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Old Sunday, January 14, 2007
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It is starvation line, not the poverty line

By Izzud-Din Pal

THERE is an imperative need to redefine poverty. The currently used poverty line should be called starvation line because that is what it is. Anybody who counts his calories for his survival lives on the brink of this critical line.

When the Millennium Declaration was signed in 2000 by 189 countries, its purpose was simply to highlight the reality of absolute poverty with reference to the developing countries. A threshold of a minimum requirement for living was set at one dollar a day. The objective never seems to have been to turn this amount into a narrow focus of policy, contrary to what it has become: an end in itself to the exclusion of other related factors.

Several countries including Pakistan have developed an index in local currencies, being equivalent to the requirement of minimum of calories in the context of their local conditions. It does reduce the sharp edge of the originally designed index in dollars. Whether in fact it still represents the intended value is a difficult question to answer.

In any case, it is simply unacceptable to call it a poverty reduction programme for a variety of reasons, whether the calorie count is in dollars or a local currency. The index, for example, does not and cannot account for a proper balance of nutritional requirements, with reference to age, gender, and style of life. The crude averages which are in vogue in data collection cannot properly reflect the differences. Also, a realistic poverty line must recognise that a person does not live by bread alone.

His basic needs extend to non-food expenditures in areas such as those defined by the UNDP which include shelter, clean water, sanitation, health, and education. A household survey which may include questions about expenditures on some of these items, nevertheless, fails the test as soon as it turns its results into a calories-count.

When we take into consideration all the factors which have been developed by UNDP, we realise how mutually reinforcing they are for maintaining a critical balance in the minimum well-being of a person. Any setback to health, for example, would push the person to below the line, no matter how it is defined.

The calorie-based index to measure poverty is totally inadequate to reflect the real situation. And whether or not this kind of index has improved by a certain percentage points makes it a fatuous exercise. Then why is it so entrenched in the official economic policy of the country is an important question.

It would be useful to refresh our memory about the background of this approach. The focus on a dollar a day was devised as a means to highlight the problem of poverty, as mentioned above. It became a convenient target as part of the neo-liberal approach to the issue under the structural adjustment programme.

It is a well-known fact that in the 1980s, the IMF started using conditionality in its assistance plans to developing countries, which was traditionally demand-constraining. It gradually expanded considerably in the public sector reform, with the World Bank (WB) becoming an important partner in implementing the policy. The focus was on stabilisation, but it had a cost for the recipient countries. This has been critically examined by many economists including the Nobel Prize recipient, Joseph Stiglitz.

My objective here is to point out that the World Bank (WB) as the major exponent of conditionality started with its structural adjustment strategy, leading up to the Poverty Reduction Strategy Paper (PRSP). The PRSP was “formally” to be country-driven and owned, based on broad participatory process. In fact it was a take-it-or-leave-it proposition, with little time for consultation. The IMF and the Bank made no secret of the fact that they wanted this paper done quickly. What about conditionality? Well, that is a different interesting story as summed up by Killick in his “Donors as Paper Tigers.”

For Pakistan, as for many other developing countries, the PRSP is a hastily drawn up paper with no input from the segments of society which have a direct stake in the matter.

It is of interest to recall that in 2002, the structural adjustment was reviewed by Structural Adjustment Participatory Review International Network (SAPRIN) which included a group of civil society organisations. It gave a very mixed opinion about the programme, and the World Bank increasingly has distanced itself from the findings of the Network.

The fundamental contradiction is, in fact, inherent in the very title of the programme known as Poverty Reduction and Growth Facility to which the PRSP is attached. The underlying assumption is confirmation and reconfirmation of the trickle-down process for reduction of poverty. This process has not succeeded in any other country, and is not likely to succeed in Pakistan. It remains an important aspect of its neo-liberal approach to economic policy. And the calorie-based index serves as a convenient instrument of this policy.

There are many aspects of the government policy which give us a reason to ponder with serious misgivings. Privatisation, for example, is presented as a cherished goal. The headlines inform us how much the compensations received from the sale of publicly owned enterprises are adding to national treasury. The flip side of this operation, the effects on employment through rationalisation and retrenchment remains unknown. Similarly, the effects of deregulation, liberalisation and adjustment to globalisation in both rural and urban areas of economic activities can only be guessed.

In the rural sector, which accommodates the largest chunk of population, absence of a meaningful land policy keeps many workers under pressure of poverty. In an earlier article on the subject, I had suggested that a sound agricultural policy is the backbone of the economy and that includes land reform. This point can bear repetition. It is simply not justified to have more than half of the agricultural land owned by less than 5 per cent of the landowners, plus the newly emerging commercial farmers from the military sector.

One usually talks about social safety nets for the poor in the context of a policy of fair distribution of national income. Their supply is very meagre in Pakistan. It is commonly understood that welfare schemes which are established to benefit the poor never seem to reach their intended goal. Their distinct feature has been to create a new class of parasites fed on easy money (See “The fate of the pro-poor schemes”, Dawn, August 14, 2006). There is no framework to streamline the system. And the IMF/WB preference for ‘free market’ solutions would discourage any action in this regard.

On the reverse side of the picture, attractive perks abound for the well-to-do. There are many grades for the bureaucrats plus opportunities for international positions. There are land grants waiting for the military personnel on retirement, not to speak of lucrative jobs and subsidised housing. Those who have them shall be given more.

Income inequality is not the issue, however. The problem is that the gap between the haves and have-nots is widening. It has serious political implications. But essentially it is an ethical question. It reminds us that poverty is an ethical issue. It is related to the fact that development consists of removing various types of `unfreedoms’ that leave people with little choice, as emphasised by Amartya Sen. One of the first important steps in resolving the problem is to improve our knowledge about it. No sensible and sustainable policy can be drawn up to cope with this state of affairs unless there are reliable and comprehensive data available about it. From this point of view, it is of paramount importance for Pakistan to establish an autonomous statistical office with powers to collect, interpret and report its findings for public information, on a regular basis.

The neo-liberal paradigm is in operation in the country, all the same, and it has its impact on various segments of society. The classical economists who invented liberalism, toyed with “subsistence” low wages to establish a stable economic system, but discarded it as soon as they discovered the social implications of the concept (one can read J.S. Mill to refresh one’s memory).

In any case, the factory legislation made it a dead issue. They remained fond of rewards for the rich nevertheless. The rich, who formed the entrepreneurial class, were known to be ‘notoriously’ parsimonious – the ones imbued with Protestant Ethic as the Sociologist Max Weber called them. The rentiers had to be accommodated as well, however. After all one needed them as patrons of the arts.

This is the picture of a society which was promoting the first great industrial revolution in the world. For a transitional society such as Pakistan , with the landed aristocracy, bureaucracy, and the military all together saddled on top of the middle and lower classes, the neo-liberal framework of government policy seems to suit admirably. It is inherently an unstable system, and the long-run implications are not very encouraging.

P.S. First part of this essay was published in Encounter on May 13, 2006.

Reference: 13 January 2007. Encounter, DAWN.
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