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Looking at Poverty, Beyond Lack of Income
Real Nature of Poverty
The issue of poverty is not a statistical issue. It is a human issue. – James Wolfensohn
Poverty is multidimensional. It extends beyond money incomes to education, health care, political participation and advancement of one's own culture and social organization. – Atal Bihari Vajpayee, Former PM, India
The UN Definition of Poverty: The Copenhagen Declaration at the “World Summit on Social Development” describes poverty as “a condition characterized by severe deprivation of basic human needs such as food, shelter, safe drinking water, sanitation, health, education, and information”.
Therefore, human poverty is a situation in life where people are simply unable to meet their minimum basic needs. Having income helps because money can be used to get what one lacks, but income or lack of it alone can’t tell every thing about the life or suffering of the poor. The World Bank uses 1.25 dollars a day measure for extreme poverty; economists generally like to talk of per capita GDP (or GNP). Income poverty lines are fairly common, at least for simplicity: you are either poor or you are not-poor and give clear headcounts. The poverty line picture is just black and white – no shade of gray. They tell nothing about “how far below” or “inequality among the poor” or ”nature of deprivations” the poor are facing.
If the 1.25 dollar line says that both Ethiopia and Uzbekistan have about 40 percent people below poverty line. Can you really say that the poor in the two countries are facing similar hardships? Or, do they have similar living standards? Most certainly not.
The problem with seeing poverty only through the lens of income is that it leaves economic growth as the only option to remove poverty. Moreover, it fails to consider the realities of poverty: the poor also lack skills to earn sufficient money, they are denied credit by the banks, they have no access to quality education and healthcare facilities, and face social discrimination and political marginalization. Poverty is a self perpetuating mess. It is rather naive to expect that just because the economy is doing well, they will suddenly start having good income and come out of poverty.
Thanks to the efforts of eminent economists such as Indian Nobel laureate Amartya Sen and late Dr Mahbub ul Haq of Pakistan, better ways of measuring poverty and human well-being than income have emerged. If the UNDP’s Human Development Index (HDI) launched in 1990 provided the first global tool to probe the standard of living, a bigger thrust was given in 2010 by the Multidimensional Poverty Index (MPI) that uses 10 different indicators to probe various deprivations the poor face.
An application of the MPI analysis on the above two countries reveals an entirely different picture. The MPI tells us that in Ethiopia 90% people are poor but Uzbekistan has just 2 percent multidimensional poor. What we learn from this is that the society in Uzbekistan looks after its people much better than the Ethiopian society - so what if personal income is low. Therefore, poverty is better understood in terms deprivations, not lack of income alone.
Economic Growth Alone is not “Development”
The only purpose of development is to enhance the well being of people and raise their standard of living, for which economic development is an important tool. However, this tool has been converted into an end in itself - and that is the cause of all troubles in the world. Today, when leaders talk of progress they are only referring to GDP growth. Per capita GDP has become another ill-founded measure of progress. It is a well known fact that GDP is just an economic number. It is merely total market value of all goods and services produced during a specified time interval. It can’t distinguish economic activities which are beneficial to people, society and the environment from those that are not.
Consider, for instance, these oddities of GDP: Polluting activities increase the GDP because expenses are involved in the clean up. Crimes boost the GDP due to expenditure on police, security, jails, are legal procedures. Wars and conflicts increase expenditure on weapons. None of these are healthy expenditure. Moreover, as people tend to become self-reliant, the GDP goes down. If a community decides to grow fruits and vegetables together and share or if community members decide to help each other at times of financial crisis, the GDP decreases. Therefore, chasing GDP as a measure of progress means promoting things unnecessary, wasteful and even harmful for people and their well-being.
This has led to senseless consumerism - people mere consume more and more, led by TV commercials, with hardly any enhancement in their well-being. Further, the over focus on economy as if it is the only thing people live for, has created a money based mono-culture where other important aspects of people's lives such as art, culture, spirituality, family and community relations, leisure time etc have become secondary.
The ever expanding economic activities have been also polluting the environment, clearing forests and green cover, killing biodiversity - the net result is global warming and climate change, wonderful topics for research and doctoral thesis!.
What Hubbers Say About Income Poverty
Over 240 Hubbers have responded to this question so far. Not a single one said that money alone is the answer. Clearly, lack of money is a symptom of the problem. Practically, all tend to imply that empowerment is the key to solving poverty. If money were the key, the super rich US would have no poor at all!
