The Hindu Business Line : Why are poor people poor?

The international conference titled ‘Taking Action for the World’s Poor and Hungry people” that recently concluded in Beijing provided a gruesome peek into the stark world of the poor. The world has, no doubt, made considerable progress in recent years in reducing poverty. It is estimated that the population living on less than $ 1 a day (global benchmark) declined to 18 per cent in 2004 from the high of 28.6 per cent in 1990. If this rate of poverty reduction were to sustain, then the Millennium Development Goal (MDG) poverty target will be met by 2015, according to the Washington-headquartered International Food Policy Research Institute (IFPRI).

Number terms

In terms of numbers, there were as many as 1,248 million in 1990 living on $ one a day. This number declined to 969 million by 2004. This is at the global level.

What is worrying policy researchers and concerned others is the regionally uneven progress in poverty reduction. According to experts, global poverty reductions have largely been driven by East Asia and the Pacific, aided to some extent by South Asia.

The percentage of poor living in East Asia and Pacific declined from 38 per cent in 1990 to 17 per cent by 2004. Many of the economies in this region have registered high growth rates, providing employment and generating incomes.

Clearly, economic growth - more investment, more employment, more income - is one of the surest ways to lift people out of poverty.

South Asia’s performance has left something to be desired. The percentage of those living on $1 a day has actually increased from 39 per cent in 1990 to 47 per cent by 2004. India, Pakistan and Bangladesh are large populous economies of South Asia. Poverty has actually risen in these countries.

It is a sad commentary on the economic and social sector policies of the governments in the region and failure to deliver real benefits to the really needy.

The situation in Sub-Saharan Africa is worse and critical. While the poor accounted for a mere 19 per cent of the population in 1990, they accounted for a much higher 31 per cent by 2004. If one looked beneath the $ 1 a day line, there is something really disturbing.

There are 485 million people experts call as ‘subjacent poor’. They live on anything between $1 and 75 cents a day. Below them are ‘medial poor’, living on anything between 50 cents and 75 cents a day and they are estimated to be 323 million in number. The ‘ultra poor’ are truly the poorest of the poor living on less than 50 cents a day and their number is estimated at 162 million.

Slow progress

Very clearly, the progress for the poorest has been the slowest. In attempts to fight poverty, poor people to have benefited the most from income growth have been those just below the poverty line. Poverty rates for the ultra poor decreased less than if everyone’s income had grown equally.

Interestingly, in East Asia and Pacific, rapid economic growth benefited all groups almost equally, experts opined. Tragically, in Sub-Saharan Africa and

South Asia, the ultra poor were mostly left behind.

Where are the ultra poor? Typically the ultra poor are located in inaccessible areas. Those people live mostly in remote areas, located farthest from roads, markets, schools and health services. Remote location denies them access to goods and services. Then there are people facing exclusion because of their ethnicity, gender or disability. Another feature of the ultra poor is that they are people with few assets or education, or access to credit. Three-fourths of the world’s ultra poor live in Sub-Saharan Africa. It is the only region where ultra poverty predominates.

On the other hand, most of Asia’ poor live just below the $ 1 a day line - only a small minority is ultra poor. If experience is any guide, then the poor in South Asia have a good chance to move out of poverty as many are subjacent poor.

In other words, policies that foster ‘economic growth with equity’ would help readily lift many poor people out of poverty in a country like India. Why do ultra poor stay poor? Experts pointed out that they are born poor or come from poor areas. Lack of education, absence of employment opportunities or labour, absence of assets and lack of access to credit can create trap for the really poor people. Clearly, they belong to a disadvantaged group.