employment. These programmes will require additional resources on a substantial scale and on reasonable terms. But in the past decade, the annual flow of official development assistance has declined by one third.

There is no clear indication so far, that the World Bank and the IMF will be able to mobilise substantial additional resources for poverty reduction. If additional resources are not provided, and the specific poverty reduction interventions and the safety net are to be financed only by certain readjustments within the existing IMF/WB programmes in the country concerned, then the Poverty Reduction Strategies being formulated by a large number of developing countries can become another conditionality like good governance. Untied resources for budgetary and balance of payments support similar to those provided as structural adjustment loans for macro stability will be necessary to induce the policy and institutional changes necessary for meaningful poverty reduction strategy. After the fall of the Berlin Wall, Germany for example, has been spending almost US$ 100 billion a year to bring up the living standards in former East Germany to the national average. It will be futile to expect that annual expenditure of US$ 2 or 3 billion will halve the number of poor people within a decade.

One promising yet feasible source of additional funding might be debt relief. Despite widespread public support and the continuing international campaign on the debt issue, the debt relief initiative is confined to 41 Highly Indebted Poor Countries (HIPC) covering only 5 percent of the total debt. Decisive action on sustainable poverty reduction require that the debt relief initiative is broadened and deepened on the following lines:

a) Action to write off the debt of the poorest countries, already approved by two successive G7 summits, should be finalised without any further delay.

b) The definition of highly indebted poor countries should be broadened to include all developing countries whose per capita income is below $ 600 and external debt is 300% or more of its annual foreign exchange earnings. The bilateral debt of such countries should be written off.

c) The third category should include the developing countries with per capita income of $ 1000 or less, which are prepared to divert any debt relief given to them for implementing their respective sustainable poverty reduction strategies. The relief can take several forms. One might be to divert interest payments, payable on bilateral debt into a special fund, to be utilised on a matching base, to finance cost of the Poverty Reduction Strategy under the supervision of the international agency concerned.

Concrete proposals on these lines must be developed for consideration at the forthcoming “Rio+10” Conference and the high level Financing for Development Conference to be held in early 2002. The developed world has gained enormously from the process of globalisation and the resultant advances in information and other technologies. The amounts involved in the proposed debt relief initiatives will be a very small fraction of these gains.

Role of the U.N. system

Strong and growing public protests that have marked almost all major international conferences, since the fateful ministerial meeting of the World Trade Organisation in Seattle in December 1995, have already highlighted the perils and inequities of the present global system and its negative fall out in terms of growing poverty, social inequalities and ecological deterioration. This protest movement is still in its infancy and largely controllable but if in the next few years, there is no serious and significant progress in addressing the underlying issues, the movement can get totally out of hand with far reaching consequences for social and political stability.

The recent slow down in the U.S. economy with global repercussions in the rest of the world, will have even greater impact in the developing world in the form of lower exports, slower growth, growing unemployment and reduced capacity for debt servicing. This would not only accentuate the world-wide repercussions against globalisation but could also lead to new wave of financial crisis and a massive increase in the incidence of poverty.

There is thus, a desperate need to highlight these problems and to create much greater awareness, within Governments and within the civil society, that with present policies and trends, the target of halving poverty by 2015 will not be achieved. The UN system has an important role in highlighting these problems and proposing bold and effective solutions for poverty reduction and environmental improvement.

In the final analysis, the challenge of sustainable development and poverty reduction has to be faced by the developing countries themselves. If they change their development models in favour of social goals and environmental stability, by recognising the economic, social and cultural rights of poor people and by reducing inequities in their own societies, then can also demand, with higher moral authority, a global economic system that is both fair and sustainable and does not discriminate against the less developed countries.