Development and Poverty Reduction

A Global Comparative Perspective

Yongnian Zheng, Jiwei Qian, Yongnian Zheng, Jiwei Qian

• Publisher: Routledge
• Year: 2019
• eBook ISBN: 9781000650556
• Edition: 1
• Topic: Scienze sociali
• Subtopic: Studi sullo sviluppo globale

Although the absolute number of poor people in the world has declined significantly in recent decades, poverty reduction continues to be a very important issue. There still are very large numbers of poor people, relative poverty is an increasingly concerning problem, and progress on poverty reduction varies enormously from one part of the world to another. Factors contributing to poverty reduction include economic growth, economic integration, and specific poverty-reduction programs, which are often initiated by Western countries. This book considers poverty reduction from a global perspective. Development and Poverty Reduction looks at a wide range of specific subjects, across all continents. It highlights in particular how the issues are perceived from a non-Western perspective and especially how the rise of China is both having a profound impact on poverty reduction globally and also changing the overall way in which development and poverty reduction are approached.

Chapter 4 of this book is freely available as a downloadable Open Access PDF at http://www.taylorfrancis.com under a Creative Commons Attribution-Non Commercial-No Derivatives (CC-BY-NC-ND) 4.0 license.

Part I

Background discussions

1 Introduction

Poverty reduction in comparative perspective

Yongnian Zheng and Jiwei Qian

Development and poverty governance remain key issues around the world today. Since the mid-twentieth century, economic development has been intimately linked to poverty reduction. The general belief is that the benefits from economic development will automatically trickle down to the poor and will lead to poverty reduction. Internationally, in 2000, the UN Millennium Declaration aimed to halve global poverty by 2015. The target was met five years ahead of the 2015 deadline. Indeed, in the past decades, the numbers of the absolute poor in the world have been significantly reduced. The number of people living below US$1.9 a day in Purchase Power Parity (PPP) terms was reduced from 1.87 billion in 1990 to 783 million in 2013 (World Bank 2018). This is reflected in the world’s two most populous countries, namely, India and China. In India, the rural poverty headcount ratio had decreased from over 60 percent in the mid-1960s to below 15 percent in 2012 (Datt et al. 2016). In China, the total number of rural population living below the official poverty line was reduced from 220 million in 1980 to about 56 million in 2015 (Qian 2016).

However, since the 2008 global financial crisis, global economic recovery has been slowing down, while the wealth gap resulting from economic development has widened in both developing and developed nations. The widening income inequality is already posing a major challenge to social justice worldwide. Global governance now will have to transcend the traditional growth strategy based on the neoliberal ideology, enhance governments’ abilities to implement social policies and deliver public services, develop effective poverty alleviation strategies, and effectively promote social welfare and freedom.

Developed and developing countries alike face the challenges resulting from development and poverty reduction. According to US Statistics, there are still more than 836 million people living in poverty, or on less than US$1.5 a day. The majority of these individuals live in developing countries, especially in Sub-Saharan Africa (SSA) and Southeast Asia. Such situations have led to social and political instability in developing countries. For developed countries, economic transformation, free movements of capital and globalization have exacerbated social inequality, forcing governments to rely on social welfare to minimize the effects of poverty on society; nevertheless, such government-sponsored welfare has led to significant government debts. When governments can ill afford such expensive welfare programs, street riots become prevalent.

Poverty reduction remains an extremely important policy issue for several reasons. First, the number of people in absolute poverty is still huge. In 2010, about 41 percent of the population in the developing world were living on less than US$2 per day (Alvaredo and Gasparini 2015). Second, relative poverty, which refers to poverty that is “contingent on the average standard of living” (Ravallion 2015: 2004), is becoming an important issue, suggesting that poverty is also a significant issue, even for the developed world. For example, in Italy, about 19.7 percent of its population was living below 60 percent of the median income in 2008, which was set as the poverty line for the EU (Marx, Nolan, and Olivera 2015). Third, poverty is persistent in many countries because there are critical constraints preventing access to health care and education (Rodrik and Rosenzweig 2010). While absolute poverty is defined by the income level, some dimensions of poverty measurement other than income are considered to be very relevant for poverty reduction. The dimensions of poverty measurement could be multiple, including income, education, health, and others. The United Nations Development Programme (UNDP) has constructed a Multidimensional Poverty Index that includes health, education, standard of living, and so on.¹