Many people say that poverty is a reflection of lack of right development.
Development is “Human Development”
Development must enrich human life and enhance well-being which is not limited to money alone. People's well-being depends upon several aspects of life such as health, education, political freedom, family relations, social participation, sufficient leisure time, cultural enrichment, and healthy environmental. Therefore, development must enhance well-being in all these spheres of life.
It defies commonsense if economy flourishes but people shrivel. GDP growth just for sake of it does not make much sense; it only wastes natural resources. The purpose of flourishing economy is not to create more number of millionaires but bring material prosperity for all including those at the bottom of the society. If poverty persists in a country it is a sure indication of having an imperfect economic system and faulty understanding of development.
Today, it is a world of plenty; the only problem is the highly unequal control and possession of resources and technology. The industrialization in the Western countries lead by technological advancements has given them enormous political power and dominance over rest of the world. Their colonization policies of the past centuries divided the world into two: the so-called “third world” and the "first world." There was tremendous transfer of wealth and resources to feed their industries back home. Even today the similar mindset prevails behind the global treaties under the garb of globalization. The operating principle is still the same and simple: What is good for us is good for everyone. Period.
This mindset has to change if the world has to change.
The tiny Himalayan kingdom, Bhutan rejected GDP as a measure of progress long time ago. Now its holistic approach to development is inspiring the world.
What is the Way Out?
In recent decades many countries have shed headcounts of the poor dramatically – including China, Malaysia, and South Korea. Obviously, experts will differ in explanations but six elements of their efforts stand out:
- Liberal investment in basic education
- Land reforms
- Making credit available to the poor
- High rate of rather evenly distributed economic growth
- Decentralizing decision making and including women empowerment policies
- Providing effective corruption free governance
The State obviously has a definite and proactive role to play. With so many imperfections in the economies and governance of poor nations, leaving everything to the market is a bad idea. Market has its own dynamics that favors the rich and can be brutal or indifferent to the needs of the poor; markets promote efficiency, equity is not their concern; and markets are not made by the poor, governments are. Therefore, the government is very much required to protect the interests of the poor and create policies that promote equity. It is a well known fact that inequalities in extreme levels can trigger social unrest and tear apart the political and social fabric. Perhaps, this is the only fear that the powerful rich ever talk of poor people.
Nobel prize winner of 1998 economist Amartya Sen offers a fresh and more comprehensive perspective on development and poverty that builds around people’s freedom and capabilities.
Development is Expansion of Freedom – Amartya Sen
According to noted economist Amartya Sen, development is the process of expanding people's capabilities and freedom. It necessarily means and involves eliminating all factors that hinder the process – poverty, lack of economic opportunities, social or political discriminations, lack of freedom to raise opinion, unresponsive or oppressive regime, etc. Taken together, all such activities constitute development and lead to enhanced well-being of people.
Freedom means allowing space to people for their growth. Expanding freedom constitute not only the means, but also the end in development. The state assumes the role of supporting these freedoms by providing necessary services and facilities, social safety nets, good macroeconomic policies, and protecting the environment. Thus, economic growth, technology, and industry are tools of development; not development in themselves.
Poverty is Deprivation of Capabilities
According to Sen, each individual is endowed with a certain set of capabilities. It is simply a matter of realizing these capabilities that will enable people to escape from poverty (or from their state of 'un-freedom'). If in today’s world of sheer abundance there are people living in poverty, they are living in a state of 'un-freedom' and hence, are unable to realize their capabilities.
The capability approach has simply revolutionized the approach to poverty measurement. It also recognizes the presence of poverty in the economically rich countries, again in terms of deprivation of capabilities.
Thus, human poverty is a state of capability deprivation that also shows up as “lack of being to earn sufficient income.” Loss of capabilities happens when people lack freedom and opportunities to acquire or expand their abilities. What people are “capable” of becoming or doing (achieving) is influenced by economic opportunities, political liberties and social powers; condition of health and access to medical facilities; access to education and skill development; and encouragement and cultivation of initiatives. Therefore, “capability deprivation” is a better measure of poverty than lowness of income and can result from many sources other than economy.
The inadequacy of income or per capita GDP to reflect the quality of life is not difficult to see. There is some positive correlation, but the relationship is not straightforward. For example, Sri Lanka and the Indian state of Kerala have low per capita GDP but have higher life expectancies and literacy rates than richer countries like Brazil and South Africa. Likewise, the African Americans in the US have lower life expectancy than China or Kerala despite higher average income.
