POLICIES FOR POVERTY ALLEVIATION

The phenomenon of mass poverty in developing countries and its relationship to the development process has been the subject of intense study for the past two decades. As a result, a considerable consensus has emerged on a number of issues. The pessimistic view that the growth process in developing countries has the perverse effect of actually accentuating poverty commands far fewer followers today than it once did. It is now widely recognized that the process of growth in most countries, even if not as equitable as might be wished, has at least led to significant improvements in the conditions of living of the poor. However, it is also evident that in many countries the pace of improvement has been slow, and in general much below expectations.

Notable examples of success in overcoming mass poverty can be cited from very different types of development strategies adopted such as in the Republic of Korea and Taipei, China on the one hand, and the People's Republic of China on the other. Impressive gains also appear to have been made more recently in Malaysia and Thailand. But elsewhere in Asia, as also in other parts of the developing world, the record is much less en¬couraging. This is partly because in many countries the pace of growth, especially in per capita terms, has been only modest. It is also partly because the nature of growth in many cases has been such as to limit the percolation of benefits to the poor. And yet expectations and political consciousness have increased dramatically in all developing countries requiring immediate and visible progress in poverty alleviation.

 Asset Ownership, Income Generation and Poverty

The income of a household is the sum of what it earns from the various income earning assets which it commands, e.g., land, capital and labour of various levels of skill. In an accounting sense, therefore, the distribution of income across households or the extent of poverty is simply the resultant of two outcomes of the development process: (i) the distribution of income-earning assets across households; and (ii) the rate of return or income earned by these assets in the relevant factor markets. To influence the extent of inequality or the extent of poverty in the process of development, it follows that we must either seek to influence the factors which determine the distribution of income-earning assets across households or the factors which determine the earnings of these assets.

 The Indirect Approach: Poverty Alleviation through Growth

Detailed prescriptions for the policy framework which maximizes the impact of growth on poverty alleviation would necessarily vary from country to country but some broad generalizations are possible based on what we have learned from experience. In this section we examine five key factors which are likely to have a powerful impact on incomes of the poor and consider the scope for policy intervention in each area. These areas are the availability of land, the scope for employment generation in agricul¬ture, the pace of employment generation in the non-agriculture sector, human resource development and population control.

 Availability of Land

We have already noted that ownership of land is an important determinant of poverty among rural households. Unfor¬tunately, this is also an area where the dynamics of the growth process is unlikely to operate in favour of poorer households. On the contrary, in a situation where land is already scarce and demographic pressures are mounting, one would expect to see continuing fragmentation of landholdings for most categories of landholders, with a consequent increase in both landlessness and the extent of marginal sized holdings. Growing pressure of population on land also weakens the position of smaller tenant farmers, especially in a situation where tenancy reforms have either not been carried out or are ineffective.

 Employment Generation in Agriculture

The objective of raising incomes of the rural poor is also served by the expansion of employment opportunities in agriculture in general. In fact, as demographic pressures lead to an increase in landlessness, the dependence of the rural poor on wage employment is likely to increase. Since the bulk of the land area under cultivation is in the non-small farm sector—in India, for example, 75 per cent of the land is in operational holdings above the 2.5 ha cut-off level which defines small farms—a large part of the employment in agriculture must necessarily come from other than small farms. The pace of expansion of this sector and the employment effect of technological changes taking place in this sector are therefore of crucial importance for the rural poor.

 Employment in the Non-Agriculture Sector

Since agricultural growth will provide only limited possibilities for labour absorption, because of the considerations outlined above, the burden of absorbing additions to the rapidly growing labour force must be shared by rapid employment expansion in the non-agriculture sector. This was the process envisaged in the classic dual economy growth models with rapid growth in the non-agriculture sector leading to progressive shifts of the labour force from the low-productivity low-income agriculture sector into high-productivity high-income non-agricultural employment. The process was expected to provide expanding employment opportunities for the poor in the non-agriculture sector, while simultaneously easing the pressure of population in agriculture, thus leading sooner or later to higher wages for those who remained in agriculture. There are obvious virtuous circles here which could become very strong over time. As the size of the non-agriculture sector increases relative to the agriculture sector, its growth has a greater potential impact on poverty through a larger capacity to absorb surplus labour from agriculture.

 Human Resource Development

Thus far, we have considered only the factors which determine the demand for labour in the growth process. Action on the supply side of the labour market is equally important to ensure a viable, labour-using growth process. There are limits to the extent to which unskilled or poorly trained labour can be absorbed productively in the non-agriculture sector. On the other hand, an abundant supply of skilled and well-trained labour is likely to encourage the establishment and expan¬sion of labour-using activities, generating both wage employment and self-employment possibilities.

SOURCE: "Poverty and Public Policy" World Development

The author of this article is Asst. Professor, Pioneer Institute of Professional Studies, Indore