China as an example of effective poverty reduction

Since the reform and opening up, China has made remarkable progress in economic development, along with poverty reduction. Indeed, China has been regarded as the paramount example of effective poverty reduction. The role of the government in promoting economic development and poverty reduction cannot be underestimated. Poverty reduction, in particular, rural poverty alleviation, has been a very important policy area in China since the 1980s, and particularly so in the Xi Jinping era (since 2012). Since the 1980s, China has initiated development programs to reduce poverty, in particular, in rural areas. Between 1990 and 2011, the number of people living on an income of less than US$1.25 a day (at 2005 prices) in China dropped from 689 million to 250 million (UNDP 2015). The Millennium Development Goals to reduce poverty were achieved 10 years ahead of the stipulated deadline (ibid.).

Economic growth and poverty alleviation have been closely linked in the development process of China. Between the 1980s and the 2000s, poverty reduction policies were largely regional and development-oriented. In the 1980s, 331 key national poverty counties were nominated and resources for poverty reduction were channeled to economic development and revenue-generating activities in these counties. National-level poverty-stricken counties were first designated in 1986. Since 1994, 592 counties have been designated as national-level poverty-stricken counties (guojiaji pinkunxian) (Qian 2016).

The gap between the nation as a whole and key national-level poverty-stricken counties in terms of poverty headcount ratio (i.e., the share of the poor in total population) had narrowed from 15 percent in 2002 (i.e., nation: 24.3 percent and key counties 9.2 percent) to 5.5 percent in 2010 (i.e., nation: 8.3 percent and key counties 2.8 percent) (ibid.).

One important concern from this period is that poverty alleviation policies should take into consideration the reasons for poverty and the accuracy in targeting the rural poor. The effects of many poverty reduction programs are heterogeneous and context-dependent. For example, migration policies are effective in some national-level poverty-stricken counties with a poor natural environment.

Many beneficiaries of the poverty reduction programs are, however, not the rural poor. While income level has been the major criterion for targeting the poor, in accordance with much research in other developing countries, poverty is multidimensional and could include income, education, health, and others. The UNDP has thus constructed a multidimensional poverty index to include criteria, such as health, education, standard of living, among others.

Also, the effects of the programs may not be enduring. Some rural poor (over 62 percent of 35 million in 2009) (Ye, Zhao, and Sun 2013), who had been lifted out of poverty were soon found to have fallen back into poverty (Chen, Mu, and Ravallion 2009; Meng 2013).

Further, income inequality has become increasingly serious, given the achievements of poverty reduction. It has been observed that the trend of the Gini coefficient of household income per capita has been increasing. Between 1984 and 2017, the Gini coefficient increased from 0.277 to 0.467. In 2008, the Gini coefficient of China peaked at 0.491, among the highest in the world.² Households with low income may have difficulty accessing public services. Since the 1990s, the provision of public services has been marketized after the government retreated from providing and funding public services. People have to pay user fees to access public services (Wong and Bird 2008). For example, for junior secondary school education, students in the rural areas were charged over RMB102 on average for miscellaneous fees in 1999 (Lv et al. 2004), which accounted for about one-sixth of the rural poverty line in that year.

The 13th Five-Year Outline Plan approved by the National People’s Congress in March 2016 has set establishing a Xiaokang or an all-round moderately prosperous society by 2020 as the major target between 2016 and 2020.³ In this context, lifting rural residents out of poverty is an indispensable task when building a moderately prosperous society.

