From Structural Adjustment to Human Development: Impact on Poverty and Inequality

From structural adjustment to human development: Impact on poverty and inequality

A conference in honour of Sir Richard Jolly

Institute of Development Studies, 17-18 November 2011

Notes: Day 2

Session 4: How about poor children and poor families?

Participant Contributions

Jan Vandemoortele, United Nations, “Equity begins with children”

MDG’s Developing Countries (DC) trends in 20yrs (School enrolment, malnutrition, underweight): Achievement Progress

·  We are NOT making enough progress à This is especially the case in maternal health, delivery of services

·  At this point we are lagging behind achievement of MDG à To 2009, NONE of the Goals we should have achieved at that time have been accomplished

·  AFRICA: has been performing better than rest of the world except on service delivery: ‘Africa is not missing the targets, you are missing the point’

·  Therefore the problem is not Africa but equity

·  S. ASIA: Trends in malnutrition… every quintile sector of the population has make progress but those behind are the poorest à The problem is INEQUALITY

·  USA:Top 10% appropriated 91% of gains in between 1989 and 2006: Again, the richest quintile makes most of the progress, the lowest is lagging behind. à Top 1% captured 60% of income growth.

CONCLUSION:

We need to focus on INEQUALITY à ‘There is no one policy for reducing inequality’ The Spirit Level

The problem relies on the way in which we face the problem of poverty… same with equity: politicians and policy makers, although they recognize the problem of inequity, have not changed their minds set and narrative: Development paradigm is still very tolerant to the issue of inequality.

-We face a Great Choice, Uncertainty, Chaos &Luck: ‘why some thrive despite them all, Collins and Hansen, 2011: The best leaders are not more visionary or more creative, they are more disciplined and more empirical’à Need to see the facts and be less tolerant – it is about equity

Isabel Ortiz, Associate Director, Policy and Practice, UNICEF “Form Structural Adjustment to Human Development : Recovery with a Human Face”

1. Why focus on children?

·  Huge income difference between rich and poor countriesà Most of children live in poor countries (Ortiz and Cummins, 2011)

·  Great income inequality between rich and poor: Not only between countries but between classes.

2. Global Crises:

·  Global crises increased inequalities: Despite fall of global food prices, local pricess remained high.

·  Phase II of global crisis: A large contraction in public expenditures

·  A large majority of developing countries are experiencing over contractionà Reducing public expenditures to a lower level than pre-crisis

·  Bailouts and ODA: 2009: the amount of ODA of IMF given to developing countries has been minimal.

·  Developing countries are victims of a crisis that they did not create

There has been a reduction of expenditures on social expenditures targeted to Social Protection (SP) systems in many of the developing countries à Expenditure in SP is not a priority à on the contrary: INCREASE ON CONSUMPTION TAX : which are regressive taxes and against poor quintiles

There is a believe that investing in Human Development is not reliableà Military-Health investment ratio has remained high (much more investing in military despite crisis)

What is needed is to create a fiscal space for children:

·  Need to reduce indirect taxation (consumption) as it affects mostly the poorer.

·  Direct ODA to pro poor issues: However: Use of ODA in Sub-Saharan SAfrica 1999-2005:

-  37% goes to debt reduction; 36% Reserve accumulation (left in central banks) (IMF): why countries are accumulating so many reserves???

·  Debt Restructuring :

·  Accommodating Macroeconomic Framework- Fiscal Policy; a more relaxed and accommodated standard policy

Conclusions: Economic stabilization with a human face. Need to Consider the way this influences early childhood development. Economic decisions are NOT technocratic – we need to consider human issues

Dharam Ghai, “Early childhood wellbeing in Africa” (Introduced by Frances Stewart)

1. Why Early Childhood welfare is important?|

·  Higher rates investment Return when investing in early childhood.

·  However: Still huge data problems

·  Indicators of early childhood. à Differences on performance on early childhood well-being indicators between developing and developed countries

·  Influences to early childhood developmentà Culture; Violent conflicts ; Mineral curse, etc..

2. Policy conclusion; need for provision of universal provision of kindergarten centres offering unified packages of provision

Commentator - : Emmanuel de Kadt

·  We must go beyond seeing poverty in terms of income alone… we need to look to peoples lives beyond countries aggregates

·  Go beyond a technocratic, extremely economic/rational/objective view of poverty to see the human face of its impact on real people’s lives.

