Policies Aimed at Raising the Income of the Poor

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Policies Aimed at Raising the Income of the Poor

• Text extracted from
• The World Food Problem
• Leathers Foster, 2004

http//www.lastfirst.net/images/product/R004548.jp
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Poverty and Inequity

• Are poverty and inequity inevitable?
• Must there be an elite?
• In U.S. we are an elite
• Traditional values
• Dominate or be dominated
• Work hard to be among the elite
• Alternative is terrible
• Is inequity a moral good?
• Or morally unacceptable?
• How can inequity be diminished?
• To achieve a better life for everyone?

Elite
Poor
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The Hungry are Poor

• Policies to alleviate poverty
• Redistribute income or wealth from the rich to
  the poor
• Progressive taxation
• Land Reform
• Promote general economic growth

http//news.bbc.co.uk/2/hi/south_asia/3535018.stm
Bangladesh Garment Factory
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Taxation

• Progressive Taxation
• Wealthy pay greater percentage of income than
  poor
• Income tax
• Sales tax in developing world
• Poor often barter for goods
• Sales taxes come from wealthy
• To redistribute wealth
• Governments have to spend tax money on the poor

http//jetcityjimbo.com/awful_wonderful/photos/emm
asmarket.html
Bartering in Zaire outside of the taxable economy
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Inflation due to income elasticity of Demand

• If one rupee taken from top 5 in India
• Reduces food demand by .003 rupees
• If government gives the rupee to the poor in
  bottom 20
• Increases food demand by .58 rupees
• Therefore inflationary
• Market economy removes some of the benefit

http//www.tribalbazaar.com/merchadise/Pictures/w.
8.jpg
India market stall
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Tax land use value

• Tax on some large land owners small
• No incentive to farm efficiently
• If tax land use, inefficient farmers will be
  forced to sell
• Land redistributed without displacing good farmers

http//www.meridianholidays.com/Can_bali_sing_supe
r_holiday.html
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Minimum wage laws

• May help the poor
• Can be enforced in urban areas
• Results in mass migration to cities in developing
  countries
• May not help the poor
• Wait for a good job can take a long time
• Family undernourished while waiting for
  employment
• Employers motivated to substitute captial for
  labor
• Invest in machines
• Reduce number of jobs

http//www.globaleye.org.uk/secondary_summer/oncam
era/india-factory.html
Clothing Factory, India
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Hope for Land Reform

• Credited with helping reconstruction of Japan,
  Taiwan
• Inequity in land can be extreme
• Columbia 10 of owners controlled 80 of land
  (1988)
• Tenant farmers pay 50 to landlord
• If small farmers own land, motivated to
• Work long hours
• Invest in fences, irrigation
• Increase productivity

http//news.bbc.co.uk/2/hi/south_asia/2322387.stm
Tenant farmers, India
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Problems with land reform

• Socialist elimination of property ownership
  causes problems
• China
• Russia
• Land to the tiller reforms did not benefit
  poorest people
• Puru
• May reduce investment in agriculture by wealthy
• Afraid of losing land
• Policy may be anti-agricultural form of urban
  bias

http//www.thebigquestion.co.za/Default.aspx?tabid
743
Land Reform in South Africa
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Economic Growth

• Private sector must grow to provide jobs
• Government projects dont create jobs efficiently
• Per capita income in Taiwan
• 1960 1,200
• 1998 12,000
• Per capita income in Democratic Republic of
  Congo
• 1960 489
• 1998 197

http//www.globaleye.org.uk/secondary_summer/oncam
era/taiwan-factory.html
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How to promote growth

• Recommendations of World Bank and IMF
• High savings leading to increased capital stock
• Good macroeconomic policy
• High labor productivity
• Education
• Health
• Anti-poverty
• Adoption of new technology
• Market orientation

http//www.thenoelfoundation.org/pinternational.ht
ml
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Good Macroeconomic Policy

• Objectives
• Low inflation
• Encourages savings
• Keep central Bank out of political process
• More confidence in savings
• Low budget deficits
• Prevents printing more money and inflation
• Reduces borrowing by governments
• Stable exchange rates
• Attract foreign investors

http//news.bbc.co.uk/2/hi/programmes/from_our_own
_correspondent/1874755.stm
McDonalds in China
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Market Orientation

• Promote open and free trade
• reduce government distortion of supply and demand
• Assign and enforce property rights
• To increase ownership
• Motivates productivity
• Eliminate corruption

http//bara.arizona.edu/research/pro-ranching-mexi
co.htm
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Agricultural Development

• Promote growth of the agricultural sector
• Increased productivity
• Stimulates economic growth
• Low food prices
• allow low wages to be paid in factories
• but workers live well
• Can buy more non-food items
• Stimulates employment

http//www.provost.uncc.edu/LatinoInitiative/Photo
s.htm
Market stall, Mexico
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Globalization

• Definition increasing integration of countries
  in the world economy
• Opening borders
• Adopting macroeconomic policies
• in order to get IMF loans
• Adopting market-oriented agricultural and
  industrial policies
• In order to get IMF loans
• Reducing restriction on foreign investment
• Adopting labor and environmental policies that
  will attract foreign investment

http//www.uwm.edu/Dept/CIE/Resources/globalizatio
n/images/globefull169.gif
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http//www.foreignpolicy.com/wwwboard/g-index.php
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Criticisms of Globalization

• Policies encourage
• Low wages
• Poor working conditions
• Poor environmental quality
• Fiscal policies imposed by IMF
• Reduce health programs
• Reduce education
• Reduce poverty alleviation programs
• IMF policies are antidemocratic
• IMF can countermand decisions by democratic
  governments
• Multinational corporations benefit
• At expense of ordinary people

http//www.zazona.com/ShameH1B/JobDestructionHumor
.htm
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http//www.foreignpolicy.com/wwwboard/g-index.php
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http//www.foreignpolicy.com/wwwboard/g-index.php
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Joseph Stiglitz

• Nobel Prize in economics 2002
• Policies imposed by IMF
• dont take into account special circumstances of
  each country
• Private sector solutions
• require infrastructure that may not be there
• Globalization policies
• need to be reformed to help poor countries grow

http//www.cigionline.ca/about/ibg.php?member41