Poverty as structural injustice
Tuesday, 14 October 2008
Prof. Rehman Sobhan
THE international development community (IDC) has become much more conscious and committed towards ending the scourge of poverty. However, initiatives to reduce poverty, whether through the Millennium Development Goals (MDGs) or the Poverty Reduction Strategy Papers (PRSPs), through enhancing the flow of resources into poverty reduction programmes, may not be fruitful unless policymakers address the structural sources of the problem which create and perpetuate poverty.
This incapacity to diagnose and address the structural dimensions of poverty has impacted on the policy perspectives of both the lDCs and the policyrnakers of South Asia. The work programme of the Centre for Policy Dialogue (CPD) and South Asian Centre for Policy Studies (SACEPS) is designed to address this deficit in the conception of poverty in order to encourage a rethinking the development strategies across South Asia. Our work addresses the structural dimension of poverty in South Asia and moves to define a set of policy and institutional interventions which could be applied in each of the countries of South Asia.
The central premise of this work seeks to move away from the visualization of poverty as a measure of income deprivation. Within the prevailing conception of poverty changes in the level of poverty are measured through the rise and fall of the incomes of poor people above and below the poverty line, This approach to poverty has been appropriately defined by Professor Anisur Rahman, as the livestock approach to poverty. If people's incomes marginally improves to elevate a percentage of the population above a pre-determined poverty line, this is deemed as poverty reduction.
Another episode of events such as a natural disaster or a severe inflation, which lowers real incomes of a segment of the population, is then seen as an elevation of poverty in the country. To measure the success or failure of public policy through the reduction or enhancement of the percentage of people above or below the poverty line appears not just conceptually challengeable but highly problematic as a guide to policy.
Our work attempts to redefine poverty as a process which excludes significant segments of the population from opportunities to participate on equitable terms in the opportunities for development and decision making in society. Within our definition of poverty those who are denied such opportunities for participation should be termed as the excluded. Eradicating poverty should, thus, be measured through the changes in the opportunity structures for the excluded.
Policies for poverty eradication would involve interventions which open up horizons for the excluded to avail of work, health care, education and assets which are traditionally more readily available to all those who are classified as 'rich'. This inequitable distribution of opportunities across society between the rich and the excluded, is defined in our work as structural injustice. The term 'structural' indicates that exclusion does not derive from the play of market forces but originates in the structural arrangements of society which determine the working of market forces, as well the design and functioning of its institutions.
The assumptions underlying this structuralist perspective on poverty recognizes that neither targetting of development resources to the excluded, nor the promotion of growth, are likely to resolve the problem of poverty. The excluded are embedded in certain inherited structural arrangements such as insufficient access to productive assets as well as human resources, unequal capacity to participate in both domestic and global markets and the undemocratic distribution of political power. These structural features of poverty reinforce each other to effectively exclude a large number of people from participating in the enefits of development or the opportunities provided by more open markets. In such a system even targetted programmes of poverty alleviation carry transaction costs due to the institutional structures which mediate the delivery of resources to the excluded.
It is, however, not enough to recognize the salience of structural issues in the poverty discourse without addressing the political economy which underlies the structural features of a society. Poverty originates in the unequal command over both economic and political resources within the society and the unjust nature of a social order which perpetuates these inequities. Such injustice remains pervasive in most societies exposed to endemic poverty and is particularly manifest across South Asia. Any credible agenda to eradicate poverty in South Asia must seek to correct the structural injustices which perpetuate poverty. The main areas of structural injustice may be addressed in relation to:
l Productive assets
l Markets
l Human Development
l Governance.
It would be appropriate to add the injustice of asymmetrical globalization to the above themes. However, the theme of globalization needs to be addressed as an issue in its own right. Responding to the unequal and immiserising incidence of globalization on countries and social groups around the world merits separate discussion which remains outside the scope of this immediate work.
The Sources of Structural Injustice:
Unequal access to assets: Productive assets provide the main currency which enable people to participate in the market economy. Much attention has been given in recent years by the international development community (IDC) as well as the policy makers of South Asia about the importance of the market in promoting development. However, much less attention is given to who participate in the market and on what terms. In all countries faced with endemic poverty and indeed many middle-income countries, inequitable access to wealth and knowledge disempowered the excluded from participating competitively in the market place. Such inequities are particularly applicable to South Asia where the excluded have little command over productive assets.
Asset poverty remains a significant source of income poverty. Rural poverty, for example, originates in insufficient access to land, water and water bodies for the less privileged segments of rural society. Where the landless or land poor do access such resources they do so under exploitative tenancy arrangements. Those of the land poor who live in urban areas command little in the way of urban property, and have virtually no access to corporate assets.
