Economic growth to win against poverty
Saturday, 9 June 2007
Syed Ishtiaque Reza
BANGLADESH'S growth performance was relatively modest throughout the period of post-Independence. Recently, it has turned faster. Notwithstanding the relatively slow income growth and modest pace of income poverty reduction, Bangladesh's achievements in the broad area of human development were faster, and in some respects, were truly remarkable. Donors and the governments say that the winds of change that swept the Bangladesh society over the past two decades were truly remarkable on many counts.
Yet for more than three decades, a big chunk of the country's population remain desperately poor and denied of the minimum conditions for human existence.
There has been an impressive decline in infant and child mortality rate since the mid nineties. But still a large number of people are illiterate and millions of children are crippled or blinded due to malnourishment.
For decades together the challenge for the Bangladesh economy is to achieve sustainable poverty reduction. But the growing mismatch between income and non-income dimensions of poverty and between advanced and backward areas in both rural and urban sectors, is affecting all efforts.
Economic growth matters for faster human development. For long the philosophy of development has been the achieving of higher growth. Along with higher growth people saw that the rich-poor gap also widened alarmingly throwing a big chunk of them in hardcore poverty. Economic growth, should be truly in line with the spirit of social progress if it can protect and care for a healthy and decent environment.
So it is clear that the developmental process that the country wants is not simply a higher growth rate. And it is not also an non-government organisation (NGO), system to slightly improve the income level of a section of the poor making them dependent on credit until death.
In fact, growth is not the only route to development with honour. Not that increase in production is not a necessary condition for poverty eradication. It is not practical to let growth take place and then to have it redistributed to the poor and needy. Growth is a summation of the wide-ranging production-oriented activities taking place in the economy. In our country the goods produced are determined largely by those who have high levels of purchasing power.
It is felt by many that a basic requirement for poverty eradication is to ensure that the poor have purchasing power. This is not to be achieved by distributing cash to those who need it. The way out is to provide employment to anyone who needs it at a reasonable wage rate, and to ensure that such employment generates goods and services. Since the vast majority of our population have low purchasing power, that leaves them in deficit in terms of goods such as food, clothes and housing facilities and services such as education and health, it can be seen as a democratic solution.
However this is not an approach to limit the growth. There is no way to go against increased foreign trade and also no other better option than opening up the economy to foreign capital.
But the bottom line is that the economy here should be largely domestic-oriented, systematically generating an expanding domestic market and domestic capital formation.
Poverty can be reduced in different ways as poverty is caused by many factors. Despite the diverse nature of causes of poverty, one can group them into some broad policy-relevant categories. Poverty can be influenced by employment, income transfer programmes and social mobilisation.
The main philosophy of any development planning should be creating opportunities for all members of the labour force to earn a minimum acceptable level of living. The development process in Bangladesh has not yet become a mass movement. It cannot become effective until it becomes a movement. If development is for the people, it has to be by the people also.
It is known that lack of fiscal prudence can lead to high inflation, discourage private investment, and adversely affect social sector investments. All of these hurt the poor.
However, there is hardly any dispute over the importance of rapid and pro-poor economic growth for faster poverty reduction. This requires broadening access of the poor to physical capital, human capital, and technological progress, which, in turn, would have favourable impacts on income and employment of the poor. Investment in physical infrastructures such as road, electricity, gas, telecommunication as well as new technology for both agriculture and non-agricultural sectors are important avenues for increasing access of the poor to physical capital and technological progress. Policies that directly promote human development of the poor include investments in education, health and nutrition, with special attention to the quality of such investments. Hence, the focus should be not just on raising capability of the poor, but also on fostering creativity of the poor.
BANGLADESH'S growth performance was relatively modest throughout the period of post-Independence. Recently, it has turned faster. Notwithstanding the relatively slow income growth and modest pace of income poverty reduction, Bangladesh's achievements in the broad area of human development were faster, and in some respects, were truly remarkable. Donors and the governments say that the winds of change that swept the Bangladesh society over the past two decades were truly remarkable on many counts.
Yet for more than three decades, a big chunk of the country's population remain desperately poor and denied of the minimum conditions for human existence.
There has been an impressive decline in infant and child mortality rate since the mid nineties. But still a large number of people are illiterate and millions of children are crippled or blinded due to malnourishment.
For decades together the challenge for the Bangladesh economy is to achieve sustainable poverty reduction. But the growing mismatch between income and non-income dimensions of poverty and between advanced and backward areas in both rural and urban sectors, is affecting all efforts.
Economic growth matters for faster human development. For long the philosophy of development has been the achieving of higher growth. Along with higher growth people saw that the rich-poor gap also widened alarmingly throwing a big chunk of them in hardcore poverty. Economic growth, should be truly in line with the spirit of social progress if it can protect and care for a healthy and decent environment.
So it is clear that the developmental process that the country wants is not simply a higher growth rate. And it is not also an non-government organisation (NGO), system to slightly improve the income level of a section of the poor making them dependent on credit until death.
In fact, growth is not the only route to development with honour. Not that increase in production is not a necessary condition for poverty eradication. It is not practical to let growth take place and then to have it redistributed to the poor and needy. Growth is a summation of the wide-ranging production-oriented activities taking place in the economy. In our country the goods produced are determined largely by those who have high levels of purchasing power.
It is felt by many that a basic requirement for poverty eradication is to ensure that the poor have purchasing power. This is not to be achieved by distributing cash to those who need it. The way out is to provide employment to anyone who needs it at a reasonable wage rate, and to ensure that such employment generates goods and services. Since the vast majority of our population have low purchasing power, that leaves them in deficit in terms of goods such as food, clothes and housing facilities and services such as education and health, it can be seen as a democratic solution.
However this is not an approach to limit the growth. There is no way to go against increased foreign trade and also no other better option than opening up the economy to foreign capital.
But the bottom line is that the economy here should be largely domestic-oriented, systematically generating an expanding domestic market and domestic capital formation.
Poverty can be reduced in different ways as poverty is caused by many factors. Despite the diverse nature of causes of poverty, one can group them into some broad policy-relevant categories. Poverty can be influenced by employment, income transfer programmes and social mobilisation.
The main philosophy of any development planning should be creating opportunities for all members of the labour force to earn a minimum acceptable level of living. The development process in Bangladesh has not yet become a mass movement. It cannot become effective until it becomes a movement. If development is for the people, it has to be by the people also.
It is known that lack of fiscal prudence can lead to high inflation, discourage private investment, and adversely affect social sector investments. All of these hurt the poor.
However, there is hardly any dispute over the importance of rapid and pro-poor economic growth for faster poverty reduction. This requires broadening access of the poor to physical capital, human capital, and technological progress, which, in turn, would have favourable impacts on income and employment of the poor. Investment in physical infrastructures such as road, electricity, gas, telecommunication as well as new technology for both agriculture and non-agricultural sectors are important avenues for increasing access of the poor to physical capital and technological progress. Policies that directly promote human development of the poor include investments in education, health and nutrition, with special attention to the quality of such investments. Hence, the focus should be not just on raising capability of the poor, but also on fostering creativity of the poor.