Making economic growth “inclusive” is a welcome step forward; but again economic growth alone can't be considered development.
Work of Dr Mahbub ul Haq
What is REAL Development?
Impact of the New Thinking
The Human Development Approach
Late Dr Mahbub ul Haq (lifelong friend of Professor Amartya Sen, Director at the UNDP) pioneered the series of annual Human Development Reports that began in 1990. It was an attempt to explore and try measuring the quality of human life (human development) beyond the GDP numbers. Given the intrinsic complexity of gauging the level of human well-being, it was a bold initiative. His Human Development Index (HDI) is a composite number derived from three parameters: health, knowledge and standard of living. It certainly gave a lot more information on the quality of life than the GDP and soon the development debates began to shift towards the “human development approach”. It brought out the multifaceted nature of human well-being or lack of it (including poverty) and decisively established the need to examine each facet more carefully.
The first Human Development Report of 1990 defined human development as “a process of enlarging people’s choices” and stated that “income is a means, not an end” of human development (p. 10). It was a major shift away from seeing development as mere economic growth and towards sustainable human development. The annual UNDP reports also began a process of questioning the traditional wisdom of 'trickle down' economics – the only way for the poor to benefit from the economic growth.
Emergence of “Capability” Measures of Poverty
Together the 1996 and 1997 Human Development Reports gave a new direction by defining measures of human deprivation, apart from human development. The path-breaking 1996 Human Development Report introduced the Capability Poverty Measure (CPM), which was the first “multidimensional index of poverty focused on capabilities”. It considers the lack of three basic capabilities with an overall emphasis on women:
(1) The lack of being well nourished and healthy – indicated by the proportion of underweight children under five.
(2) The lack of capability for healthy reproduction – that is, the proportion of births unattended by trained personnel.
(3) The lack of capability to be educated and knowledgeable – measured by level of female illiteracy. The report stated that “unlike income, capabilities are the ends, and they are reflected not in inputs, but in human outcomes—in the quality of people’s lives.”
This CPM supplemented the income poverty measurements and complemented the Human Development Index (HDI). In this evaluation, human capabilities and potentials were directly linked to deprivations experienced by women who are considered as the centre of the family. The value of such a non-income measure becomes apparent if one considers the case of a family where the income earner (generally male) wastes his increased income on non- productive uses such as gambling or drinking.
The 1997 HDR reformulated the capability poverty and produced the human poverty index (HPI), which was explicitly aligned with the three dimensions of the human development index. The HPI did not use income, as the HDI does. Instead, it used indicators for malnutrition and lack of access to healthcare facilities and safe water. This was meant to incorporate measures of the lack of both private income (leading to hunger) and public income (leading to lack of public health services and water supply). In the income approach to poverty it is difficult to account for public income (that goes behind state provided healthcare and education). Further, income has little direct correlation with some basic capabilities like political and social freedom. So income approach cannot capture the full range of human deprivation.
The Human Development Report 2000 focused on 'Human Rights and Human Development' and considerably expanded the linkage between human freedom and human development. In 2010, the UNDP launched the "Multidimensional Poverty Index (MPI)" which considers deprivations more comprehensively in a larger set of capabilities. This approach also provides a convincing argument for the existence of poverty even in affluent countries and is a great tool for the policymakers.
1.4 Billion Reasons
Poverty is a state of deprivation which has multiple dimensions. Trying to measure it in terms of income alone is grossly inadequate. The poor are in fact deprived of capabilities (opportunities and freedom) which may originate from several sources: personal, social and political. Thus, poverty can only be probed by a multidimensional approach, exemplified by say the multidimensional poverty index.
Sustainable poverty removal efforts involve following a human development approach to build the capabilities of the poor.
For Further Reading
- An Introduction to the Human Development and Capability Approach
- Amartya Sen on justice: How to do it better
The Idea of Justice. By Amartya Sen
- Economics focus: A wealth of data
WHAT IS poverty and when is a person poor? Most would agree that poverty involves not having enough of certain things, but there is a better way to measure poverty, beyond income.
- UNDP's Human Development Reports (1990-2013)
The Human Development Report (HDR) was first launched in 1990 with the single goal of putting people back at the center of the development process in terms of economic debate, policy and advocacy.
- Amartya Sen: The taste of true freedom
The Nobel-laureate champion of democratic development for the world's poor, delivers a stinging indictment of India's unequal boom.