·  Children hold the key for breaking the cycle of poverty’ – especially investments on early childhood.

·  Ctizens that are in a situation of wellbeing are much more likely to contribute to economic growth

·  Most countries, even those that have made some progress on under 5 mortality have not yet been able to reduce gaps between the richest and the poorest differences…although there have been improvement in the averages of child-focused indicators, the lowest quintile of population has not seen improvements.

·  Regarding policy-making; children are underrepresented and have no face in the political system.

·  We need a particular kind of leadership that understands the insult to children of neglecting their fundamental rights and see the relation between protecting them and society’s general welfare.

·  Rural/urban; income inequalities have significant impacts on child malnutrition and mortality and in children well-being. In the case of gender disparity, in early childhood it is not a big issue \it comes later/ but rather a question of economic inequality and distribution.

Discussion

·  Richard Morgan: what about coruption issues? There is a problem with data… the lack of data impedes changing the prejudices… equity, equity, equity. What about governance factors? The issue of governance has a lot to do with issues of equity and equality (Jolly\)… what about corruption issues? à Need to consider ways in which power systems function

·  Need to consider the psychological aspects of HD- the way HD in early childhood will impact on later psychology and how that contributes to society’s development.

·  An important issue for pushing forward equity impact and in children welfare is the fragmentation of agencies interventions (UN)—greatest efforts to do interventions (education, health) to a more holistic approach…

·  Answer from panellist Van Moortele: Need to switch from an Area-based development to a more holistic approach

·  The question of Educationà Great vertical inequality on question of access.

·  What about the natue of financial institutions… governance issues…financial oligarchy. We are overlooking it. What are UNICEF, IDS, development institutions doing to push for a greater accountability of those financial institutions and more aid

·  What about the variation between low income countries on these issues of inequality

·  What about chidren’s voice? Poor’s voice?

·  Andrea Cornia - Children voice is dependent on their family voiceà separarting children voice from their family voice is methodologically wrong.

·  Richard Jolly -Would be Happy to see UNICEF refocusing on the macro level analysis with creativity; The HD paradigm has not yet focus on youth people and on early childhood issues. The lack of data: there are growing efforts (Africa Policy Forum). About children’s voice… it is important to go beyond the orthodoxy

Session 5: Shouldn’t it be all about inequality?

Participant Contributions

Ravi Kanbur, Cornell University: Equality of opportunities and equality of outcomes”

2. Measuring inequality… The problem relies on matters of principles and theory under this viewà The problem: Is inequality a matter of circumstancesor luck?

·  Paes de Barros: Mainstream measures of inequality (From the Left) “In an ideal wrld, inequality in outcomes should reflect only differences in effort and choices individuals make as well as luck’

- P. de Barros Methodology:

- Effort-Circumstance – Luck relationship to Inequality

·  Circumstance: Gender, Race/Ethnicity/Birthplace/ Mothers Education/

·  Barros: Inequality of opportunity is important; major policy strategy to reduce inequality to address discrimination between genders

·  Luck: Milton Freeman (RIGHT): Redistribution as a constraint to human freedom. …. Question on ‘ outcomes’ (resulting inequality) or an ‘ opportunities’ (equality of opportunities)

Barros left) and Freeman(right) would say there is no right to intervene as this would affect the equality of opportunities (presumes individuals are equal in opportunities) But: What happens when person effort becomes another person’s circumstance? (parents-sons)

- What happens when luck determines difference between opportunity and outcomes?

Robert Wade, London School of Economics: “Why has income inequality remained a neglected subject, and when can we say the rich are too rich?”

1. Defenders of Inequality (IN): à Inequality, a matter of most capable individuals à focusing in inequality would affect the most capable individuals…

·  Defence of INà economists: MKT as coordination mechanism

·  competitive labor market produces the optima and fair income distribution, such that each factor of production earns a value for its marginal opportunity

·  Market as an inentive mechanism for the development of skills and creativity.

·  People choose ocupations and work/leisure on basis of extrinsic material rewards, not intrinsic satisfactions or respect and powerà people will only excercised creativity and effort only if they are allow to retain value added of their effort

RESULT à This leads economists to be complacent with raising inequality.

