Poverty and Exclusion in North and South

Elizabeth Dowler, Paul Mosley, Elizabeth Dowler, Paul Mosley

• Publisher: Routledge
• Year: 2005
• ISBN:
  9781134450060
• Edition: 1
• Topic: Business
• Subtopic: Business generale
• Index: Business

Over the past decade there has been a worrying increase in poverty in the industrialised countries of the "North", while many of the developing countries of the "South" have experienced some improvement. This collection argues that there are a number of likenesses between the predicaments of North and South, and that these warrant further investigation and analysis.

1 Introduction

Paul Mosley and Elizabeth Dowler

‘The end of history’, Ravi Kanbur has reminded us, ‘lasted such a short time’. Writing in the wake of the anti-globalisation protests at Seattle, Gothenburg and Genoa, but prior to the terrorist attacks of 11 September 2001, Kanbur was referring specifically to the breakdown of ‘convergence’ for many countries and specifically of consensus concerning what should be done about global poverty and inequality. As the chief editor and inspirer of the World Bank’s World Development Report 2000/01 on poverty, Kanbur had helped achieve an important redefinition of what poverty is, but in many detailed areas of policy had stopped short of detailed prescriptions concerning what should be done about it. Agreement in reaching such policies, he argued, was impeded by differences in the points of departure of the protagonists – concerning not only their definition of poverty but also their ‘units of account’, including whose poverty was being measured, at what level of aggregation, within what market structure, over how long a period (Kanbur 2001: 1083).

In the presence of such deep cleavages of opinion it might seem foolish to search once again for areas of common ground on anti-poverty policy, and yet this is what is attempted here. Following some analysis of the driving forces underlying such policies, we then seek to define what is agreed and what is contentious about them. The distinguishing features of our approach are, first, the attempt at an integrated treatment of poverty in ‘northern’ and ‘southern’ environments but also, second, the extensive incorporation of the views of development and social policy practitioners as well as those of academic researchers.

To fix ideas, it is worth reminding ourselves that, in the decade or so before the millennium and following the period of global crisis and structural adjustment in the 1980s, poverty trends – using the dollar-a-day definition which Kanbur’s report partly supplanted – were as follows. Within developing countries there were dramatic falls in poverty and large increases, as recorded in Table 1.1, in Africa and in Europe and the former Soviet Union. Within industrialised countries there were substantial increases in, specifically, child poverty.¹ Many have sought to decompose these increases into ‘transient’, ‘conjunctural’ or simply ‘new’ poverty induced by structural adjustment (which is demand-related and can be reduced by demand-side policies) and ‘chronic’, ‘persistent’ or ‘old’ poverty (which is related to productivity and can only be reduced by supply-side policies such as improvements in health, education and infrastructure).

Table1.1 Income poverty by region, 1987–98

Notwithstanding the large and obvious differences in initial conditions between the industrialised countries of the ‘North’ and the less developed countries of the ‘South’ – notably the higher levels of income, more extensive levels of state welfare and pension provision and the predominantly rural character of poverty in the South by comparison with the North – a number of likenesses exist between the predicaments of North and South that warrant the integrated, comparative approach which we have used in this book. These include:

• an increased ratio of unproductive to productive people in most countries, derived from a rising ratio of old people to the population almost everywhere, in many countries rising unemployment and/or poverty, and in many countries a rising ratio of children to the total population;
• as a consequence, pressures on welfare spending in most countries, not all of which can be abated by economic development however poverty-focused; but
• at the same time, limitations on the scope for expansion of public provision and increased selectivity of benefits (Gough et al. 1997), with the ideal of a universalised welfare state having been reduced, even in industrialised countries, to a few items such as minimum pensions and child benefit;
• at the same time as state benefits have been focused and reduced in real terms, traditional sources of ‘extended family’ support have gradually eroded as well, so that it is no longer possible for some poor people to turn to family or community networks to counterbalance what the state no longer provides; and finally
• labour contracts have, under the influence of globalisation, become more short-term and less secure in the tenure they give, with a shift in the centre of gravity of many countries’ labour forces from men working full-time to women working part-time.

