Can Identifying the Causes of Poverty Give Insight into Eliminating Poverty?

1
Can Identifying the Causes of Poverty Give
Insight into Eliminating Poverty?

• IDEAs Conference Development Experiences and
  Policy Options for a Changing World
• Tsinghua University, Beijing 7 June 2007
• Jan Kregel
• Senior Scholar, Levy Economics Institute of Bard
  College
• Distinguished Professor, Center for Full
  Employment and Price Stability,
• University of Missouri, Kansas City

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How Does WB Measure Poverty?

• Surviving on less that 1.00 per day
• Why 1.00?
• We dont have an analytical measure of Poverty
• The mid-point of National Poverty Lines of 10
  Developing Countries chosen by the World Bank
• Expenditure in national currency reported in
  national household expenditure surveys
• Converted to US at PPP exchange rates

3
Poverty Reduction as Development Strategy

• NGOs Target Poverty
• Pro-Poor policies
• World Bank Targets Poverty
• The MDGs Target Poverty
• The IMG Targets Poverty
• The main tool of Policy is the Poverty Reduction
  Strategy

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We have to know what it is before we know what
causes it

• Like US Supreme Court on Pornography
• I know it when I see it
• The World Bank tells me what it is
• Governments Decide what it is
• NGOs decide what it is

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Alternative Measures?

• Physical
• Caloric Intake
• Basic Needs
• Social -- Demonstration Effect
• Political
• Universal Declaration of Human Rights
• Social Inclusion/Exclusion
• Economic
• Marginalisation
• Participation in the Production Process
• Self-Subsistence
• Are Indigenous Peoples in Poverty?

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How to Eliminate WB/MDGPoverty?

• GlobalWelfare Programme
• Moral Responsibility
• Official Development Assistance
• Income Transfers to Increase Incomes
• External Provision of Social-Medical Services
• Creates
• Aid Dependency
• Aid Fatigue
• Has not produced results

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But this does not tell us what Causes Poverty

• There are Poor People in Rich Countries
• There are Rich People in Poor Countries
• Is it an income distribution problem?
• Would redistribution make everyone poor?
• People in Rich Countries would still be richer
  than the People in Poor Countries
• Is it a Problem of the Level of Development?

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Linking Poverty and Development

• Poverty is neither a synonym for
  underdevelopment nor a cause of underdevelopment
  it is only more symptomatic of a more general
  problem.
• Poverty forms part of a culture. Most
  frequently the culture of poverty develops when a
  stratified social and economic system is breaking
  down or is being replaced by another
• Often it results from Imperial conquest in which
  the native social and economic structure is
  smashed and the natives are maintained in a
  servile colonial status, sometimes for many
  generations.
• The culture of poverty is not identical in all
  settings .it varies from place to place and from
  one era to another.
• Keith Griffin, Underdevelopment in Spanish
  America, Cambridge Massachusetts, MIT Press, 1969

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Globalisation and the Culture of Poverty

• Globalisation
• Insertion in the International Trade and
  Financial System
• Washington Consensus
• Introduction of Monoeconomic Policy
• Structural Adjustment Policies
• Market Friendly Policies
• Shifting from Government Provision to Individual
  Responsibility Market provision
• Profit Based Performance Criteria

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Globalisation, Development and Poverty

• Does poverty result from rapid integration into
  the global economy that dismantles the existing
  social and economic structure?
• Those without marketable skills are marginalised
  and become socially excluded?
• Joan Robinson What if the General Equilibrium
  model produces an equilibrium wage that is below
  subsistence?

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National Development Strategies

• Mandated in 2005 Global Summit Outcome
• To Include All Internationally Agreed Development
  Goals from the UN Conferences and Summits of the
  1990s
• To Move Beyond MDGs
• To Move Beyond PRSPs
• To Provide Alternative Approaches for real
  national policy space
• To see Poverty as part of the integral process of
  Economic and Social Development
• National Reponsibility for Poverty Reduction

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Major Addition to Development Goals -- Employment

• 2005 World Summit Paragraph on Employment
• High-level segment of the 2006 substantive
  session of the Economic and Social Council
  Ministerial Declaration
• Make full and productive employment and decent
  work for all, including for women and young
  people, a central objective of relevant national
  and international policies and national
  development strategies and to be part of efforts
  to achieve the internationally agreed development
  goals, including the Millennium Development
  Goals.

