Arguments for Pro-Poor Economic Growth Policies - Essay Example

Arguments for Pro-Poor Economic Growth Policies By Presented to Location Due Arguments for Pro-Poor Economic Growth Policies Poverty is a serious problem in the global community especially in developing countries. About three billion people are suffering from poverty related problems. This has made all financial and humanitarian organizations to join efforts in ensuring that that poverty is kicked out of the planet. The Development Assistance Committee which among other things serves to alleviate poverty, issued guidelines to tackle poverty in the globe in 2001 (Ravallion 2003). The guidelines show that poverty has many interlinked dimensions and causes including: human, economic, security, and social-cultural causes. Policies that have been used to tackle poverty since 1970s aim at reducing economic poverty by initiating pro-poor growth. Pro-poor growth is as the term suggests is growth on the part of the poor by raising their I ncomes (Ravallion 2003). Pro-poor growth policies are appropriately set to ensure that sustainable growth is achieved. Pro-poor growth policies should be able to cause rapid and sustainable poverty reduction. This can be ensured through allowing the poor people to participate, contribute and benefit. The argument behind such policies is that the involvement of the poor as both facilitators and beneficiaries is crucial because it ensures long-term growth and sustainable poverty reduction. For the policies to be effective, however, they should deal with all dimensions of poverty including environment and gender. Achievements in any of the dimensions are influenced by achievements in the others. This means that tackling one dimension of poverty cannot reduce poverty as others will curtail progress (Hausmann, Dani & Andres 2006). The policies should also empower the poor so as to ensure that they will not slip back to poverty in the future. If the policies fail in this respect, then the poor will remain poor even with considerable growth in the overall economy. All the processes involved in pro-poor growth should be transparent and accountable to be able to serve the interests of the poor successfully. Sustainable pro-poor growth will help the over three billion people who hardly get their basic need. Pro-poor policies are believed to be effective in that they tend to target the root causes of poverty (gender inequality, limited asset base, and lack of education among others). Initiating pro-poor growth is not possible without identifying and analyzing the major causes of poverty. All stakeholders in government agencies and private sectors have been in the front line to ensure that problems causing poverty are identified and dealt with appropriately. Poverty affects both the developed and developing nations. Its causes are influenced by local situations as well as national and international circumstances (World Bank 2000). In most of the developing countries, international debt covers a big percentage of government expenditure. This has made many developing nations to spend more money in clearing their debts than they use in health and education. One of the pro-poor polices was to ensure that the poor get education and health services (OECD 2006). The world bank and other financial organization as well as private sector have come in to help government in various countries in provision of education and health care to the poor. This has enabled several countries to offer primary education for free. Governments and non-governmental organization have even given free food to school children (World Bank 2000). This helps children to remain in school and pursue their education. Education is a crucial part of pro-poor growth as it provides them with appropriate opportunities to get employment and knowledge to handle challenges successfully. Health services helps the poor stay healthy and be able to pursue their various goals (World Bank 2000). When offered health care services, the poor are able to avoid high medical expenses that make them continue to be poor. The financial sector plays a major role in pro-poor growth. It is able to mobilize savings that can aid in creating employment and productive investment (Besley and Cord 2006). If financial sector can offer stable interest rates, members are able to borrow money for investment and consequently create employment opportunities for the poor. Friendly, long-term credits can influence productivity and investment. The poor are able to acquire money making assets which can aid in reducing poverty (Beck, Demirguc-Kunt and Levine 2004). The international bodies and national stakeholders lobby financial institution to reduce their interest rates in order to enable the poor borrow (Applegarth 2004). This is because lower interest rates lower associated risks and consequently the poor will be willing to take more friendly risks. Financial institutions are also advised to reduce competitions between them as a way of stabilizing economy (Beck, Demirguc-Kunt and Levine 2004). This will help growing economies to avoid financial crises. Economic stability can help the poor grow and consequently stabilize their income. Offering banking services for the poor is also beneficial to them as it provide them with wise ways of managing and spending their money. By doing this, financial institutions will help to avoid macroeconomic crises. Government and financial institution should make micro-credits readily available for the poor (Applegarth 2004). The poor lack collateral and consequently cannot have accesses to the normal credits. Also, they lack verifiable credit history and steady employment. Micro-credits will help the poor receive money on credit and therefore make them rise from their poverty (Hausmann, Dani & Andres 2006). This will be of much benefit to the poor as their living standards and efforts to grow out of poverty will not be ruined. One argument in support of pro-poor policies is that when resources such as land are labor that previously were not in use or were underused are properly engaged in production, people will get out of poverty and the economy will grow faster (Overseas Development Institute 2008, p. 2). Land reforms may help in pro-poor growth in this regard. The many poor people depend on farming for their livelihood. They, however, control a very small section of the available land. In addition, the poor may have no legal rights for their lands and are mostly hired for labor in large farms (Moene 2000). This results into low income and increased poverty. Land reforms are required to redistribute the land among