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Africa: Thinking Beyond Acronyms

AfricaFocus Bulletin
Sep 16, 2010 (100916)
(Reposted from sources cited below)

Editor's Note

"Even if globally the poverty rate is reduced by half by 2015, as the latest United Nations progress report on the MDGs [Millennium Development Goals] suggests, about one billion people will still be mired in extreme poverty by 2015. ... The report argues that current approaches to poverty often ignore its root causes, and consequently do not follow through the causal sequence. Rather, they focus on measuring things that people lack to the detriment of understanding why they lack them." - UNRISD Report on Combating Poverty and Inequality, September 2010

As world leaders gather for the Summit on Millennium Development Goals on September 20, the reports and the speeches will be largely predictable: some real progress made, but the effort will fall short unless, unexpectedly, more rich countries meet previous commitments and all governments step up their efforts.

Among the few reports to probe systematically beyond acronyms such as "MDGs" is the latest report from the UN Research Institute for Social Development (UNRISD), which was initiated by its previous director Thandika Mkandawire and included key researcher Yusuf Bangura. The authors do not deny some of the macroeconomic policy needs embodied in the World Bank's PRSPs, or the goal-setting of the UN's MDGs and of programs in specific sectors. But they argue that these approaches are doomed to fail by addressing poverty as a "residual category" rather than pursuing structural transformations, including job creation, universal rights to social services, and countering inequality as well as poverty.

This AfricaFocus Bulletin contains excerpts from the preface and the executive summary of the report. The full report is available on the UNRISD website at http://www.unrisd.org / direct URL: http://tinyurl.com/3994c27

For previous AfricaFocus Bulletins on economic issues, visit http://www.africafocus.org/econexp.php

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Correction

Apologies to Joseph Hanlon and to AfricaFocus readers for an error in the e-mail version of the last AfricaFocus about Mozambique (http://www.africafocus.org/docs10/moz1009a.php). Because of a mistake in punctuation in the version on the web the article was pasted from, "Milton Keynes" was inadvertently transformed from the location of the Open University to a co-author! Although the error did not originate with AfricaFocus, I definitely should have caught it. Sorry!

Royal African Society

This month the Royal African Society (RAS) and AfricaFocus begin a collaboration, with RAS featuring AfricaFocus in the Highlights section of the RAS website (http://www.royalafricansociety.org) and in their regular news updates to members. Thanks much to Richard Dowden and Magnus Taylor for this initiative.

Facebook

I set up a page for AfricaFocus on Facebook sometime ago, but hadn't until recently decided what was best to put there, in addition to links to each AfricaFocus Bulletin as published. But I often find material of interest that doesn't work as a Bulletin, for one reason or another, and in any case I limit the number of Bulletins so as not to overload your in-boxes. Now I've decided to post some of these on the Facebook page - I will still be selective in picking items that I think of interest to readers.

So, if you use Facebook, and want to keep up on additional recommendations for web reading from AfricaFocus, visit http://www.facebook.com/pages/AfricaFocus/101867576407 and click to "like" the page. If you see something particularly interesting, you can help promote AfricaFocus by passing it on further to your friends.

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Combating Poverty and Inequality: Structural Change, Social Policy and Politics

United Nations Research Institute for Social Development (UNRISD)

2010

http://www.unrisd.org / direct URL: http://tinyurl.com/3994c27

Preface

Combating Poverty and Inequality is published just as global leaders meet to review and recommit themselves to a set of goals for reducing poverty agreed, under vastly different circumstances, a decade ago. The optimism of the new millennium is now overshadowed by the effects of multiple, interrelated crises. Progress in many areas appears threatened and resources are more constrained.

This volume provides a timely reminder of the strengths and limitations of various approaches to addressing poverty in the current context. It is the culmination of an ambitious project, Poverty Reduction and Policy Regimes, initiated with characteristic foresight by my predecessor as Director of UNRISD, Thandika Mkandawire. Responding to a concern that dominant approaches to poverty reduction, as reflected for example in the PRSPs and MDGs, had serious shortcomings, the research aimed to reposition the analysis of poverty and poverty reduction processes within the broader political economy of development.