In the face of these shrinkages at both ends of the spectrum of social protection – in state and in family provision – what has grown is the NGO (non-governmental organisation) sector, defined by the World Bank as nonprofit organisations operating independently of government and serving humanitarian, social or cultural interests. The number of NGOs operating internationally rose between 1978 and 1998 from 10,000 to 42,100 and their budget increased to $1,100 billion, equivalent to 5 per cent of GNP (Walker 2001, citing report by Lester Salaman of Johns Hopkins University). They have taken over functions of income redistribution and management of community development in many countries, North and South, and often much more: for example SEWA in India, a registered trade union, also takes responsibility for health insurance, legal representation and financial support for self-employed women and BRAC of Bangladesh, in addition to the above, provides primary health care, agricultural support and marketing facilities, and primary and higher education. The achievement of many NGOs has been criticised as falling well short of their mission statements (e.g. Hulme and Edwards 1992, 1994; Lister 2001) and they have been accused of lacking accountability. But for now their growth continues, particularly in the context of what has been called ‘the emerging development-security complex’ (Duffield 2001). Especially in environments of reconstruction such as Rwanda, the former Yugoslavia and now Afghanistan, the range of functions with which they are in competition has grown to embrace also those of the army and the security forces.²

In face of these common trends in resource allocation, two related and equally global trends in thinking call for attention. The first is the reconceptualisation of poverty in terms of insecurity or vulnerability, and of anti-poverty policy, correspondingly, as (social) risk management. In relation to industrialised countries, Nicholas Barr in his book The Welfare State as Piggy Bank (2001), argues that the primary function of the welfare state is not the ‘Robin Hood’ function of redistribution of income from rich to poor people but rather the ‘piggy bank’ function of protecting everyone, since we are most of us vulnerable, against unforeseen livelihood risks; he further specifies, building on research by Falkingham and Hills (1995), that ‘between two-thirds and three-quarters’ of welfare state expenditure in the UK consists of risk-mitigating rather than income-redistributing expenditure. In relation principally to developing countries, the 2001 World Development Report – that for which Ravi Kanbur was responsible – based its analysis on the three pillars of ‘opportunity, empowerment and security’; and the greatest of these, or certainly the most innovative, was security, since it involved a reconceptualisation of poverty from objective definitions such as those of Table 1.1, which specify the number of people below a consumption-requirements Plimsoll line, to at least partly subjective definitions of poverty in terms of the vulnerability of one’s livelihood to being pushed below that line and the certainty of being able to prevent this; in other words, a security-centred and risk-centred definition of poverty (see especially Holzmann’s Chapter 4 in this book). ‘To be well’, argued one of the respondents to the Voices of the Poor study organised to provide raw material for the 2000 World Development Report, ‘is to know what will happen to me tomorrow’ (World Bank 2000a: 135) and, while not all might share the preferences of the ‘elderly Bulgarian’ thus quoted, his conception of well-being drives much of the reorientation of welfare policy in both North and South. Risk mitigation, of course, is a key function not only of the welfare state but also of microfinance (Cohen and Sebstad 2000), most of it operated by NGOs and the theme of Chapters 11 and 12 in this book.

The other key ‘North–South linking’ theme to which we wish to draw attention is that of social capital. First invented by James Coleman in 1960, this idea converts the insight that individuals may derive material gain from their social relationships into the concept of those relationships as a factor of production analogous to physical and human capital. What has given the idea leverage is the proposition that, in some contexts at least, the rate of return to this factor of production is so high as to make social capital the pivot of the development process: as Paul Whiteley puts it in his contribution to this volume (Chapter 6, page 123), ‘politics counts for more than economics’. In Putnam’s famous (1993) analysis of comparative economic development in northern and southern Italy, it was not the superior capital stocks and skills of northern Italy that were the driving force behind the country’s North–South divide, but rather the superior linkage of citizens in the North to one another and to the policy process. (And there is little doubt that economists, in face of the collapse of some of their predictions over the past 30 years, feel somewhat on the defensive).³ What is important is that the concept of social capital, like the concept of social risk management, invaded the analysis of the 2000 World Development Report, to the point that all Poverty Reduction Strategy Papers and nearly all NGOs in both North and South see themselves as being in the business of social capital-building. And social capital-building, as we argue in Chapter 10, may in many cases be seen, precisely, as a form of risk management that brings interpersonal risks under control. As individuals accumulate capital within ventures which invariably contain an element of risk, so they mitigate the risk attached to those assets, not only through the financial system, but also, where they can, by ‘investing’, often as a literal money contribution, in support networks which might protect them against the adverse consequences of their investment.⁴ That the returns on such investments are not always easy to control or capture does not negate their importance.