2. Inequality in development policy.

·  Poverty is focus, inequality assimilated to poverty

·  World Bank’s World Development Reports: 1978-2011: Poverty used 3 times more frequently than any of 15 words relating to inequality.

·  WDR 2001: equity and development. First writers wanted to call it inequality and development. But directors banned it for being too political.

3. Why electorates acquiesce to top-end inequality?

·  In the last 20 years, there has been an enormous raise in income concentration (2006 concentration = to Pre- 1929 levels)

·  Most of the top-end concentration has been in the Anglo-American countries.

·  Political mechanisms that promote inequality; Blair, Thatcher…

4. Why middle class acquiescent to inequality?

·  Almost all of the increase in the income of the top quintile has been at the expense of the reduction of income of the bottom 40% of population. (USA)

·  Middle classes have been able to increase their consumption through brrowing out of stagnant income

·  Fear of loss is bigger than aspect of gain

·  Talk of redistribution raises prospect of bottom 40% being raised is perceived as a way to affect middle class relative situation.

5. What can Centre-left academics do?

·  Provide sound intellectual basis for challenging inequality defenders

Conclusion à Development institutions have ignored questions of inequality.

Although centre-left can write papers to attack top-down inequality, there is a lack of institutional base to promulgate this vision and effort to reduce inequality … on the opposite, the Right (pro inequality) vision has been really well promoted with a solid institutional base that promote intellectual support for increasing or maintaining institutional levels of inequality.

Tony Killick, ODI, “The Washington Consensus rules still?: Ghana’s shrinking poverty despite rising inequalities”

1. GHANA’s Economic History

·  3 Phases: Black yrs – Recovery period - early 90’s till now

1.1. Black Years

·  Ghana in the last 40 yrs: a near complete economic collapse in the 70’s after independence: rejection of any recognized form of economic mgt. à over valued currency: black market; high levels of corruption and rent-seeking; a disastrous economic management.

·  This lead to the collapse of Ghana’s economy (the black years… 70’s) à This lead to the stabilization process that lasted till half the 90’s

1.2 Currently (2000’s)

·  A TWO party political system.

·  A considerable raise of economic growth

1.3 Inequality

·  Black years: raising inequality, reduced service delivery for the poor, benefits for the richest….

·  Consumption poverty measures in Ghana: Spatial inequality: rural-urban… both rapidly declining poverty since 1998.

·  Rapid economic recovery as a result of the programmes of the recovey phase…

How has Ghana been so successful in reducing poverty?: Reducing poverty the Ghana way

·  Growth path has been labour intensive

·  Largely based on the private sector

·  The rural economy participated in this growth--- rural economy participated (for once)

·  Education has been a strongpoint but questions remain on quality of it.

·  Very few pro-poor government policies

2. Conclusions:

·  Ghana’s rapid poverty reduction mainly do to WC approach.

·  Economic management has a dreadful power to impoverish,à it took 35 yrs for average incomes to recover.

·  Compatibility of rapid poverty reduction and opening up of the economy

·  But a large amount, of the population has been left outà the problem of the North.

·  It may be worth distinguishing between functional and dysfunctional inequalities: some forms of inequality might not affect economic growth.

·  Mkts. Alone are not going to do the job… need fr effective interventions

Commentatory: Rosemary Thorp

·  Shouldn’t it all be about inequality.: Why should we worry about inequality. ? What kind of inequality?

·  2 kinds of arguments:

-  Human Justice: Moral issue: UNICEF

-  Structural inequalities: We need to focus on these, as they have a real impact on people’s lives (case of Bolivia peasant)

-  Wade: A rent in Central London could be 40,000 pounds a week

-  Killick argument: that there is a lot that can be done to reduce poverty with increased inequality… BUTà but there are exceptional circumstances that would positively affect outcome in the Ghana’s story (i.e. Huge increase of AID, debt relief)

THE BIG QUESTION : Then what kind of inequality should we worry about?

·  Shall we worry about ineqaulity of opportunity or outcome? Ravi Kanbur: Both matter but we need to document outcomeà its purely an academic debate…

·  Group or Individual?

- For Thorp, we need to focus on both. There has been an extreme focus on economic inequality but it is necessary to focus more on all kinds/multidimensional aspects of inequality.