A key premise of the report is that poverty cannot be reduced when both analysis of the problem, and the people affected, are relegated to the margins of development processes -- targeted with safety nets or residual policy interventions while economic growth fails to create jobs, deliver services, or provide other means through which all individuals can realize their capabilities.

Building on lessons from prior research on social policy by UNRISD, the report demonstrates that countries which have successfully reduced poverty, from Europe to East Asia, did so through strategic state interventions. These included transformative social policies that aimed not only at protecting the vulnerable, but that also enhanced productive capacities, provided critical social investments and performed a redistributive function that contributed, in turn, to social cohesion and nation building.

...

Sarah Cook, Director of UNRISD, Geneva, July 2010

Overview

The global economic and food crises have called into question the possibility of achieving the Millennium Development Goals of halving poverty and hunger by 2015. Before the crises, the number of poor people, defined in the MDGs as those living on less than $1.25 a day, had fallen: from 1.8 billion in 1990 to 1.4 billion in 2005. Progress across regions was, however, varied with East Asia experiencing the sharpest fall - thanks to China's rapid growth - and sub-Saharan Africa the least. Even if globally the poverty rate is reduced by half by 2015, as the latest United Nations progress report on the MDGs suggests, about one billion people will still be mired in extreme poverty by 2015. Furthermore, according to estimates of the Food and Agriculture Organization of the United Nations (FAO), the number of malnourished individuals rose above the one billion mark in 2009 for the first time.

Income and wealth inequality have also increased in most countries, as have inequalities based on gender, ethnicity and region. In developing countries, children in the poorest households and those in rural areas have a greater chance of being underweight than children in the richest households or those in cities and towns. In some of the least developed countries, children in the poorest households are three times less likely to attend primary school than those in the richest households. And globally, girls account for a much higher percentage of those who drop out of school than boys.

Persistent poverty in some regions, and growing inequalities worldwide, are stark reminders that economic globalization and liberalization have not created an environment conducive to sustainable and equitable social development. Even now, when poverty reduction is relatively high on the international policy agenda and governments are launching direct assaults on poverty through various programmes, poverty and inequality are proving intractable foes.

This report explores the causes, dynamics and persistence of poverty; it examines what works and what has gone wrong in international policy thinking and practice, and lays out a range of policies and institutional measures that countries can adopt to alleviate poverty. The report argues that current approaches to poverty often ignore its root causes, and consequently do not follow through the causal sequence. Rather, they focus on measuring things that people lack to the detriment of understanding why they lack them.

The report analyses poverty reduction as part of long-term processes of social, economic and political transformation, but also draws important lessons from the experiences of those countries that have successfully combined economic development and active social policy to reduce poverty over relatively short time periods. It is critical of current approaches to poverty reduction that treat the poor as a residual category requiring discrete policies. When a substantial proportion of a country's population is poor, it makes little sense to detach poverty from the dynamics of development. For countries that have been successful in increasing the well-being of the majority of their populations, long-term processes of structural transformation, not poverty reduction per se, were central to public policy objectives.

The report also examines the complex ways that poverty alleviation outcomes are shaped by the interconnection of ideas, institutions, policies and practices in a triad of economic development, social policy and politics. It advocates a pattern of growth and structural change that can generate and sustain jobs that are adequately remunerated and accessible to all - regardless of income or class status, gender, ethnicity or location. It calls for comprehensive social policies that are grounded in universal rights and that support structural change, social cohesion and democratic politics. And it makes the case for civic rights, activism and political arrangements that ensure that states are responsive to the needs of citizens and that the poor have influence in how policies are shaped.

