unit 1: poverty reduction, development, and the … one: poverty reduction, development, and the...

Unit One: Poverty Reduction, Development, and the Millennium Development Goals

Unit Information 2

Unit Overview 2 Unit Aims 2 Unit Learning Outcomes 2

Key Readings 3

Further Readings 4

References 5

1.0 Towards poverty reduction: the evolution of international development paradigms 7

Section Overview 7 Section Learning Outcomes 7 1.1 Development as modernisation and economic growth 7 1.2 Human development 9 1.3 Structural adjustment 11 1.4 Development as poverty reduction 12 Section 1 Self Assessment Questions 16

2.0 Millennium Development Goals 17

Section Overview 17 Section Learning Outcomes 17 2.1 What are the Millennium Development Goals (MDGs)? 17 2.2 Implementing the MDGs at national level 22 2.3 Critiques of the MDGs 24 2.4 What happens after 2015? 27 Section 2 Self Assessment Questions 29

3.0 Growth and poverty reduction 30

Section Overview 30 Section Learning Outcomes 30 3.1 Beyond growth? 30 Section 3 Self Assessment Questions 34

Unit Summary 35

Unit Self Assessment Questions 36

Key Terms and Concepts 37

P519 Understanding Poverty Unit 1

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Unit Information

Unit Overview In September 2000, the representatives of 189 countries, including 147 heads of state, unanimously approved the so-called Millennium Declaration, which, inter alia, committed them to the goal of poverty reduction in the new millennium. In September 2001, eight Millennium Development Goals (MDGs) and their associated targets and indicators were also endorsed by the UN General Assembly as the international framework for planning and monitoring progress on poverty reduction. Poverty reduction remains the primary objective of international development efforts and features in the policy statements and pronouncements of many developing country governments. This unit places the objective of poverty reduction in historical context, by charting the evolution of development paradigms, and looking at the process through which the MDGs themselves came into being. It then critically examines the MDGs as an instrument for catalysing global poverty reduction efforts and concludes by discussing the role of economic growth in poverty reduction.

Unit Aims • To develop a critical understanding of the main development paradigms.

• To present and assess critically the Millennium Development Goals (MDGs).

• To evaluate the centrality of economic growth to poverty reduction objectives.

Unit Learning Outcomes By the end of this unit, students should be able to:

• summarise the evolution of major development approaches over recent decades and explain how the MDGs arise from this history

• discuss the major strengths and weaknesses of the Millennium Development Goals


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KEY READINGS

Collier P (2007) Falling behind and falling apart: the bottom billion. In: The Bottom Billion. Oxford University Press, pp. 3–13.

Introduces the concept of the ‘bottom billion’.

pp. 8—12 explain why the rest of the book focuses on means to stimulate economic growth in bottom billion countries.

Hulme D (2007) Global Public Policy and the Millennium Development Goals (MDGs): A Short History of the World’s Biggest Promise. Paper presented to the ‘Wellbeing in International Development’ Conference, 28–30 June 2007, Bath.

This paper documents the development of the MDGs in considerable detail, starting around 1990. Although not ‘short’, it can be read quite quickly to gain the main points and provides valuable understanding of the motivations driving MDG development. Section 2 can be skipped.

Vandemoortele J (2007) MDGs: misunderstood targets. In: IPC Collection of One Pagers. International Policy Centre for Inclusive Growth, Brasilia, Brazil, p. 28.

Available from: http://www.ipc-undp.org/pub/IPCOnePagerBook.pdf

A thoughtful response to Vandermoortele is provided by Hamid Tabatabai on page 33 of the same volume.

http://www.ipc-undp.org/pub/IPCOnePagerBook.pdf


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FURTHER READINGS

Chronic Poverty Research Centre (2007) Chronic Poverty and the MDGs. Policy Brief No 6, Chronic Poverty Research Centre.

Available from: http://www.chronicpoverty.org/pubfiles/CPRC_PB6.pdf

This brief analyses how the MDGs relate to chronic poverty. It voices concern that a rigid interpretation of the MDGs could encourage a focus on those ‘easy to reach’, and away from extreme and chronic poverty. The brief asks how the MDGs can be best used to prepare for the longer-term task of eradicating poverty beyond 2015 and highlights the crucial importance of human development and social protection for reducing chronic poverty.

Haughton J, Khandker S (2009) Handbook on Poverty and Inequality. The World Bank, Washington DC, pp. 162–169.

Available from: http://go.worldbank.org/I0Y1NQB150

The entire e-book can be downloaded. The pages selected here summarise some of the arguments on the centrality of growth to poverty reduction, albeit largely from a World Bank perspective.

Sachs J (2005) A global family portrait. In: The End of Poverty. Penguin Press, pp. 5–25.

Sachs J (2005) The spread of economic prosperity. In: The End of Poverty. Penguin Press, pp. 25–50.

Copies of this book can be acquired cheaply on Amazon. Like Collier (2007), it is an easy read. As will be discussed below, Sachs and Collier agree on a number of key points, but also disagree on others.

Chapter 1 (pp. 5—25) provides cameo descriptions of livelihoods of poor people and communities at different stages of development. In doing so, it illustrates several of the themes that will be picked up in this and subsequent units.

Chapter 2 (pp. 25—50) provides a brief historical overview of growth processes.

Sumner A (2010) Global Poverty and the New Bottom Billion: What if Three-Quarters of the World’s Poor Live in Middle-Income Countries? IDS Working Paper, Brighton.

Available from: http://www.ids.ac.uk/files/dmfile/GlobalPovertyDataPaper1.pdf

Questions the argument advanced especially by Collier (2007) that the challenge of poverty reduction lies increasingly in dealing with conflict zones and failed states. If most of the world’s poor live in middle-income countries, then we should be equally concerned with issues of inequality in the midst of growth. Don’t get too bogged down in how countries are categorised, but do reflect on the central fact highlighted by the paper’s title!

http://www.chronicpoverty.org/pubfiles/CPRC_PB6.pdf

http://go.worldbank.org/I0Y1NQB150


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REFERENCES

Baulch B (2004) Aid Distribution and the MDGs. CPRC Working Paper 48.

Collier P (2007) Falling behind and falling apart: the bottom billion. In: The Bottom Billion. Oxford University Press, pp. 3–13.

Chronic Poverty Research Centre (2007) Chronic Poverty and the MDGs. Policy Brief No 6, Chronic Poverty Research Centre.

Available from: http://www.chronicpoverty.org/pubfiles/CPRC_PB6.pdf [Accessed 1 May 2013]

Colclough C, Manor J (eds) (1991) States or Markets? Neo-liberalism and the Development Policy Debate. Clarendon Press, Oxford.

Diao X, Hazell P, Resnick D, Thurlow J (2007) The Role of Agriculture in Development: Implications for Sub-Saharan Africa. Research Report 153, IFPRI, Washington DC.

Dollar D, Kraay A (2001a) Growth is Good for the Poor. Policy Research Working Paper Series 2587, The World Bank, Washington DC.

Available from: http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2001/05/11/000094946_01042806383524/Rendered/PDF/multi0page.pdf [Accessed 1 May 2013]

Dollar D, Kraay A (2001b) Trade, Growth and Poverty. Policy Research Working Paper 2615, World Bank, Washington DC.

Available from: http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2002/08/23/000094946_02082304142939/Rendered/PDF/multi0page.pdf [Accessed 1 May 2013]

Eisenstadt S (1966) Modernisation: Protest and Change. Prentice-Hall, New Jersey.

Fukuda-Parr S (2008) Are the MDGs Priority in Development Strategies and Aid Programmes? Only Few Are! Working Paper 48, UNDP International Poverty Centre, Brasilia, Brazil.

Available from: http://www.eadi.org/fileadmin/MDG_2015_Publications/IPCWorkingPaper48.pdf [Accessed 1 May 2013]

Hulme D (2007) Global Public Policy and the Millennium Development Goals: a Short History of the World’s Biggest Promise. Paper presented to the ‘Wellbeing in International Development’ Conference, 28–30 June 2007, Bath.