Inequities in title and access to agrarian assets do not derive from the competitive play of the market but from the injustices of history. In South Asia title to land was mostly appropriated through the exercise power or access to political patronage rather than in the market. Ownership of land has thus been used as a source of social authority as well as a political resource. Retention of land, in such circumstances is not just about its income earning potential but as a measure of political power and position in the social hierarchy. These inequities in the right to land are perpetuated through the malfunctioning of land and capital markets which do not make land readily available to those who most need it or provide them with capital on affordable terms to buy such land. Within such a socio-economic context the concept of freely functioning land markets for the sale or lease of land remains of limited policy relevance.
Such an inequitable access to productive assets in the rural economy of South Asia has kept the region's agricultural performance well below its full productive potential. Small and even subsistence farmers in South Asia have proven to be both more productive than larger farmers and have played a major role in stimulating the growth of crop production over the last four decades. Moreover, these small farmers spend most of their income derived from their meagre assets, in stimulating secondary activity in the rural economy. This has contributed to the significant growth of the non-farm economy which has reportedly contributed to the reduction of income poverty in some South Asian countries.
Where there is a dichotomy between the owners of land and the actual tiller of the land, this serves as a disincentive to both investment of capital, as well as more productive effort on the land. In such circumstances the prevailing dispensation governing access to land lacks not just economic justification but moral as well as social legitimacy. Furthermore, the prevailing structures of land ownership remain inimical to the construction of a functioning democratic order which remains contingent on reducing the relations of domination and dependence which define relations between the land rich and the land poor.
Lack of access to capital and property assets in the urban sector serve as a measure of urban poverty. Lack of landed assets in the urban areas of South Asia, is a reflection of market failure. The homeless remain willing to pay market prices not just for land and housing but for the accompanying utilities in the form of water, sewerage, sanitation, gas and electricity as well as for just law enforcement. Neither private providers nor the state have been able to fully, or in most cases even minimally, respond to this effective demand from the urban excluded. Where the homeless mostly tend to be displaced immigrants from the rural areas, lack of access to property rights' leave then without a legal identity. The urban excluded thus remain insecure, disempowered and without a real stake in the society where they live. This is dangerous not to just to civic peace but to the sustainability of democratic institutions.
Unequal participation in the market
Within the prevailing property structures of society, the resource poor remain excluded from the more dynamic sectors of the market, particularly where there is scope for benefiting from the opportunities provided by globalisation. The fast growing sectors of economic activity tend to be located within the urban economy, where the principal agents of production tend to be the urban elite, who own the corporate assets which underwrite the faster growing sectors of the economy. Even in the export-oriented rural economy, in those areas linked with the more dynamic agro processing sector, a major part of the profits, in the chain of value addition, accrue to those classes who control corporate wealth.
The excluded, therefore, interface with the dynamic sectors of the economy only as primary producers and wage earners, at the lowest end of the production and marketing chain, where they sell their produce and labour under severely adverse conditions. This leaves the excluded with little opportunity for sharing in the opportunities provided by the market economy for value addition to their labours.
The incapacity of the excluded to share in the value addition process derives from institutional failure. As long as the primary producer remains an isolated individual who interfaces with economically more powerful or better organized buyers as well as manufacturers, they will remain condemned to participate in an unequal relationship, held captive at the bottom of the product chain. The incapacity of primary producers to come together through collective action, to enhance their bargaining capacity in the market place, represents a form of institutional failure.
Capital markets also fail the excluded and thereby limit their capability to participate in the more dynamic segments of the market. Capital markets have failed to provide credit to the excluded even though they have in recent years demonstrated their creditworthiness through their low default rates in the micro-credit market inspite of the high rates of interest charged by the microfinance institutions (MFI).
The micro credit market has originated from the non-profit sector as a response to the failure of the formal credit market but has remained segmented from the formal capital market. Micro-credit has served to meet the subsistence needs of the excluded but is not designed to empower them to participate in the macro-economy. The excluded therefore remain impounded in the ghetto of the micro-economy. Structural constraints leave the excluded with little scope for graduation into a level of entrepreneurship where they could compete with those who dominate the macroeconomy.
Nor do formal capital markets provide the financial instruments needed to attract the savings of the excluded and transform these into investment assets in the faster growing corporate sector. This market failure extends to the failure by the insurance companies to provide appropriate insurance products to meet the specific needs of the resource poor in the urban and rural sector. These market failures originate in institutional failure on the part of South Asia's formal corporate financial institutions to restructure their organizations to reach out to the effective demand for capital and financial services by the excluded.
(The writer is chairman of Centre for Policy Dialogue. This paper titled 'Rethinking Poverty Eradication in South Asia: An Agenda for Inclusive Development' was presented at a two-day seminar under SACFPS/CPD project held in Dhaka.)