Such an approach contrasts with contemporary efforts to reduce poverty through discrete social policies that are often weakly related to a country's system of production or macroeconomic policies. This has been the case with three of the dominant approaches to poverty reduction in the past decade, including the IMF- and World Bank-led Poverty Reduction Strategy Papers (PRSPs), the introduction in many countries of targeted poverty reduction and social protection programmes, and the UN-led Millennium Development Goals (MDGs) (see box O.1).

In the five years that remain of the MDG process, it is important that the world community continue to concentrate on meeting the agreed-upon targets, drawing lessons from recent experience about the most effective mechanisms for doing so. It is equally important to begin an inquiry into how to sustain progress towards equitable development and poverty reduction in a post-MDG world. This report aims to contribute to this endeavour.

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BOX O.1: Contemporary approaches to poverty reduction

Poverty Reduction Strategy Papers

Poverty Reduction Strategy Papers lay out the economic and social policies that governments in low-income countries should pursue to achieve growth and reduce poverty. The PRSPs share a strong lineage with the structural adjustment policies of the 1980s, which sought to correct the macroeconomic imbalances of crisis-affected countries. The deflationary and social consequences of these policies galvanized the international community, in 1996, to launch the Heavily Indebted Poor Countries (HIPC) initiative, which focuses on reducing countries' debts while helping to spur growth and reduce poverty. Through this process, the PRSPs emerged as a framework aimed at ensuring that resources freed up by debt relief would be used for poverty reduction. The IMF's Poverty Reduction and Growth Facility (PRGF), established in 1999, subsequently became the key instrument for providing loans. The PRGF was expected to support the PRSP goals of growth, poverty reduction and country ownership. In practice, however, it has remained narrowly focused on achieving fiscal stability. Rather than being designed to support PRSPs, therefore, it often pre-determines the macroeconomic frameworks and low inflation targets of the PRSPs. The resulting fiscal frameworks tend to be pro-poor in the sense that aid policy has been reoriented towards basic services. However, they have failed to be pro-growth, especially in terms of infrastructure investment and support for other growth-related activities that will expand capacity in agriculture and industry.

Programmes that target the poor

In the 1980s, fiscal constraints, as well as criticism of the capture of resources by elites, forced many governments in developing countries to shift priorities, placing less emphasis on the goal of universal social protection and more emphasis on targeting the poor. Social programmes were often cut back to residual interventions to cushion the worst effects of adjustment measures, while narrowly targeted mechanisms gained popularity on efficiency grounds. Since then social spending on health and education has often increased but targeted approaches have remained. While there are many positive examples of initiatives that have reduced poverty, sustained consumption and encouraged labour market participation, there are also shortcomings associated with this approach. Identifying and reaching those most in need requires a degree of state administrative capacity that is often not present in low-income countries, or that has been undermined in recent decades as a result of structural adjustment policies and public sector retrenchment. Where poverty is widespread, targeting is unlikely to make significant inroads. Moreover, targeted programmes that are not linked to a broader strategy aimed at ensuring that all citizens have access to basic services and income or consumption guarantees may exacerbate exclusion, resulting in lower quality services for the poor. Targeting also mitigates against the building of links among classes, groups and generations that enhance social solidarity.

Millennium Development Goals

The MDGs are a clear demonstration that world leaders can come together to address the major challenges of our time - not only war and financial crisis, but also poverty. The MDGs acknowledge the multidimensional nature of poverty, going beyond simplistic measures of income to identify other elements that define the experience of being poor. Leaving aside the improbability that people in some parts of the world could even survive on $1.25 a day - the current definition of extreme poverty - such income metrics fail to account for the vulnerabilities and indignities that plague the lives of many people in poor countries. Such concerns are refl ected in the inclusion in the MDGs of other targets, such as alleviating hunger, promoting universal primary education, reducing maternal and child mortality, advancing gender equality and easing the burden of major diseases. Despite an ambitious agenda, the MDGs nonetheless represent a cautious approach to social development. A number of critical issues and obstacles to overcoming poverty have not been addressed, including the mechanisms required to achieve the goals individually, or the synergies among them; the role of employment; growing levels of inequality; the often contradictory impact of certain macroeconomic policies; and the political and social relations that structure power and exclusion.