Available from: http://www.welldev.org.uk/conference2007/parallel-2.htm [Accessed 1 May 2013]

http://www.chronicpoverty.org/pubfiles/CPRC_PB6.pdf

http://ideas.repec.org/s/wbk/wbrwps.html

http://ideas.repec.org/s/wbk/wbrwps.html

http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2001/05/11/000094946_01042806383524/Rendered/PDF/multi0page.pdf






http://www.eadi.org/fileadmin/MDG_2015_Publications/IPCWorkingPaper48.pdf

http://www.welldev.org.uk/conference2007/parallel-2.htm


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Humberto Lopez J (2004) Pro-Poor Growth: a Review of What we Know (and of What we Don't). The World Bank (PRMPR).

Available from: http://siteresources.worldbank.org/INTPGI/Resources/15163_ppg_review.pdf [Accessed 1 May 2013]

Kakwani N, Pernia E (2000) What is pro-poor growth? Asian Development Review 18 1–16.

Oxfam (2000) Growth with Equity is Good for the Poor. Oxfam Briefing Paper, Oxfam, Oxford.

Available from: http://policy-practice.oxfam.org.uk/publications/search?q=Growth%20with%20Equity%20is%20Good%20for%20the%20Poor;sort=publication_date [Accessed 1 May 2013]

Ravallion M (2005) Inequality is Bad for the Poor. Policy Research Working Paper, The World Bank WPS3677, The World Bank, Washington DC.

Ravallion M, Chen S (2004) China's (uneven) Progress against Poverty. Policy Research Working Paper No 3408, The World Bank, Washington DC.

Sachs J (2005) The End of Poverty. Penguin Press.

Sumner A (2010) Global Poverty and the New Bottom Billion: What if Three-Quarters of the World’s Poor Live in Middle-Income Countries? IDS Working Paper, Brighton.

UN (undated) Millennium Development Goals Indicators: The Official United Nations Site for the MDG Indicators. United Nations.

Available from: http://mdgs.un.org/unsd/mdg/Host.aspx?Content=Indicators/OfficialList.htm [Accessed 1 May 2013]

UN Millennium Project (2005) Investing in Development. A Practical Plan to Achieve the Millennium Development Goals. Millennium Project Report.

Available from: http://www.unmillenniumproject.org/reports/index.htm [Accessed 1 May 2013]

UNDP (1996) Human Development Report 1996. Oxford University Press, New York, Oxford.

Vandemoortele J (2007) MDGs: misunderstood targets. In: IPC: Collection of One Pagers. International Policy Centre for Inclusive Growth, Brasilia, Brazil, p. 28.

Available from: http://www.ipc-undp.org/pub/IPCOnePagerBook.pdf [Accessed 1 May 2013]

White H, Anderson E (2000) Growth vs Redistribution: Does the Pattern of Growth Matter? Mimeo, Institute of Development Studies, University of Sussex, Brighton.

http://siteresources.worldbank.org/INTPGI/Resources/15163_ppg_review.pdf

http://policy-practice.oxfam.org.uk/publications/search?q=Growth%20with%20Equity%20is%20Good%20for%20the%20Poor;sort=publication_date



http://mdgs.un.org/unsd/mdg/Host.aspx?Content=Indicators/OfficialList.htm

http://www.unmillenniumproject.org/reports/index.htm

http://www.ipc-undp.org/pub/IPCOnePagerBook.pdf


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1.0 TOWARDS POVERTY REDUCTION: THE EVOLUTION OF

INTERNATIONAL DEVELOPMENT PARADIGMS

Section Overview In September 2000, the representatives of 189 countries, including 147 heads of state, unanimously approved the so-called Millennium Declaration, which, inter alia, committed them to the goal of poverty reduction in the new millennium. In September 2001, eight Millennium Development Goals and their associated targets and indicators were also endorsed by the UN General Assembly as the framework for planning and monitoring progress on poverty reduction. Poverty reduction remains the primary objective of international development efforts and features in the policy statements and pronouncements of many developing country governments, although the extent of commitment to poverty reduction as a public policy goal can be quite shallow (Hulme 2007).

Poverty reduction came to prominence as the primary objective of international development efforts during the 1990s. In this section, we chart the recent history of development objectives and ideologies, illustrating that development narratives are dynamic. Whilst we might expect poverty reduction to remain central to international development narratives and within aid-dependent countries at least until 2015, a future shift of emphasis is also predicted.

Section Learning Outcomes By the end of this section, students should be able to:

• understand and critique different development theories

• describe how past development theories are continuing to shape current approaches to poverty reduction

1.1 Development as modernisation and economic growth

The post-Second World War world order

The events leading up to the Second World War and the war itself had a profound impact on political and economic structures. The main impact was the emergence of a bi-polar world order, with the rise of a communist power, the USSR, on the one side and the United States as leader of the liberal capitalist system on the other. The US had emerged from the war as the strongest economy, enjoying rapid growth and capital accumulation and saw itself as leader of the emerging monetary and economic system in the capitalist world.

A major early objective of the US was to assist Europe’s recovery and lay the foundations of a new economic and political order, while containing the spread of communism in Western Europe. It was felt that institutions were needed that were able to create functioning, liberal market economies and order the economic, social, and political development in a post-war world. Amongst other things, the Bretton Woods conference of 1944 saw the establishment of the International Monetary Fund (IMF), and the International Bank for Reconstruction and Development (IBRD or


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World Bank). Initially, these institutions were tasked with providing the loans, credits, and investment necessary for Europe’s post-war reconstruction and preventing a backlash into depression. As former colonies of European powers achieved independence from the 1950s onwards, these two institutions started to get more involved in broader international development.

Meanwhile, the United Nations (UN) came into existence in October 1945 with the goal of creating a wider and more permanent system of global security. In addition to maintaining peace and security, other important objectives included developing friendly relations among countries based on respect for the principles of equal rights and self-determination of peoples; achieving worldwide co-operation to solve international economic, social, cultural, and humanitarian problems; respecting and promoting human rights; and serving as a centre where countries could co-ordinate their actions and activities toward these various ends. To help it carry out its mandate, the UN established a number of specialised agencies, including the World Health Organization (WHO), the International Labour Organisation (ILO), United Nations Educational, Scientific and Cultural Organization (UNESCO), United Nations Children’s Fund (UNICEF), United Nations Development Programme (UNDP), and the International Atomic Energy Authority (IAEA). Most of these were established around the end of the Second World War, for example, the ILO and UNESCO in 1944, WHO in 1946, and IAEA in 1957.

For much of the past half century, the World Bank and IMF on the one hand and the UN system (led by UNDP) on the other, have stood as the two main poles of the international development system. At times, the relationship between them has been principally one of tension, with the Washington institutions emphasising market-led economic growth and the UN system championing human and social development. Arguably, however, the Millennium Development Goals represent an attempt at a consensus between them.

Development as growth and modernisation

Post-war development theories were dominated by the idea of development as economic growth and material well-being. With it came a strong focus on the state: The belief that growth and prosperity would come if the market was left on its own had been shattered by the Great Depression and mass-unemployment of the 1930s. Furthermore, the apparent success of state planning in the early years in the USSR led to a rethinking about the role of the state in the economy.

The European Recovery Programme, an aid programme for Europe, allowed reconstruction of war-damaged industries. In most Western countries, growth picked up rapidly and was driven by the state and the industrial sector. The path of growth was assumed to be a linear one: state intervention and aid would encourage savings and investment for technological innovation. The resulting increase in productivity would absorb the workforce from low-productivity sectors (agriculture) to the industrial sector and thus accelerate industrialisation and fuel growth. Progress in this model was – and to a large extent, continues to be – measured in terms of growth in the size of national economies and per capita income.