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Creating National Policy Space

• Fiscal Policy Space
• To support Social Safety Nets
• To support economic growth
• To support employment
• Monetary Policy Space
• Central Bank Policy supports Fiscal Policy
• Domestically directed interest rate policy
• Exchange Rate Policy
• Contribution of Foreign Investment

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National Policy Space requires Fiscal Sovereignty

• Is running a government fiscal surplus sound
  resource mobilsation policy?
• Government spending creates private sector assets
  in the banking system
• Taxation creates private sector debts to the
  government that must be financed with those
  assets
• If taxes exceed government spending the private
  sector is in net deficit, i.e. Insolvent
• We no longer use debtors prison as punishment
  just poverty
• If the private sector holds assets for other
  convenience purposes financial stability requires
  a government deficit over time equal to the
  private sectors demand for money balances
• Government Deficit is Required for Growth

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Domestic Policy Space requires Monetary
Sovereignty

• Government deficit spending increases unborrowed
  bank reserves
• Excess reserves drive interbank bid rates to zero
• To keep interest rates positive the government
  must borrow
• As borrower of last resort it can always fix the
  interest rate and the tenor at which it borrows
• Interest rates are thus not constrained by
  private sector willingness to buy government debt
  or the size of the deficit
• The government does not have to borrow or issue
  debt in order to deficit spend
• It follows that the government can always set the
  short term policy interest rate independently of
  the size of the deficit
• Did large government debt and government deficit
  cause interest rates to rise in Japan over the
  last 10 years?

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What are the Limits to Sovereignty?

• Servicing External Borrowing Creates Need for
  Negative Net Resource Flows
• Creates need for Emergency Liquidity
• Creates need for IMF programme
• Imposes short-term Structural Adjustment and
  externally determined changes in domestic
  economic and political structure
• Indonesia, Korea
• Argentina
• Leads to Increased Poverty
• National Monetary Sovereignty eliminates need to
  borrow externally mobilisation of domestic
  resources

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How to use policy space to support mobilisation
of domestic labour resources?

• If private sector development is insufficient to
  provide full employment
• Government takes responsibility to provide
  employment to all those willing and able to work
  at or marginally below the prevailing informal
  sector wage

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What does work mean?

• Different according to level of development
• Primary goals
• Maintain and improve skill level of the labour
  force basic educational skills
• Provide social safety net income maintenance
• Provide social inclusion for the
  unemployed/unemployable social services
• Meet the needs of female heads of households to
  combine work with family responsibilities
• Improve the well-being of society useful public
  works
• Eliminating the Culture of Poverty

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Can it be done?

• Argentina experience Jefes programme
• Education at all levels an integral part of the
  programme primary to occupational
• Interministerial cooperation Labour, Eduction
  and Social Development ministries cooperate in
  providing educational programme
• Promotes work practice and experience
• Provides vocational skills
• Integrates marginal communities
• Supports Gender Equality
• Creates entrepreneurial Skills
• Counters Culture of Poverty

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Is Jefes a relevant example?

• Verified examples of success
• Verified examples of fraud and corruption
• Depends heavily on local government for
  implementation
• Depends heavily on individuals
• Depends on Federal government for financing
• Constrained by government budget goals but need
  not be given monetary and fiscal sovereignty that
  Argentina currently possesses

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Jefes is not ELR

• The Jefes programme was close to the ELR proposal
  but was an emergency response to the crisis
• A suitably designed ELR can build on the success
  of Jefes
• It can be designed to integrate the MDGs as well
  as the other Internationally Agreed Development
  Goals to be included in the National Development
  Strategies mandated at the 2005 Global Summit
• It Can Contribute to the Elimination of the
  Culture of Poverty

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ELR as an MDG/Poverty Reduction programme

• A suitably designed ELR programme to provide
  employment can also be designed to satisfy
• MDG Goal 1 Eradicate Extreme Hunger and Poverty
• MDG Goal2 Universal Primary Education
• MDG Goal 3 Promote Gender Equality and Empower
  Women
• MDG 4 and 5 Reduce Child Mortality and Improve
  Maternal Health