the poor and issue them with title deeds. This will help to increase their food productivity and consequently raise their income. Land security for the poor can easily translate to food security (Moene 2000). Subdivision of land increases food productivity per hectare. These achievements have been witnessed in China and India (Moene 2000). In these countries 10% increase in land ownership among the poor led to 4% increase in food production per person. Particularly in China, shift from large farms to small farms increased land output and many Chinese rose from poverty. This is a clear indicator that land reforms can help to alleviate poverty. In most developing nations, wealthy people on large farms and consequently underutilize them (Besley and Cord 2006). In Africa and Latin America, land reforms have not been effected appropriately because of political interference and collectivist nature of reforms. The Rural Poverty report of 2001 stated that giving land to women and the rural people will definitely reduce household food shortage. Rural areas of the countries hit by poverty have both industrial and agricultural potential. This potential has, however, been hindered by poor infrastructure (Calderon and Servén 2004). Poor infrastructure prevents rural areas from accessing social and economic services (Tamang 2008). Banking institutions and other beneficial organization are not able to operate in regions with poor infrastructure. This makes people in the rural region to lack financial aid, appropriate inputs and access to good transportation system (Oyeranti & Olayiwola 2005). This calls for developers to develop rural infrastructure in order to enable the poor people in the region to access appropriate services (Tamang 2008). Good infrastructure will attract investors and other beneficial institutions. Good transportation system will enable the poor to transport their products to various markets and consequently increase the value of their produces. Also, poor will have access to machinery and consequently improve their productivity (Calderon and Servén 2004). Agricultural machinery means increased production and expansion of agricultural sector. The larger the agricultural sector the more people employed. Agricultural expansion is a big boost poor because it increases their standard of living (Oyeranti & Olayiwola 2005). Modern industrialization mostly focuses much on capital, technology and entrepreneurship. Labor has had a passive role but after several centuries it has proved to be vital in the whole process of industrialization (Sugihara 2007). Labor intensive industrialization has at last turn to be one of the best approaches as it helps to save resources. Many people are able to be employed and raise their standards of living especially the poor. This industrial approach encourages pro-poor growth and therefore should be adopted (Sugihara 2007). Labor intensive approach in production sector will prove to be beneficial to the poor. This is because it promises many chances of employment which promise changes in living standards of the poor (OECD 2006). Initiation of pro-poor growth policies is a big boost to the poor. Conditions in the global community have facilitated income inequality for a long time. Pro-poor growth initiatives have proved to be effective in solving the problem of poverty. All the policies and the measures proposed aimed at creating means for the poor to create income. All sectors of economy are targeted to ensure that they employ as many poor as possible. Employment will ensure that the poor have their sources of income and consequently the experience inequality will be reduced. Agricultural sector is the biggest sector in the countries experiencing high poverty levels. All stakeholders should ensure that all possible inputs are put in place so as to ensure it absorbs many poor people as possible. International community should also come in and help the developing nation to avoid problems associated with climatic changes and natural disasters which affect agricultural productivity. All governments across the world should ensure land reforms so as to allocate some land to the poor to boost their food production. Financial institutions should ensure that financial crises which affect the poor badly do not occur frequently. They should also provide micro-credits to the poor to enable them acquire capital for investment. Education should be provided for the poor in order to give them desired knowledge for increased production. Also all sectors of economy should adopt labor intensive approach so as to absorb the poor and consequently improve their living standards. References Applegarth, P.V. 2004. Capital Market and Financial Sector Development in sub-Saharan Africa, Center for Strategic and International Studies (CSIS), Washington DC Beck, T., A. Demirguc-Kunt, A. and Levine, R. 2004. “Finance, Inequality and Poverty: Cross Country Evidence”, NBER Working Paper 10979. Besley, T., and L. Cord, L. 2006. Delivering on the promise of pro-poor growth. London: Palgrave Macmillan Calderon, C. and Servén, L. 2004. “The Effects of Infrastructure Development on Growth and Income Distribution”, World Bank Policy Research Working Paper 3400. Hausmann, R., Dani R. & Andres V., 2006, ‘Getting the diagnosis right. A new approach to economic reform’, Finance & Development, 43 (1), 12–15 Moene, K. O. 2000. ‘‘Poverty and Land Ownership,’’ American Economic Review, LXXXIII, 52–64. Organization for Economic Co-operation and Development (OECD). 2006. Promoting Pro-Poor Growth. Key policy messages: Private Sector Development; Agriculture; Infrastructure and Harmonizing ex ante Poverty Impact Assessment. Oyeranti, O. & Olayiwola, K. 2005. Policies and Programmes for Poverty Reduction in Rural Nigeria. An Interim Research Report Submitted to the African Economic Research Consortium (AERC), Nairobi for the Second Phase Collaborative Poverty Research Project Ravallion, M. 2003. Pro-Poor Growth: A Primer. Development Research Group, World Bank, Washington DC Sugihara, K. 2007. Labor-intensive Industrialization in Global History. Kyoto Working Papers on Area Studies No. 1 Tamang, D. B. 2008. Rural Infrastructure for Reducing Poverty and Improving Livelihoods. An Overview of the Decentralized Rural Infrastructure and Livelihoods Project (DRILP) in Nepal World Bank 2000, World Development Report: Attacking Poverty, New York: Oxford University Press. Overseas Development Institute 2008, Pro-poor growth and development. Briefing Paper, viewed 20 March, 2014 http://www.odi.org.uk/sites/odi.org.uk/files/odi-assets/publications-opinion-files/825.pdf Read More