The end of colonialism and the foundation of independent nation states reinforced the notion of development as growth and modernisation. The rapid recovery of post-war Europe had led to widespread optimism and the firm belief that the newly independent states could copy the example of Europe’s reconstruction. Emulating


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‘modern’ Western societies, so it was believed, would lead developing countries out of poverty and allow them to catch up with the developed world. It was widely assumed that development could only happen if traditional values were replaced with modern ones.

By ‘traditional’ values modernist theorists meant:

• people are oriented to the past and not to the future

• economic, political, and legal relationships are dominated by kinship

• an emotional, superstitious, and fatalistic approach to the world

Contrast these values with what are assumed to be modern values.

• progress matters more than traditions

• an individual’s position in society depends on personal achievement rather than kinship ties

• modern people are forward looking and have a strong entrepreneurial spirit

Hence, modernisation implied a change in the value system. The West was seen as the blueprint for development and modernisation was regarded as ‘the process of change towards those types of social, economic, and political systems that have developed in Western Europe and North America’ (Eisenstadt 1966 p. 1). Modernisation theory underpinned the idea of development as growth, with modernisation defined as a linear path towards a developed industrial society. Economic development through industrial transformation would lead to economic growth, allowing poorer countries to catch up with industrial countries. The resulting growth theories assumed that wealth generated through economic growth would trickle down and eventually benefit all segments of society.

To what extent are these ideas still prevalent in a developing economy or society with which you are familiar?

1.2 Human development By the 1970s there was a change in the dominant international development paradigm, championed by the United Nations agencies. There was growing concern that economic growth would not necessarily trickle down to poorer segments of the population. The focus on economic growth was challenged by people who argued that growth in simple GDP terms may not eradicate poverty, but instead exacerbate it by sharpening divides within society.

Basic needs

As a result, alternative approaches emerged that sought to supplement economic growth with provisions to redress the inequitable distribution of wealth and resources. The role of the state was no longer seen as just promoting the creation of wealth. Instead, it was argued that the state had a moral obligation to fulfil the basic needs of its population. The basic needs approach that came to prominence in the mid-1970s emphasised human needs, which were viewed in terms of human rights.


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This contrasted with previous technical discussions of growth rates, saving rates etc, which had focused on the means (ie growth) rather than the end (ie well-being) of development.

What basic needs are we talking about? Although the content of the bundle of goods and services that satisfy basic needs varies from one country (and proponent) to another, there is a common core that includes:

• health

• education

• nutrition

• drinking water of adequate quality

• sanitation

• housing

Redistribution with growth

Amongst economists, the basic needs approach was accompanied by the concept of ‘redistribution with growth’. The focus shifted from investing in technology to investing in people. The idea behind redistribution with growth was that, by investing in human development, governments would still invest in their productive capacity.

Basic Needs theories had three main elements: Incomes + Public Services + Participation (UNDP 1996):

• In countries with a labour surplus, efficient labour-intensive production should be stimulated so as to increase incomes.

• The public sector had a key role in reducing poverty through involvement in the provision of mass education, safe water, family planning, and health services.

• Beneficiary participation was important in the planning and delivery of interventions.

In practice, many governments and agencies focused on the delivery element without sufficient attention being paid to increasing incomes or improving levels of participation. The result tended to be heavy involvement of the public sector in top down schemes which were characterised as ‘count, cost, and deliver.’ (Count the poor, cost the bundle of services that were needed, and deliver it to them).

The basic needs approach tended to focus on material rather than non-material needs and aimed at satisfying needs rather than creating new opportunities for the poor. It was accompanied by an expansion in large-scale infrastructure projects, mainly financed through foreign borrowing.

Is there a trade-off between accelerated economic growth and the promotion of human development objectives, such as health and education?


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Investing heavily in social sectors means that there is less capital available in the economy for alternative investments. In the short term, one might expect to see lower production levels. However, in the long run, it was expected that better education, nutrition, and health for the population would reduce birth rates, increase the productivity of labour, enable people to respond to change in a more proactive manner, and create a more stable political environment, all of which would be good for growth.

1.3 Structural adjustment In practice, the environment for growth became increasingly difficult during the 1970s. The two OPEC-inspired oil price rises of 1973 and 1979 not only raised the price of oil (a major import commodity for many countries), but also led to a global economic slowdown which, in turn, reduced demand for developing country exports.

The second oil price rise had particularly severe impacts on many developing countries. It further ignited inflationary pressures in developed economies, leading to rapid rises in interest rates, which hugely increased the cost both of new capital and of debt repayment for developing countries that had borrowed heavily from commercial capital markets during the 1970s. In 1982, Mexico declared its inability to repay its debts, triggering an international debt crisis. Furthermore, the impact on commodity prices of the global recession that followed the 1979 oil price rise was reinforced by decisions taken during the 1980s to terminate (or not renew) a number of international commodity agreements that had supported the prices of key export commodities such as coffee and cocoa.

However, this difficult external environment was not the only factor held responsible for the poor growth performance of many developing countries by the start of the 1980s. In addition, neoliberal economic ideologies had gained a new prominence particularly in the US and the UK. These blamed poor economic performance, in both developed and developing economies, on excessive state intervention. According to the International Monetary Fund and World Bank, economic problems were primarily caused by inappropriate policies such as:

• excessive government expenditure, characterised by an inefficient, bloated bureaucracy

• inappropriate state intervention (eg price subsidies on consumer goods)

• overvalued exchange rates (aimed at reducing the costs of imports)

They saw the solution to these problems in liberal economic models, which emphasised minimal interference by government in the economy. The state came to be seen as an obstacle rather than an enabler of growth, so neoliberal economists called for the minimal state.

‘If there were to be a single statement which symbolised the fundamental message of neo-liberalism, it would be this: in settling matters of resource allocation, imperfect markets are better than imperfect states’

Source: Colclough and Manor (1991) p. 7.


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The debt crisis and economic difficulties of many developing countries, particularly in Latin America and Africa, gave new power to the IMF and World Bank. Their lending carried new conditions, under which borrower governments were expected to undertake economic stabilisation policies. These included

• fiscal policies preoccupied with small deficits (achieved, inter alia, through scaling back of investment in infrastructure, social services, and safety nets) in order to balance budgets and repay debts

• monetary policies focused on achieving low inflation targets

• devaluation of overvalued exchange rates and achievement of full exchange rate convertibility

Economic stabilisation was then accompanied by structural reforms within the economy, dominated by privatisation of state-owned enterprises and deregulation of markets, intended to promote growth.

This period thus witnessed both a change in the influence of the main international development actors – from leadership by UN agencies in the 1970s to the IMF and World Bank in the 1980s – and a dramatic change in development strategies – from an emphasis on state-led development to market-led. Growth returned as the main imperative of development, in part a response to the poor performance since the late 1970s and in part driven by the need to repay debts. However, arguably there was also some reversion of focus to the means (market-led growth) rather than the end of development.

There has been much discussion about the impact of such adjustment programmes on developing states. Whereas some argue that structural adjustment has worsened poverty by curbing essential social services and food subsidies for the poor, others contend that the costs of non-adjustment would have led to even more poverty. A major critique is that, rather than promoting growth, over-zealous stabilisation policies undermined the growth prospects of countries pursuing IMF stabilisation programmes.

1.4 Development as poverty reduction Even though poverty had always been part of the development agenda, it was only in the 1990s that poverty reduction became the central focus of international development thinking. This shift may be attributed to

• disappointment with the initial outcomes of structural adjustment programmes

• a realisation that, in the context of highly imperfect markets, any growth that did occur could not be assumed to trickle down to poor groups, some of whom had been disadvantaged by reductions in social spending as a result of economic stabilisation and structural adjustment

The World Bank itself signalled a new focus on poverty reduction with the publication of its 1990 World Development Report, simply entitled Poverty. In the same year, the first UNDP Human Development Report was published, giving renewed prominence to notions of human development that had largely disappeared from view during the 1980s. In both of these reports, access to social services like health and education was seen once again as being vital to poverty reduction.