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Seven Arguments towards the Reduction of Poverty and Inequality

Poverty reduction requires growth and structural change that generate productive employment

A fundamental precondition for poverty reduction is a pattern of growth and structural change that generates productive employment, improves earnings and contributes to the general welfare of the population. ...

Three issues undermine efforts to adopt growth strategies that are employment centred. First, increased globalization has weakened the organic links between agriculture and industry. In many countries today, the urban population is largely fed by importing food rather than by supporting domestic agriculture; many countries also import most of their manufactured goods rather than expanding domestic production. In least developed countries with high levels of poverty, both agriculture and industry have stagnated because of this trend. Second, technological change and sources of productivity growth are increasingly determined by foreign firms, reducing the demand for labour. The third issue relates to the continued hold of neoliberal ideas on macroeconomic policies, which emphasize fiscal restraint, privatization and liberalization. Within this framework, employment is seen as a by-product of growth that does not require direct policies. Even the macroeconomic frameworks of the PRSPs, which are supposed to help low-income countries generate growth and reduce poverty, are constrained by standard structural adjustment programmes that have been strongly criticized as deflationary.

Governments can achieve employment-centred structural change by pursuing deliberate policies in a number of areas. These include:

  • instituting selective and well-managed industrial and agricultural policies that connect the agricultural sector more productively to industry and other sectors of the economy;
  • stimulating and maintaining an adequate level of labour demand by expanding domestic production and raising the demand for domestic goods and services;
  • investing in infrastructure as well as education, training and research to improve skills, productivity and the mobility of the population; and
  • adopting a macroeconomic framework that avoids procyclical policies or restrictive monetary and fiscal policies during periods of slow growth. In addition, the international community can
  • provide support to the least developed countries by reducing vulnerability to commodity price and interest rate shocks, phasing out agricultural subsidies in rich countries and granting more access to rich country markets. Comprehensive social policies are essential for successful poverty reduction

Even when employment levels are high, social policies play an essential role in enabling people to extricate themselves from poverty. A number of welfare policies are feasible and affordable for countries at fairly low levels of income. In fact, evidence from across the world, including high-income countries, suggests that poverty levels are drastically reduced after social transfers have been implemented, with the most significant reductions occurring in countries with comprehensive social policies that aim at universal coverage.

Although the MDGs are fundamentally about the promotion of social development, they do not provide a social policy framework for achieving the targets and exploiting the synergies among them. In efforts to meet the MDG targets, many countries, sometimes with the support of donors, have introduced targeted social assistance programmes. In countries where such programmes are well funded and stable, and reach large numbers of people, the results have been positive. However, where poverty and deprivation are widespread, targeting is unlikely to make significant and sustained inroads into poverty, may fail to build support among middle-income groups that are needed for funding and providing good quality services, and may condemn the poor to inadequate services.

An effective social policy framework for rapid and sustained poverty reduction must be grounded in universal rights. It should aim to:

  • reinforce the redistributive effects of economic policy;
  • protect people from income loss and costs associated with unemployment, pregnancy, sickness, chronic illness or disability, and old age;
  • enhance the productive capacities of individuals, groups and communities; and
  • reduce the burden of the growth and reproduction of society, including care-related work, which is unfairly borne by women.

...

The PRSPs and MDGs are concerned primarily with absolute levels of poverty; neither directly addresses the issue of inequality. In contexts of high inequality, growth is often concentrated among sectors that benefit the elite; the poor, on the other hand, are likely to be excluded from market opportunities or to lack the resources to benefit from growth. High levels of inequality make it harder to reduce poverty even when economies are growing, while the evidence also reveals that poor countries are generally more unequal than rich ones. Poverty and inequality must thus be considered as interconnected parts of the same problem. ... These inequalities are often interlocking and dysfunctional for development for a number of reasons.

