A V Rajwade: Compassion for the poor

WORLD MONEY

Watering down safety nets at home is going hand in hand with global poverty removal programmes.

One sees two opposite streams in the political economy of the industrial countries, running simultaneously. On the one hand, several governments seem to be watering down the social safety nets and services put in place over a long period.

In a way, the provision of free education, medical care, unemployment compensation, and so on were a direct response on the part of the capitalist democracies, to Karl Marx's Communist Manifesto.

Indeed, those who managed to co-opt the Manifesto's goals remained as capitalist societies, and those who did not, or could not, like Russia, became Marxist.

In recent years, as the spectre of communism has ceased to haunt capitalist society, the political compulsions underlying these social services are getting watered down.

Even Germany is seriously considering liberalisation of job protection laws "" it seems to have realised that laws protecting employment are actually barriers to creation of new employment.

On the other hand, recent years have witnessed an outpouring of manifestos, reports and plans to remove dire poverty in the developing world, in sharp contrast to the 1990s.

The then prevalent "aid fatigue" in the richer countries was the result partly of fiscal pressures; partly of a growing feeling that aid too often meant a transfer of resources from the worse off in rich countries (through indirect taxation) to the relatively better off but corrupt politicians, bureaucrats and middlemen in the poor countries; partly also of the changed geopolitics: after the collapse of the Soviet Union there was no need to woo the developing world with aid.

The United Nations Millennium Project seems to have changed the aid climate somewhat: it aims at reducing the number of extremely poor, that is, those with incomes of less than $1 a day and lacking basic services by half by 2015.

It is an ambitious target and Gordon Brown, UK's chancellor of the exchequer, seems to be passionately committed to it. Coincidentally, the UK currently chairs the G-7 group and Brown is using that forum to push the agenda.

A G-7 (or G-8?) summit is scheduled for later this year on the theme of poverty reduction.

The Commission on Africa appointed by the UK government has come out with its report last week. Poverty seems to be such a fashionable subject that apparently even the World Economic Forum meeting earlier this year in Davos was dominated by poverty related issues.

Jeffrey Sachs, who is heading the UN's Millennium Project, has recently come out with a book The End of Poverty, a passionate appeal to the industrial countries to raise development aid to 0.7 per cent of GDP, a goal that has been accepted long time ago but is nowhere near implementation: the