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The impending end not just of the 20th century but of a millennium as well, also focused minds. More than four decades of development strategies since the Second World War had not been able to eradicate poverty and inequality. Despite impressive progress in living standards at the end of the 20th century, in many parts of the world life expectancy remained low, child mortality high and food insecurity was still widespread. It was felt that, rather than focusing solely on economic growth, addressing these gross inequalities should be the raison d’être of development policies. Section 2 examines how these ideas came to shape the Millennium Development Goals.

Finally, as the 1990s progressed, ‘mainstream’ international development thinking also came to recognise (once again) an increased role for the state in economic development.

This role was not identical to that advocated in the 1970s, but covered

• the provision of many basic social services, although the possibility and even desirability of private sector participation was also recognised

• creating the conditions (through macroeconomic policies, infrastructure provision, regulation, and, increasingly, forms of public–private partnership) for private sector expansion and market development

Based on the preceding sections and any existing knowledge of the various development paradigms, consider where you would place the following on the chart below:

– economic modernisation

– basic needs

– redistribution with growth

– structural adjustment

– Millennium Development Goals (if you have some prior knowledge)


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Answer.

Precise locations on the chart can be debated. However, we suggest the following rough plotting. The arrows show shifts in international development paradigms over time.

Looking forward

It is always risky to make predictions. However, whilst we might expect poverty reduction to remain central to international development narratives and within aid-dependent countries at least until 2015, looking to the future, the course authors suggest that the next move might be back towards economic modernisation. Factors that might drive this include

• an increasing emphasis on national ownership of development priorities, even in aid-dependent countries

• the growing influence of Asian countries in international relations, including as trading partners (and, in some cases, donors) for countries in Africa and Latin America. Whilst changing international development paradigms have exerted a big influence over policies in Africa and Latin America, where many countries have been highly aid-dependent, the larger Asian economies have continued to pursue their own path of economic growth and modernisation, with success that can no longer be ignored

• the fact that economic growth and modernisation appeals to the interests of both national elites and the growing middle classes (as well as hopefully delivering benefits to poorer groups, as witnessed in Asia), whereas an emphasis on poverty reduction suggests that their interests should be secondary to those of poorer citizens


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Can you see any evidence of these tendencies in a developing country with which you are familiar?

If there turns out to be any validity to this prediction, a final provocative thought is that, whilst international development narratives have evolved considerably over time, the priorities of domestic political elites (where they are revealed) have been much more stable.


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Section 1 Self Assessment Questions

uestion 1

What problems do you see with the modernisation theory?

uestion 2

Which of the following are generally true statements?

(a) Modernisation theorists believe in the importance of traditional values to achieve economic development.

(b) The Basic Needs approach focuses on human rather than productive development.

(c) Privatisation and deregulation are at the centre of structural adjustment programmes.

(d) In the 1990s poverty reduction came to be seen as the ultimate goal of development.

Q

Q


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2.0 MILLENNIUM DEVELOPMENT GOALS

Section Overview This section will provide you with an understanding of how different concepts, such as monetary poverty and the human development approach, have shaped the MDGs. We then look at the goals and their associated targets and consider a range of criticisms that have been levelled at the MDGs. Finally, as the 2015 end-date for the MDGs rapidly approaches, we briefly consider debates as to what, if anything, should replace the MDGs after this date.

Section Learning Outcomes By the end of this section, students should be able to:

• be familiar with the Millennium Development Goals

• formulate some of the challenges developing countries face in meeting the targets

• evaluate critically the relevance of the MDGs for national development programmes

2.1 What are the Millennium Development Goals (MDGs)? The MDGs have been described as ‘the world’s biggest promise’ to end poverty (Hulme 2007). First set out in 2001, following the Millennium Declaration of the United Nations Millennium Assembly in September 2000, the MDGs are a global framework to shape the planning and monitoring of development efforts, particularly in low income and developing countries. They suggest that such countries should strive to achieve a number of quantified goals to reduce extreme poverty, disease, and deprivation by 2015.

2.1.1 MDGs, targets, and indicators

This is an overview of the eight MDGs, targets and a selection of important indicators. The original list of MDGs as adopted in 2001 are presented in normal font. The four new targets and associated indicators, added in 2006—2007, are presented in italics.

(1) Eradicate extreme poverty and hunger

Target 1A: Halve, between 1990 and 2015, the proportion of people whose income is less than $1 a day

Target 1B: Achieve full and productive employment and decent work for all, including women and young people (added in 2007)

Target 1C: Halve, between 1990 and 2015, the proportion of people who suffer from hunger

Selected key indicators (responsibilities for monitoring in brackets):

– Proportion of population below $1 (PPP) per day (World Bank)

– Poverty gap ratio (World Bank)

– Share of poorest quintile in national consumption (World Bank)


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– Prevalence of underweight children under 5 years of age (WHO/UNICEF)

– Share of population below minimum level of dietary energy consumption (FAO)

– Employment-to-population ratio

– Proportion of employed people living below $1 (PPP) per day

(2) Achieve universal primary education

Target 2: Ensure that, by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling

Selected key indicators (all monitored by UNESCO):

– Net enrolment ratio in primary education

– Proportion of pupils starting grade 1 who reach grade 5

– Literacy rate of 15—24-year-olds, women and men

(3) Promote gender equality and empower women

Target 3: Eliminate gender disparity in primary and secondary education preferably by 2005 and in all levels of education no later than 2015


– Ratio of girls to boys in primary, secondary, and tertiary education (UNESCO)

– Share of women in wage employment in the non-agricultural sector (ILO)

– Proportion of seats held by women in national parliament (IPU)

(4) Reduce child mortality

Target 4: Reduce by two-thirds, between 1990 and 2015, the under-5 five mortality rate

Selected key indicators (all monitored by WHO/UNICEF):

– Under-five 5 mortality rate

– Infant mortality rate

– Proportion of 1-year-old children immunised against measles

(5) Improve maternal health Target 5A: Reduce by three-quarters, between 1990 and 2015, the maternal mortality ratio

Target 5B: Achieve, by 2015, universal access to reproductive health (added in 2007)

Selected key indicators (all monitored by WHO/UNICEF):

– Maternal mortality ratio

– Contraceptive prevalence rate

– Adolescent birth rate

(6) Combat HIV/AIDS, malaria, and other diseases

Target 6A: Have halted by 2015 and begun to reverse the spread of HIV/AIDS

Target 6B: Achieve by 2010 universal access to treatment for HIV/AIDS for all those who need it (added in 2007)

Target 6C: Have halted by 2015 and begun to reverse the incidence of malaria and other diseases


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– HIV prevalence among 15—24-year-old pregnant women (UNAIDS, WHO, UNICEF)

– Ratio of orphans to non-orphans aged 10—14 who are attending school (UNAIDS, WHO, UNICEF)

– Prevalence and death rates associated with malaria (WHO)

– Prevalence and death rates associated with tuberculosis

– Proportion of population with advanced HIV infection with access to antiretroviral drugs

(7) Ensure environmental sustainability

Target 7A: Integrate the principles of sustainable development into country policies and programmes; reverse loss of environmental resources

Target 7B: Significantly reduce the loss of biodiversity by 2010 (added in 2007)

Target 7C: Reduce by half the proportion of people without sustainable access to safe drinking water

Target 7D: Achieve significant improvement in the lives of at least 100 million slum dwellers, by 2020


– Proportion of land area covered by forest (FAO)

– Ratio of area protected to maintain biological diversity to surface area (UNEP-IUCN)

– GDP per unit of energy use (UNSD, IAEA, World Bank)

– Proportion of population with sustainable access to improved water source, urban and rural (WHO, UNICEF)

– Proportion of urban population with access to improved sanitation (WHO, UNICEF)

– Proportion of households with access to secure tenure (HABITAT)

(8) Develop a global partnership for development

Target 8A: Develop further an open, rule-based, predictable, non-discriminatory trading and financial system

Target 8B: Address the special needs of the least developed countries

Target 8C: Address the special needs of landlocked countries and small island developing states

Target 8D: Deal comprehensively with the debt problems of developing countries

Target 8E: In co-operation with pharmaceutical companies, provide access to affordable essential drugs in developing countries

Target 8F: In co-operation with the private sector, make available the benefits of new technologies, especially information and communications


– Proportion of total bilateral, sector-allocatable official development assistance (ODA) to basic social services

– Proportion of total developed country imports from developing countries and LDCs, admitted free of duties

– Average tariffs imposed by developed countries on agricultural products and textiles and clothing from developing countries


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– Agricultural support estimate for OECD countries as a percentage of their GDP

– Proportion of population with access to affordable essential drugs on a sustainable basis (WHO)

– Personal computers in use per 100 population and internet users per 100 population (ITU)

Source: a full list of indicators can be accessed at UN (undated)

Do you think the MDGs cover all the most important aspects of poverty? If not, what is missing?