The 13th Five-Year Outline Plan stipulates that China should reduce the number of national-level poverty-stricken counties and the number of the rural poor to zero by 2020. In November 2018, it was announced by the State Council Leading Group Office of Poverty Alleviation and Development that the number of poverty-stricken counties reduced by 153 in 2016 and 2017.⁴ The 2017 target was to lift over 10 million rural residents out of poverty, and this was backed by a substantial increase of more than 30 percent in 2017 government expenditure in the central government’s fund earmarked for poverty alleviation above that in 2016.⁵

To achieve these goals, social safety nets have been initiated and expanded in the rural areas to protect the poor, through the implementation of the rural social assistance and rural social security programs in 2007 and 2009, respectively. By February 2018, rural social assistance programs covered about 39.4 million rural residents.⁶ In addition, over 144 million enrollees claimed pension benefit from the social security scheme in 2017 and most of them are residents of rural areas.⁷

Therefore, it is important for both scholarly research and policy research if China’s experience is examined in the global context of economic development and poverty reduction. With this aim in mind, in August 2017, the Institute of Public Policy, an independent research institute affiliated with the South China University of Technology in Guangzhou, invited scholars from Europe, the USA, East Asia, South Asia, Africa, Latin America, and Mainland China to discuss the experiences and challenges faced by countries in their global development and poverty reduction initiatives. The conference aimed to deepen the understanding of the issues of poverty reduction through analyses of poverty governance experience in China and around the world.

The chapters in this volume are those originally presented at that conference even though some of the papers were also presented elsewhere. All the papers have been revised to fit our general theme of economic development and poverty reduction. All the contributors hope that this volume can aid in our understanding of worldwide poverty today.

Poverty, inequality, and economic growth

In earlier research, it was questioned whether economic growth is useful for poverty alleviation. For example, Dollar and Kraay (2002: 195) comment, “The world economy grew while during the 1990s, there is intense debate over the extent which the poor benefit from the growth.” Recent research in the literature shows that economic growth is highly relevant to poverty reduction (e.g., Bourguignon 2004; Aghion and de Aghion 2006). In particular, the rapid economic growth in the past decades in China and India was associated with large-scale poverty reduction. Rapid economic growth is likely to facilitate the structural transformation from the agricultural sector to the manufacturing and service sectors, thus raising the income/wage level and alleviating poverty (Eswaran and Kotwal 2006).

While economic growth can lift people out of poverty, economic inequality may also be positively associated with poverty. From the recent dataset of 38 countries, including both developed and developing countries (i.e., the Luxembourg Income Study),⁸ a 10-point increase in the Gini coefficient is associated with a 6 percentage point increase in relative poverty (Morelli, Smeeding, and Thompson 2015: 618). Inequality may also be linked to institutions with limited access to economic opportunities (Engerman and Sokoloff 2006; North, Wallis, and Weingast 2009; Acemoglu and Robinson 2012) as there is a lack of investment in public goods and human capital.

In the literature, poverty, economic inequality, and economic development are interconnected (e.g., Bourguignon 2004; Ferreira 2010). In this context, policies, including structural transformation, institutions, development policy, foreign aid, and human capital accumulation, are very important.

However, the way economic growth or inequality can affect poverty reduction could be highly country-specific and related to policies and economic, political, and social conditions there. Poverty affects developing countries in a heterogeneous way at different stages of their economic development. The income differences among developing countries could be more than a factor of 20. Further, the inequality in the political and economic orders can also be related to the quality of the institutions (e.g., the capability of the bureaucracy) in the process of economic development and reducing inequality (e.g., North et al. 2013). For example, in the past few decades, East Asia’s economic growth policies have been highlighted, in which an export-oriented growth strategy, industrial policy, and an investment driven economy are major features. Many of these policies were connected to the capability of the bureaucracy (e.g., Johnson 1982; Hayami and Godo 2005: 275). Nevertheless, in the Southeast Asian countries or Sub-Saharan Africa, policy implementation could differ greatly, given different initial conditions.

The impact of social policies on poverty reduction could also be country-specific. For example, it has been well observed that conditional ...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Table of Contents
• List of figures
• List of tables
• Notes on contributors
• Acknowledgments
• List of abbreviations
• PART I: Background discussions
• PART II: America
• PART III: Africa
• PART IV: Southeast Asia
• PART V: East Asia
• Index