THE international development community (IDC) has become much more conscious and committed towards ending the scourge of poverty. However, initiatives to reduce poverty, whether through the Millennium Development Goals (MDGs) or the Poverty Reduction Strategy Papers (PRSPs), through enhancing the flow of resources into poverty reduction programmes, may not be fruitful unless policymakers address the structural sources of the problem which create and perpetuate poverty.
This incapacity to diagnose and address the structural dimensions of poverty has impacted on the policy perspectives of both the lDCs and the policyrnakers of South Asia. The work programme of the Centre for Policy Dialogue (CPD) and South Asian Centre for Policy Studies (SACEPS) is designed to address this deficit in the conception of poverty in order to encourage a rethinking the development strategies across South Asia. Our work addresses the structural dimension of poverty in South Asia and moves to define a set of policy and institutional interventions which could be applied in each of the countries of South Asia.
The central premise of this work seeks to move away from the visualization of poverty as a measure of income deprivation. Within the prevailing conception of poverty changes in the level of poverty are measured through the rise and fall of the incomes of poor people above and below the poverty line, This approach to poverty has been appropriately defined by Professor Anisur Rahman, as the livestock approach to poverty. If people's incomes marginally improves to elevate a percentage of the population above a pre-determined poverty line, this is deemed as poverty reduction.
Another episode of events such as a natural disaster or a severe inflation, which lowers real incomes of a segment of the population, is then seen as an elevation of poverty in the country. To measure the success or failure of public policy through the reduction or enhancement of the percentage of people above or below the poverty line appears not just conceptually challengeable but highly problematic as a guide to policy.
Our work attempts to redefine poverty as a process which excludes significant segments of the population from opportunities to participate on equitable terms in the opportunities for development and decision making in society. Within our definition of poverty those who are denied such opportunities for participation should be termed as the excluded. Eradicating poverty should, thus, be measured through the changes in the opportunity structures for the excluded.
Policies for poverty eradication would involve interventions which open up horizons for the excluded to avail of work, health care, education and assets which are traditionally more readily available to all those who are classified as 'rich'. This inequitable distribution of opportunities across society between the rich and the excluded, is defined in our work as structural injustice. The term 'structural' indicates that exclusion does not derive from the play of market forces but originates in the structural arrangements of society which determine the working of market forces, as well the design and functioning of its institutions.
The assumptions underlying this structuralist perspective on poverty recognizes that neither targetting of development resources to the excluded, nor the promotion of growth, are likely to resolve the problem of poverty. The excluded are embedded in certain inherited structural arrangements such as insufficient access to productive assets as well as human resources, unequal capacity to participate in both domestic and global markets and the undemocratic distribution of political power. These structural features of poverty reinforce each other to effectively exclude a large number of people from participating in the enefits of development or the opportunities provided by more open markets. In such a system even targetted programmes of poverty alleviation carry transaction costs due to the institutional structures which mediate the delivery of resources to the excluded.
It is, however, not enough to recognize the salience of structural issues in the poverty discourse without addressing the political economy which underlies the structural features of a society. Poverty originates in the unequal command over both economic and political resources within the society and the unjust nature of a social order which perpetuates these inequities. Such injustice remains pervasive in most societies exposed to endemic poverty and is particularly manifest across South Asia. Any credible agenda to eradicate poverty in South Asia must seek to correct the structural injustices which perpetuate poverty. The main areas of structural injustice may be addressed in relation to:
l Productive assets
l Markets
l Human Development
l Governance.
It would be appropriate to add the injustice of asymmetrical globalization to the above themes. However, the theme of globalization needs to be addressed as an issue in its own right. Responding to the unequal and immiserising incidence of globalization on countries and social groups around the world merits separate discussion which remains outside the scope of this immediate work.
The Sources of Structural Injustice:
Unequal access to assets: Productive assets provide the main currency which enable people to participate in the market economy. Much attention has been given in recent years by the international development community (IDC) as well as the policy makers of South Asia about the importance of the market in promoting development. However, much less attention is given to who participate in the market and on what terms. In all countries faced with endemic poverty and indeed many middle-income countries, inequitable access to wealth and knowledge disempowered the excluded from participating competitively in the market place. Such inequities are particularly applicable to South Asia where the excluded have little command over productive assets.
Asset poverty remains a significant source of income poverty. Rural poverty, for example, originates in insufficient access to land, water and water bodies for the less privileged segments of rural society. Where the landless or land poor do access such resources they do so under exploitative tenancy arrangements. Those of the land poor who live in urban areas command little in the way of urban property, and have virtually no access to corporate assets.