One observation is that no mention is made about the political dimension of poverty, including power relations and the exclusion of poor groups from decision-making processes. Yet, it is often the lack of these rights which hinder the poorest from accessing services or benefiting from growth processes taking place within their economy.

The MDGs also make no mention of climate change or social protection. Back in 2000, there was much less international awareness of the importance of these issues than there is today.

How and why the MDGs emerged

Hulme (2007) documents the process by which the MDGs were developed and ultimately agreed by UN member nations. The story has elements of vision, organisational power struggles, individual contributions, and chance.

In terms of organisations, Hulme (2007) highlights the contributions of the following players.

• Various UN agencies, responsible for organising a number of thematic summits, for example, on Children, Women, and on Social Development in the early 1990s. These were an attempt to reassert the influence of the UN system within international development debates following a decade (the 1980s) dominated by the IMF and the World Bank. Several of these summits produced targets and indicators for progress in their areas, which later fed into the compilation of the MDGs.

• The Development Assistance Committee (DAC) of the OECD, which attempts to enhance the aid efforts of donor countries. In the mid-1990s the DAC was becoming increasingly concerned at the declines in aid budgets in many developed countries. This reflected the relative neglect of international development by a number of right-wing governments and, at least in the US, the sense that development assistance had become less important as a foreign policy tool following the end of the Cold War. In 1996, the DAC produced a list of seven International Development Goals as a way of renewing the interest of donor governments in, and commitment of these governments to, development assistance.

• The UN Secretariat, which seized the political opportunity provided by the new millennium to renew commitment to international development efforts.


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As already noted, during the 1990s there was a growing consensus that poverty reduction should be the ultimate goal of international development efforts. The UN summits and the DAC International Development Goals, which preceded the MDGs, both drew from and contributed to this consensus. Nevertheless, there remained debates and struggles. Thus:

• The UN summits sought to reassert a human development agenda, linked to human rights, as an alternative to the economic growth focus of the IMF and World Bank.

• The DAC International Development Goals attached relatively greater weight to economic growth (whilst still acknowledging that poverty reduction efforts had to go beyond this), reflecting the need to appeal to sceptical governments in developed countries.

These tensions were only finally resolved after the passing of the Millennium Declaration in New York in September 2000. The economic development goal (halving the number of people living in extreme poverty, defined in terms of a daily consumption level) was made goal 1, complemented by seven others that reflected broader understandings of poverty.

The process of moving from a commitment to the overarching goal of poverty reduction at the Millennium Summit to development targets and indicators also involved the sharing out of responsibility for monitoring the various indicators amongst multilateral development agencies. The World Bank was given responsibility for the income/consumption target within MDG 1, whilst the others were mostly shared out amongst a number of UN agencies (see 2.1.1).

Which players are conspicuously absent from the discussions so far?

Answer.

Although the Millennium Declaration highlights national ownership and the need to take into account national development priorities, the most obvious absentees are developing countries themselves.

According to Hulme (2007)

‘… to a high degree developing countries have been followers not leaders of the process of MDG evolution. … The lack of fuller engagement of G77 with the evolution of the MDGs remains a cause for concern ...’

Source: Hulme (2007) p. 38.

In fact, the main involvement of developing countries in the process of MDG development came from certain Islamic countries that were successful in lobbying – along with the Vatican – against the inclusion of reproductive health targets in the MDGs. Interestingly, in 2007, the General Assembly of the UN decided to add reproductive health to the original MDG targets.

There is continued debate over how well the MDGs capture the aspirations of developing countries. Because the MDGs were set by a political process at a global level, it can be questioned how far policy-makers and populations of partner countries have felt any ownership of the specific quantified targets and indicators used to monitor progress towards the MDGs.


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This sense of ownership has varied from country to country. Have policy-makers in your country (or a country with which you are familiar) shown commitment to achieving the MDGs as appropriate goals for them?

2.2 Implementing the MDGs at national level All 189 UN member countries signed the Millennium Declaration, which committed countries to the achievement of the MDGs. Progress towards the MDGs is measured using 60 indicators. Drawing on statistical data, countries report back on their progress once a year. However, as you might expect, data availability and reliability have been a serious challenge in many countries. In some countries and for some indicators, there were no 1990 data to set a baseline against which progress could be measured. Many countries also lack administrative reporting systems to compile data on indicators such as the number of people with access to secure tenure or to affordable essential drugs.

Take a look at the indicators and choose the two you think are the easiest to monitor and the two you think are the hardest to measure.

The United Nations set up the Millennium Project (later replaced by the MDG Support Facility) to assist signatory countries who requested assistance in developing MDG-based national development strategies. These strategies could be benchmarked against the global MDGs or, alternatively, countries could set goals and targets appropriate to their local context.

In aid-dependent countries it is common for the national Poverty Reduction Strategy Paper to focus on actions that are designed to achieve particular MDGs within the country concerned.

Consider the country in which you live or work (if it is a low- or middle-income country) or, alternatively, another country with which you are familiar. Reflect on the progress (or lack of it) with national development and poverty reduction that the country has made since 2000. In what way, if at all, have the MDGs contributed to this? Or, to put the same question the other way round, what difference in performance might you have observed if the MDGs had not existed?

Answer.

Obviously, your answer will depend on the country that you have chosen! However, your challenge is to imagine a ‘without MDG’ scenario. If you simply compare what happened in the 1990s with what happened in the 2000s, you may be failing to ‘control’ for all sorts of other changes (eg in the domestic political situation, international markets or geopolitics) across the two decades.

If you do attribute significant changes to the existence of the MDGs, your next challenge is to explain the mechanism by which the MDGs had an impact on national development or poverty reduction in your country.


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Broadly speaking, the MDGs may have achieved an impact on national development or poverty reduction at country level through one of three routes:

• national leaders personally ‘owned’ the goals to which they had signed up and, as a result, directed the efforts of the state to meeting the goals

• aid donors reoriented their lending and support activities towards the pursuit of the MDGs in the countries in which they work. This in turn influenced the types of public investments made in these countries during the 2000s

• the existence of the MDGs, plus data on progress towards them at national level, provided ‘ammunition’ for the advocacy efforts of civil society organisations, which were, therefore, better able to hold governments and donors to account for their performance in public investment and service delivery

It is possible that none of these mechanisms was effective in some countries. For example, in some Asian countries, the state was already committed to rapid economic growth and investment in public service delivery, even without the encouragement of the MDGs. Few Asian countries are heavily donor dependent, so changing donor priorities probably had little effect in such places, and civil society organisations may also be weak. (Strength of civil society organisations varies from country to country).

Progress with democratisation notwithstanding, civil society organisations still have limited influence in many African countries, too. In a few such countries, national leaders have genuinely championed investment in pursuit of the MDGs. However, in some, the main mechanism through which the existence of the MDGs has affected in-country processes has probably been through the impact of the MDGs on donor priorities and investments.