First, they make it harder to incorporate the poor and disadvantaged in the growth process; inequalities constrain their productive capacity and their potential contribution to development. Second, in highly unequal societies, the poor are more likely to be locked into a subsistence economy. This may limit the size of the domestic market and thus retard the potential for sustained growth. Third, high levels of interlocking inequalities may undermine the realization of civil, political and social rights; they may raise the level of crime and plunge societies into conflict. Fourth, high levels of inequality may create institutions that maintain the political, economic and social privileges of the elite and lock the poor into poverty traps from which it is difficult to escape.

Countries can adopt a number of redistributive policies to tackle the multiple dimensions of inequality. These include:

  • providing the poor (differentiated by gender, ethnicity and other relevant characteristics) with greater access to productive assets, such as land;
  • investing in social infrastructure to reduce the drudgery of domestic work;
  • pursuing affirmative action policies for disadvantaged groups within a framework that incorporates all citizens in national development and welfare provision;
  • stimulating investment in rural infrastructure, creating public works programmes and increasing access to credit;
  • pursuing fiscal reforms that improve tax administration, prevent tax evasion, and limit opposition to progressive taxation and redistribution; and
  • creating a stable global economic environment that responds to the needs of low-income countries. Poverty reduction requires effective state action

Poverty reduction requires effective state action

Sustained progress in combating poverty requires effective states that are both developmental and redistributive. Countries that have successfully reduced poverty in relatively short periods of time had purposeful, growth-oriented and welfare-enhancing political systems; they also built and maintained competent bureaucracies. ...

Building state capacity requires a focus on three crucial dimensions:

  • the crafting of political coalitions needed to set and carry out policy;
  • mobilizing resources with which to implement development objectives; and
  • allocating resources to productive and welfare-enhancing sectors and enforcing rules governing their use.

...

Current approaches to state-building have focused largely on market-enhancing reforms of good governance, managerialism and decentralization. Aspects of these reforms are desirable goals for all countries, but they do not necessarily generate and sustain growth or produce socially equitable outcomes.

Politics matters for poverty reduction

The protection of civic rights, active and organized citizens, and political parties that effectively engage the poor and other disadvantaged groups are all important for sustained progress towards poverty reduction. Most low-income countries have relied on the participatory frameworks of PRSPs to involve citizens in designing and implementing anti-poverty strategies. However, the consultative process adopted has generally failed to give citizen groups the power to effect real change or to get policy makers to deliver on agreed-upon goals. Many such groups typically feel that real decisions on important policies lie elsewhere. ...

Lessons from successful democracies suggest that effective strategies to combat poverty require that:

  • rights be institutionalized to allow citizens to organize and contest public policies as autonomous actors;
  • political parties are embedded within broad social coalitions that include the active participation of the poor, women and other disadvantaged groups;
  • bargaining regimes or social pacts are constructed that give groups voice and influence in holding corporations and states to account and in shaping development policies and outcomes; and
  • the democratic regime is sufficiently competitive to create uncertainties in electoral outcomes, allow for periodic changes in power and prevent ruling parties from becoming complacent.

Different countries have pursued divergent paths to achieve development. Most countries that have been successful in exploiting the benefits of globalization have adopted heterodox policies that reflected their national conditions, rather than fully embracing market-conforming prescriptions. ...

The global economic crisis has given added impetus to the calls from developing countries for greater policy space. This is a potentially important development, but it should not be reduced to issues such as less donor conditionality or the possibility of developing country governments adopting countercyclical policies. Policy space also means that countries and peoples should have the option to adopt different models of development in which issues of employment-centred growth and structural change, transformative social policy, and democratic politics that elevate the interests of the poor in policy making, figure prominently.

...


AfricaFocus Bulletin is an independent electronic publication providing reposted commentary and analysis on African issues, with a particular focus on U.S. and international policies. AfricaFocus Bulletin is edited by William Minter.

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