A book on eliminating poverty advocates integration of social and economic policy as the magic development pill.
The World Bank recently said there are 1.4 billion poor in the world. Of these, 455 million, or nearly half, are in India. Its estimate was based on a new poverty line of $1.25 a day.
Why does poverty not go away despite the billions spent on driving it away?
A human development economist, Santosh Mehrotra, who is an advisor in the Planning Commission, besides being one of the authors of the 11th Five-Year Plan, tries to find an answer in a new book, Eliminating Human Poverty.
The book, co-authored by economist Enrique Delamonica, says the fulcrum of efforts to remove poverty has to rest firmly in improvement of basic social services (BSS) and not just macro-economic growth. For high growth doesn’t translate into an improvement in the income of the poor. BSS — which include basic education, health, water, nutrition, reproductive health — should combine with economic growth, says the book.
Explaining the synergy between economic and social growth, the book says there is a GNP (gross national product) per capital growth with technological change as the engine, then there is poverty reduction in income terms which is determined by GNP per capital, asset distribution (through land reform, distribution of shares etc), distribution of services and provision of social security. The third element, it says, are BSS.
It says not all countries which made great strides in health and education achieved substantial or long-lasting reduction in poverty measured in income terms. Kerala and Sri Lanka are examples.
Neither element is necessary for advancement of the other but they help each other. Wherever the linkage is strong, there have been good results. The book takes nine sets of countries and finds that the economic growth was the highest in countries where the mortality rate of children less than five years old was the lowest. Hence it calls for an integration of social and economic policies to promote all objectives simultaneously rather than putting economic growth at a higher pedestal so that social outcomes appear to be at a discount. It advocates small land holdings as well as a boost to small village enterprises.
It cites the South-East Asian tigers to say that they had special policies for small enterprises (employing 10 to 15 people) and a significant share of employment today in developing countries is in micro enterprises (which have less than 10 employees).
Advocating an industrial policy aimed at reducing poverty, it says that contrary to the advice of international lending agencies, developing countries should seek strategic integration with the international economy. It supports FDI but cites China, which initially allowed FDI only in joint ventures. But the wider effect of FDI on the Chinese economy has been a boost to town and village enterprises sponsored by local governments. These grew as they were connected to the international markets.
While India sheds tears over big companies like Tatas and Posco which are struggling to get land for their factories and mines, maybe it is worthwhile to look at the smaller players who may ultimately lead the country out of the woods.