Financing the MDGs

You might be asking yourself how poor developing countries can afford to raise the resources necessary to invest not only into growth strategies but simultaneously into health and education. However, recall that one of the drivers behind the development of the MDGs was the ambition of the DAC to renew commitment to international development assistance amongst donor countries. The MDGs as a whole have thus formed a basis on which to mobilise international resources for investing in poverty reduction and human development.

More specifically MDG 8 committed developed countries to contribute to the achievement of the MDGs by substantially increasing aid flows to developing countries. Unfortunately, unlike goals 1–6, goal 8 did not establish time-bound commitments or quantifiable indicators.


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2.2.1 Regional breakdown of donor assistance to finance the investment needed to meet the MDGs

(In billions of 2003 US$)

2006 2015

East Asia and Pacific 11.1 8.9

Europe and Central Asia 2.0 2.9

Latin America and Caribbean 0.7 1.3

Middle East and North Africa 0.9 1.4

South Asia 22.4 36.8

Sub-Saharan Africa 36.4 83.4

Source: UN Millennium Project (2005)

Does this seem a lot to you? Sachs (2005) argued that even though financing the MDGs would require a doubling of official development assistance (ODA), this amount would be less than the 0.7% of the GNP that developed countries were already officially committed to. However, although aid flows have increased, they have still been far from meeting the amounts specified in 2.2.1. The impact of the post-2008 financial and economic crisis in many donor nations has not helped here.

2.3 Critiques of the MDGs

Choice of targets and indicators

Given the history of the MDGs, it is hardly surprising if there are some gaps and/or inconsistencies in the targets and indicators that were eventually chosen. Looking positively, the targets highlight the needs of some of the world’s poorest people. This has encouraged some international development agencies to target their resources more consciously towards these people and the countries that they live in – and away from middle-income countries that were beneficiaries of large aid flows primarily because of their strategic importance in foreign policy terms. More critically, it can be argued that the targets nevertheless represent something of a ‘lowest common denominator’. Governments of most persuasions and from most types of political systems (democracy, autocracy) will agree, on paper at least, that it is a good thing to tackle the material needs of the poor. However, targets relating to political rights might not have gained unanimous approval at the UN General Assembly (the UN Declaration of Human Rights notwithstanding). Meanwhile, the target for MDG 3 on gender equality and women’s empowerment falls woefully short of the ambition of the goal, because conservative (including Islamic) states would not agree to a more encompassing target.

MDG 2 targets universal completion of primary education, although some countries started far behind others in terms of enrolment rates, whilst targets for other goals seek proportional reductions (of differing magnitudes). From a rights-based perspective, proportional reductions are hard to justify: all human beings have the


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same basic rights (including to food and health), so how can public policy aspire only to assist half of those whose basic rights are not yet met? How does one decide which half will have their rights and needs addressed?

Meanwhile, some who believe in the primacy of growth in achieving poverty reduction argue that the MDGs place too much emphasis on social sector spending (the focus of five goals) as opposed to growth (‘just’ MDG 1). Moreover, whilst MDGs 2–6 can readily be translated into focused spending programmes, no process indicators are provided to guide or monitor actions in pursuit of MDG 1.

What do you think of the argument that the MDGs place too much emphasis on social sector spending?

Especially in countries that are heavily dependent on donor finance for their public investment, the MDGs do seem to have been associated with an increase in social spending. It can be debated whether over time this will stimulate growth or impede it (directing investment away from economic infrastructure, for example).

On the second point regarding lack of process indicators for MDG1, a counter-argument is that agreement would never be achieved across 189 nations as to how to achieve economic growth. The advantage of MDG 1 is thus that it promotes agreement on the ‘end’ of reductions in consumption poverty, whilst leaving it up to national policy processes to identify the best way to achieve this.

Global, regional or national targets?

Vandemoortele (2007), one of the architects of the MDGs, argues that the MDGs were not originally intended to be monitored at individual country level at all. Rather, they reflected global aspirations for poverty reduction, with the targets reflecting past trends on the respective indicators, projected forwards. As different countries are at different stages of development and face different constraints, it is unreasonable to expect all to perform equally on such a wide range of indicators. Vandemoortele (2007), therefore, stresses the importance of national development strategies selecting locally appropriate indicators. He was concerned that sub-Saharan African countries, in particular, could be stigmatised for failing to meet international MDG targets, which might discourage domestic political leadership in these countries from even aspiring to make progress in some important areas.

Whilst there is an obvious case for locally adapted targets, what benefits, if any, can you see from having a common set of targets across countries?

Answer.

Having any form of public targets that are also monitored and the results made public increases the accountability of governments to their citizens. Civil society organisations can raise awkward questions if their country is failing to make progress towards achieving the targets that have been set. Admittedly, this process is likely to be weakened if the targets were unrealistic in the first place. However, having a common set of targets across neighbouring countries (where many of the key starting conditions are similar) probably does give civil society groups useful benchmarks for assessing the performance of their own country and government.


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The need to balance cross-country comparability with relevance of targets may argue for regionally agreed targets, rather than purely national ones (no comparability) or global ones (limited relevance to some countries).

Ownership

As already noted, representatives of developing countries were conspicuously absent from the process of developing the MDGs, although national representatives did ultimately approve the goals at the UN. Such broad, high-level political approval is one of the strengths of the MDGs. However, it does not necessarily translate into a strong sense of ownership amongst policy-makers and elites within developing countries. Thus, on the one hand, Asian economies such as China have achieved considerable success with poverty reduction, but this has been driven by domestic imperatives. Meeting MDG targets has arguably been an incidental by-product of domestic growth and development strategies. Meanwhile, the language of the MDGs has been more evident in the official strategies of many poorer countries, but this may have reflected their sense of what the main international donors wanted to see as much as a genuine local commitment to achieving those targets. Fukuda-Parr (2008) argued that, although Poverty Reduction Strategy Papers often noted the international MDG targets, they rarely identified feasible targets under local conditions or credible strategies for achieving these.

Fukuda-Parr (2008) also noted the limited civil society participation in the development of such strategies. Limited civil society participation in policy-making and advocacy will tend to reduce the impact of any international goals such as the MDGs on development outcomes at national level. If civil society groups do not exist, or are unable to hold governments to account for poor performance against MDG targets, then official commitments to the MDG targets may mean little in practice.

Can you think of any civil society groups in a developing country with which you are familiar that are using national performance in pursuit of the MDGs to hold the government to account for its actions? If not, why do you think this is?

Where civil society participation in policy-making and advocacy is limited, the main benefit of international goals such as the MDGs may be as benchmarks for donors to use when assessing their programmes and priorities.

What do you think of this argument?

There are limitations to any target-based approach

A final criticism of the MDGs is a generic criticism that can be applied to all targets and indicators: they distort the activities and priorities of the organisations and individuals whose performance is being measured. To take a couple of UK-inspired examples:


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• Suppose schools are assessed on the basis of the proportion of their school leavers that achieve certain minimum educational standards (basic numeracy and literacy at the end of primary school or a certain number of exam passes at the end of secondary school). How might this influence the activities and priorities of teachers? It would be rational for teachers facing this incentive structure to give most of their attention to those children who are in danger of not meeting the basic standards, at the expense of stretching and developing those who are already comfortably above them.

• Suppose the performance of academics is assessed on the basis of their publications and research income. How might this influence their activities and priorities? It would be rational for academics facing this incentive structure to give less time to their teaching activities, so as to be seen to perform in the other areas.

Following similar logic, how might the MDG targets distort the activities and priorities of governments and/or international development agencies?

Answer.

One could argue that the MDGs are designed precisely to influence the activities and priorities of governments towards meeting the needs of the poorest members of society. However, concerns have been raised, specifically in relation to MDG 1, that the prominence given to a headcount measure of poverty (the proportion of the population with consumption levels below a minimum threshold) might lead policy-makers to concentrate on the easy-to-reach-poor – those whose consumption levels could most readily be raised above the threshold – at the expense of the most deprived – whose problems might be more complicated and need greater and longer-term investment (Chronic Poverty Research Centre 2007).