Inequities in title and access to agrarian assets do not derive from the competitive play of the market but from the injustices of history. In South Asia title to land was mostly appropriated through the exercise power or access to political patronage rather than in the market. Ownership of land has thus been used as a source of social authority as well as a political resource. Retention of land, in such circumstances is not just about its income earning potential but as a measure of political power and position in the social hierarchy. These inequities in the right to land are perpetuated through the malfunctioning of land and capital markets which do not make land readily available to those who most need it or provide them with capital on affordable terms to buy such land. Within such a socio-economic context the concept of freely functioning land markets for the sale or lease of land remains of limited policy relevance.
Such an inequitable access to productive assets in the rural economy of South Asia has kept the region's agricultural performance well below its full productive potential. Small and even subsistence farmers in South Asia have proven to be both more productive than larger farmers and have played a major role in stimulating the growth of crop production over the last four decades. Moreover, these small farmers spend most of their income derived from their meagre assets, in stimulating secondary activity in the rural economy. This has contributed to the significant growth of the non-farm economy which has reportedly contributed to the reduction of income poverty in some South Asian countries.
Where there is a dichotomy between the owners of land and the actual tiller of the land, this serves as a disincentive to both investment of capital, as well as more productive effort on the land. In such circumstances the prevailing dispensation governing access to land lacks not just economic justification but moral as well as social legitimacy. Furthermore, the prevailing structures of land ownership remain inimical to the construction of a functioning democratic order which remains contingent on reducing the relations of domination and dependence which define relations between the land rich and the land poor.
Lack of access to capital and property assets in the urban sector serve as a measure of urban poverty. Lack of landed assets in the urban areas of South Asia, is a reflection of market failure. The homeless remain willing to pay market prices not just for land and housing but for the accompanying utilities in the form of water, sewerage, sanitation, gas and electricity as well as for just law enforcement. Neither private providers nor the state have been able to fully, or in most cases even minimally, respond to this effective demand from the urban excluded. Where the homeless mostly tend to be displaced immigrants from the rural areas, lack of access to property rights' leave then without a legal identity. The urban excluded thus remain insecure, disempowered and without a real stake in the society where they live. This is dangerous not to just to civic peace but to the sustainability of democratic institutions.
Unequal participation in the market
Within the prevailing property structures of society, the resource poor remain excluded from the more dynamic sectors of the market, particularly where there is scope for benefiting from the opportunities provided by globalisation. The fast growing sectors of economic activity tend to be located within the urban economy, where the principal agents of production tend to be the urban elite, who own the corporate assets which underwrite the faster growing sectors of the economy. Even in the export-oriented rural economy, in those areas linked with the more dynamic agro processing sector, a major part of the profits, in the chain of value addition, accrue to those classes who control corporate wealth.
The excluded, therefore, interface with the dynamic sectors of the economy only as primary producers and wage earners, at the lowest end of the production and marketing chain, where they sell their produce and labour under severely adverse conditions. This leaves the excluded with little opportunity for sharing in the opportunities provided by the market economy for value addition to their labours.
The incapacity of the excluded to share in the value addition process derives from institutional failure. As long as the primary producer remains an isolated individual who interfaces with economically more powerful or better organized buyers as well as manufacturers, they will remain condemned to participate in an unequal relationship, held captive at the bottom of the product chain. The incapacity of primary producers to come together through collective action, to enhance their bargaining capacity in the market place, represents a form of institutional failure.
Capital markets also fail the excluded and thereby limit their capability to participate in the more dynamic segments of the market. Capital markets have failed to provide credit to the excluded even though they have in recent years demonstrated their creditworthiness through their low default rates in the micro-credit market inspite of the high rates of interest charged by the microfinance institutions (MFI).
The micro credit market has originated from the non-profit sector as a response to the failure of the formal credit market but has remained segmented from the formal capital market. Micro-credit has served to meet the subsistence needs of the excluded but is not designed to empower them to participate in the macro-economy. The excluded therefore remain impounded in the ghetto of the micro-economy. Structural constraints leave the excluded with little scope for graduation into a level of entrepreneurship where they could compete with those who dominate the macroeconomy.
Nor do formal capital markets provide the financial instruments needed to attract the savings of the excluded and transform these into investment assets in the faster growing corporate sector. This market failure extends to the failure by the insurance companies to provide appropriate insurance products to meet the specific needs of the resource poor in the urban and rural sector. These market failures originate in institutional failure on the part of South Asia's formal corporate financial institutions to restructure their organizations to reach out to the effective demand for capital and financial services by the excluded.
(The writer is chairman of Centre for Policy Dialogue. This paper titled 'Rethinking Poverty Eradication in South Asia: An Agenda for Inclusive Development' was presented at a two-day seminar under SACFPS/CPD project held in Dhaka.)