2.4 What happens after 2015? As you read this, you will be aware that the 2015 end-date for the achievement of the MDGs is rapidly approaching. Many targets will be achieved at global level and within a fair number of countries. However, whatever the original intention for the MDGs, plenty of attention will be given to the fact that many countries will not achieve many of the targets. Moreover, in terms of human well-being, the targets themselves were still quite modest. What about the millions who continue to live on less than US$1.25 per day or the many children who die before their fifth birthday? This raises the question of what, if anything, should come after the MDGs?

As you would expect, many suggestions have already been offered, from simply extending the MDG end-date to 2020 to allow remaining countries to achieve their targets to conceiving ambitious new visions of development that encompass middle and high income countries and not just the poorest. Assuming that global leaders do have the appetite for some form of post-2015 global development goals, which does now seem likely, here are some of the big questions that need to be answered:


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• Should they focus on poverty reduction (and hence, in practice, on the poorest countries), as the MDGs have done? The world has changed rapidly in the years since 2000, with Asian countries in particular acquiring much greater economic and political power, yet few Asian countries have engaged seriously with the existing MDGs, either as countries that are home to the majority of the world’s poor or as donors to other poor countries.

• Should they simply take existing targets further, eg aim to eliminate (rather than to halve the incidence of) extreme poverty? Alternatively, are there additional issues that should be brought into the new global development vision? We have already mentioned climate change and social protection as two such candidates. Crafting a vision of future ‘development’ that does not provoke catastrophic climate change is arguably one of the central challenges facing the world today. It would be relevant to middle and high income countries every bit as much as to low income ones. However, the limited progress at global climate summits to date – plus the lack of binding targets for rich countries under existing MDG8 – suggests that achieving such an all-encompassing post-2015 vision will be extremely difficult.

• Who should be responsible for devising the post-2015 goals? As noted, developing countries had very little input into the current MDGs. How can a more ‘inclusive’ process of goal development be managed for their replacements?

• Should the same goals and targets be set for all regions or countries of the world?

Imagine that you have been selected to be part of a taskforce that will advise on a set of goals to replace the MDGs in 2015. The new goals should (1) retain the strengths of current MDGs (eg relative simplicity and clear focus), (2) compensate for some of the current weaknesses and (3) be politically feasible (ie have some chance of being adopted by world leaders). What are the two main things that you would advocate for within the taskforce?

Your two priorities could be responses to any of the questions above, eg new issues that should form part of the post-2015 goals, the process for agreeing the goals at global level, regionalisation of target setting. Don’t spend too long thinking about this, but please do post your ideas on the online learning environment (OLE) for your fellow students to see!


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uestion 3

Which elements of the growth and basic needs approach are reflected in the MDGs? Fill in the relevant MDGs and briefly summarise them.

MDGs

Human development

Material poverty

Long and

healthy life

Knowledge

Acceptable

standard of living

Income

Consumption

MDG Nr.:

Summary:

uestion 4

Which of the MDG targets are specified in proportional terms?

uestion 5

True or false?

The investment needed from donors to finance achievement of the MDGs in Africa is more than double that of South Asia.

Q

Q

Q


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3.0 GROWTH AND POVERTY REDUCTION

Section Overview Our review of development paradigms in Section 1 suggested that, whilst fashions have come and gone, the importance of economic growth has never been entirely rejected. Indeed, the debate has tended to be about whether growth alone is sufficient for development (and poverty reduction) or whether other measures are needed in addition. In this final section, we briefly summarise this debate..

Section Learning Outcomes By the end of this section students should be able to:

• examine critically to what extent the national economic performance explains poverty outcomes

• formulate some of the problems with a too narrow focus on growth

3.1 Beyond growth? Sachs (2005) and Collier (2007) both divide the world into ‘billions’. Sachs’ breakdown is slightly more detailed, so we present it here in 3.1.1. The figures are only illustrative, however, as the global population passed the seven billion mark in 2011.

3.1.1 Breakdown of world population by income level

Source: adapted from Sachs (2005) pp. 18—19.

Sachs and Collier are agreed that the fundamental divide in the first decades of the 21st century is between the ‘extreme poor’ and the rest. Who are this ‘bottom billion‘ and where do they live?

7

6

5

4

3

2

1

0

No

of p

eopl

e (b

illio

ns)

High Income

Middle Income

Upper Low-Income

Extreme Poor


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Sachs draws on World Bank data that show that those under the international poverty line live primarily in the rural areas of South Asia, Sub-Saharan Africa and East Asia. Thus, some live in countries that are experiencing economic growth, but have not yet benefitted from it for a variety of reasons, whilst others live in countries where the economy has so far failed to grow with any consistency. By contrast, Collier arrives at his figure of a billion by aggregating the populations of entire countries – primarily in Sub-Saharan Africa and Central Asia, plus a disparate group comprising Haiti, Bolivia, Laos, Cambodia, Yemen, Burma and North Korea – where the economies have been caught in some form of low growth trap.

Whilst Collier presents his case in starker terms, the underlying assumption of both authors is that ultimately it is national economic performance that is going to drive poverty reduction. If you live in one of the poorest countries, characterised for too long by slow or even negative growth, your chances of escaping poverty are shaped by that. Yes, household and personal characteristics matter – and help some to prosper – but the national growth context is the major determinant of the prospects for most. By contrast, if you live in a middle income country, both Sachs and Collier are much more optimistic about your chances of escaping poverty, even if Sachs recognises the challenges posed by rising inequality in such countries. Many such countries have apparently now attained some level of long-term growth that can be sustained through international trade and capital flows in an increasingly globalised world and which, in due course, will allow extreme poverty to be eradicated.

What is your initial response to this position?

A first point to note is a basic factual one: the majority of the people in the world living on less than US$1.25 per day currently live in middle income countries, not low income countries (Sumner 2010). As of 2010, India was officially classified as a lower middle income country, as was Africa’s largest nation, Nigeria. China had already qualified as an upper middle income country. (The largest remaining low income countries, in population terms, were Bangladesh and Ethiopia).

Thus, even if economic growth in middle income countries is sustained for some years to come, there is an awful lot of work to be done before extreme poverty is eradicated in such places. This raises important questions about the relationship between growth and poverty reduction.

In their study ‘Growth is good for the poor’, Dollar and Kraay (2001a) argued that growth is closely associated with poverty reduction. In a related study (Dollar and Kraay 2001b), they argued furthermore, that globalisation and openness bring the same benefits to the poor as to the non-poor.

The position that growth is a sufficient condition for poverty reduction is far from universally accepted, however. In its critique of Dollar and Kraay, Oxfam (2000) contended that, although growth is good for poverty reduction the incidence of poverty is determined by income distribution and not growth alone. Ravallion (2005) found that the responsiveness of poverty to a given rate of growth depends on the level of initial inequality: the higher the initial inequality, the less poverty rates respond to growth. Growth is also likely to be slower when the initial distribution of assets and incomes is less equal.


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3.1.2 What constitutes pro-poor growth?

‘Pro-poor growth has been broadly defined by a number of international organizations as growth that leads to significant reductions in poverty (OECD 2001 and UN 2000). But what is a significant reduction in poverty? How much must the poor benefit for growth to be considered pro-poor? In attempting to give analytical and operational content to the concept two broad definitions of pro-poor growth have emerged. The first definition would basically require that the income share of the poor population increases for a growth pattern to be regarded as pro-poor. The simpler version of this definition is based on a relative concept of inequality and would simply state that the growth rate of the income of the poor is greater than the average growth rate (White and Anderson 2000). Thus (relative) inequality would fall with growth whenever growth is pro-poor. A more radical criterion (also proposed by White and Anderson (2000)) would require that the share of the poor in the income increase is at least as large as their population share. This version is much more difficult to meet in practice, and would require that (absolute) inequality declines. A third version of this definition is proposed by Kakwani and Pernia (2000) and it is based on the comparison of the changes in poverty due to growth alone (ie holding inequality constant) and changes in poverty that take into account the actual changes in inequality. The authors refer to the ratio of these two elements as the pro-poor growth index, and an episode would be considered as pro-poor when the index is greater than 1 (ie when inequality falls). … The second available definition of pro-poor growth is much less strict and focuses solely on the link between poverty and growth: growth is pro-poor if it reduces poverty (Ravallion and Chen 2004). Note that this definition would consider a growth episode as pro-poor if poverty falls, regardless of the developments on the inequality front. Thus growth will be pro-poor except when the income of the poor is stagnant or declines [sic] leading to an increase in the poverty measure. (In terms of Kakwani and Pernia (2000) index growth will be pro-poor when the index is greater than 0.)’

Source: Humberto Lopez (2004) p. 4.

This brings us to a consideration of the nature of growth. Some growth benefits the poor more than other types, with a critical issue being the source of the growth. Growth is more likely to benefit the poor if the growing sectors make intensive use of labour, as labour is one of the principal assets of many poor people. Labour-intensive manufacturing, such as the production of garments, generates more benefits for the poor, per unit of growth, than capital-intensive minerals extraction, for example.

There is an abundant literature showing that growth is particularly pro-poor when it originates within smallholder agriculture (see Diao et al 2007 for a summary). Smallholder agricultural production uses labour extremely intensively and also enables many poor households to achieve a return on their other major asset, land. (Note that land holdings are increasingly unequally distributed within even smallholder agricultural settings. However, smallholder agriculture still has more of its key assets in the hands of poor households than any other sector.) Smallholder agricultural growth also has other pro-poor benefits.

• As poor households in rural areas acquire additional income, they tend to spend a high proportion of it on locally-produced goods and services. This benefits other households, also often poor, who are engaged in the production of these goods and services. This is called a multiplier effect.

• Similarly, agricultural growth can stimulate other economic activities, often located outside rural areas, including agricultural input supply industries and food processing. In middle and upper income economies, eg Chile, food processing can account for a greater share of GDP (more value added) than agricultural production itself.


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• Critically for poor households, most of whom rely on buying food for some or all of the year, agricultural growth tends to lower food prices. For the poorest households, consumption of basic food can account for 50% or more of total expenditure. Hence, lower prices mean more to spend on other things.

• In turn, lower food prices may keep wages down for the manufacturing industry. This does not immediately sound like good news for poor workers. However, it can assist in making industry competitive, hence perpetuating the cycle of growth.

As you read through Collier (2007) during this module, you will see that he has little to say about agriculture. Try to ‘read between the lines’ and work out why Collier has so little time for agriculture.

There are also dangers in a simple determination to pursue growth at all costs. Can you think what these might be?

Growth may generate medium-term benefits for many. However, a determination to pursue growth at all costs could disadvantage poor groups, who might be amongst the last to benefit from the resulting growth.

For example, policy might

• move smallholder households off their land in order to create new large-scale commercial farming enterprises

• encourage the privatisation of communal woodlands (on which the poor may depend heavily, especially in times of crisis), so as to allow (wealthier) households to expand their landholdings

Another critique of the growth-only approach says that much depends on one’s view of poverty. If poverty is conceived solely as consumption levels of below $1.25 or $2 per day, then growth alone might make a significant difference to poverty rates. However, if poverty is equated with low levels of human development, policy will have to take a broader approach in order to combat it.

Finally, however, we have presented the ‘growth only’ view in rather caricatured terms so far. What might a more refined version of the growth position look like?

Real world policy-making is about setting priorities under conditions of resource scarcity – extreme scarcity in the poorest countries. Not only do states have limited financial resources, their human resources to devise, implement, and assess policies are also extremely limited. Under such conditions, it can be argued that a state should concentrate on promoting growth first, then tackle other issues. The increased incomes and tax revenues can be used to finance investments in human capital. Meanwhile, as growth raises incomes, civil society groups are likely to become stronger, which will in due course force other issues onto the political agenda anyway.


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uestion 6

Fill in the missing word/phrase.

The responsiveness of poverty to a given rate of growth depends on _______.

uestion 7

Briefly summarise the benefits of smallholder agriculture for poverty reduction.

uestion 8

Some form of growth benefits the poor more than others. Which of the following growth forms are considered pro-poor?

(a) manufacturing growth

(b) growth based on resource extraction

(c) capital-intense growth

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UNIT SUMMARY

We can broadly define two strands in development thinking.

(a) Reliance on market versus reliance on the state.

(b) About access to factors of production versus access to social capital, education, and health.

Earlier development theories emphasised the importance of access to factors of production to achieve growth and development and pursued a state-led approach. In the 1970s, the focus then shifted to human development and access to social services.

However, ill-designed and costly public investment into infrastructure projects contributed to the growing public deficit in many developing countries and, as a consequence, the state came to be seen as an obstacle rather than an enabler of development. Neoliberal scholars demanded a policy of non-state intervention, rapid privatisation, and deregulation as the only means to promote growth and hence development. This new thinking was reflected in the structural adjustment programmes of the 1980s.

The perceived failure of neoliberal policies in promoting growth and reducing poverty led to a focus on poverty reduction which became enshrined in the Millennium Development Goals. The MDGs are concerned with material as well as non-material poverty and establish time-bound and quantifiable indicators to halve poverty, provide universal access to primary schooling, reduce infant and maternal mortality, halt and reverse the spread of HIV/AIDS and other diseases, ensure environmental sustainability, and establish a global partnership. Arguably, the MDGs have given international development efforts a clearer focus than they have ever had before. However, they have also been criticised for their choice of targets and indicators, the unfairness of applying global targets across diverse national contexts, the lack of developing country participation in their design and subsequent ownership over their implementation, and because all target-based approaches inevitably generate distortions in performance incentives. As the MDG end-date of 2015 approaches, the debate is strengthening as to what, if anything, should replace the MDGs after that date. The unit reviewed some of the key questions within this debate.

Despite changing paradigms, the importance of economic growth has never been entirely rejected. Indeed, the debate has tended to be about whether growth alone is sufficient for development (and poverty reduction) or whether other measures are needed in addition. There has been much debate about what constitutes pro-poor growth. Most agree that growth is more likely to benefit the poor if the growing sectors make intensive use of labour, as labour is one of the principal assets of many poor people. Labour-intensive manufacturing, such as the production of garments, generates more benefits for the poor, per unit of growth, than capital-intensive minerals extraction, for example. However, there is also an abundant literature showing that growth is particularly pro-poor when it originates within smallholder agriculture.


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UNIT SELF ASSESSMENT QUESTIONS

uestion 1

Growth is good for poverty reduction: discuss.

uestion 2

Which of the following approaches are reflected in the MDGs?

(a) The modernist approach.

(b) The human development approach.

(c) The growth approach.

(d) The dependency approach.

uestion 3

Given the change of development paradigms over the past decades, what kind of prevailing development paradigm would you expect for the future?

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KEY TERMS AND CONCEPTS

basic needs promoted satisfaction of the essential needs of the poor, (in theory) treating these as higher priority than the interests of the non-poor

commodities here: raw or primary products

comparative advantage if country A has a natural resource or a product that country B does not have, A has a comparative advantage over B

human development a focus on developing the capabilities of individuals through investments in education, health etc. Often contrasted with development paradigms focused on economic growth. In the latter, there has often been an assumption that it is increased wealth that will stimulate both private and public investments in education and health. However, there is now widespread recognition of the importance of improved health and (especially) education for economic growth

modernism a post-war concept that defined development as the substitution of ‘backwards’ traditional values with ‘progressive’ modern values

structural adjustment economic stabilisation and growth programmes which included the scaling back of social services and safety nets in order to balance budgets, repay debts, and accelerate growth

trickle down effect assumes that economic growth will automatically benefit the poor

Washington consensus market-based approach to development promoted by the Washington-based IMF and The World Bank

unit 1: poverty reduction, development, and the … one: poverty reduction, development, and the...

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