Within the context of these common North–South trends in thinking and in social structure we may now locate the contributions to this volume. It is useful to remember, specifically within the context of the Development Studies Association (DSA), which co-sponsored the originating conference of this book, that the approach of examining poverty across the North– South divide is not new. It was used, for example, by Dudley Seers in many a DSA meeting in the late 1970s and 1980s, but taken by him to the extent of arguing that northern and southern researchers should stick to the examination of processes of underdevelopment in ‘their own’ region, for example that Italian development researchers should focus on the North–South divide within Italy, British researchers on west Wales and Northern Ireland, and developing-country researchers on their own countries and regions. This is the opposite of the comparative and mutual-learning approach taken here, which can already see in operation, and wishes to reinforce, processes of continuous transmission of development policy ideas between North and South. This comparative approach, however, formed the point of departure for Simon Maxwell’s edited version of the IDS Bulletin (Maxwell 1998), which in particular performed the service of extending the social-exclusion approach to poverty to the study of southern contexts.

Setting aside this chapter, the remaining chapters of the book fall into four sections, which are concerned with the relations between the social policy and development literatures; our ‘linking concepts’ of risk and social capital; the influence of the globalisation discourse; and operational solutions. Within each section, we have deliberately tended to pair essays expressing enthusiasm for a concept (e.g. Whiteley on social capital, Chapter 6, or Mosley and Markusˇ on microfinance, Chapters 11 and 12) with essays which are more sceptical (e.g. Campbell, Chapter 7, on social capital and Henderson, Chapter 13, on microfinance).

Our first group of papers (Chapters 2 and 3), then, review the changing context of the analysis of poverty and action against it in both North and South. Bob Deacon, in Chapter 2, rejects the proposition that the principle of selectivity, rather than universalism, needs to be the foundation stone for the provision of social safety nets in a globalising world, and that the continuing privatisation of welfare state functions is therefore inescapable. He insists however that for southern countries to have appropriate ownership of such provision, a commitment to a much higher level of North–South transfers is required, and that regional groupings such as SADC, MERCOSUR and ASEAN may have an important role in making this possible. In Chapter 3, Arjan de Haan, writing as a member of, but not on behalf of, the UK Department for International Development, also examines the consequences of globalisation which contributed the main theme of the recent (December 2000) White Paper.⁵ He applies to the context of social policy the argument that prevention is better than cure (or, if you will, that risk prevention and mitigation are better than risk coping); in other words, that social policy needs to be a forward-looking component of the process of economic integration, rather than occupying the role of compensating ex post those who find themselves disadvantaged by the process. In the process he strongly criticises the new growth theory regressions which concluded that economic convergence (one element in ‘the end of history’) occurred whenever policies converged on a neo-liberal norm of ‘good policy’, suggesting rather that even good-policy economies may be unable to avert crisis – as was demonstrated by the experience of many sufferers during the east Asian crisis and now by the case of Argentina. If global inequality is increasing in a manner which after-the-event compensatory policies cannot influence, then before-the-event ‘insurance’ policies, incorporating health and pensions, will need to assume a much larger role. This is a major theme also of Chapters 4 and 10. In Chapter 4, Robert Holzmann, one of the main architects of the World Bank’s ‘social risk management’ philosophy presented in the 2000/01 World Development Report, develops that philosophy in the light of later writing, including reactions to that Report. Holzmann echoes de Haan’s call for a forward-looking role for social protection, traces its intellectual roots back to a broadened awareness of information asymmetries between gainers and losers, and redefines vulnerability in terms of the balance between risk exposure and risk instruments. He acknowledges, and does not idealise, the vulnerability of informal coping mechanisms. He draws on recent poverty dynamics literature (e.g. Baulch and Hoddinott 2000) in order to reinforce the point that shocks often reinforce a long-term slide into poverty, thereby blurring the standard distinction between transient and chronic poverty.

The second group of papers relates to our two ‘unifying themes’ of risk and social capital, connected by the fact that the relationships of which social capital is composed are expected to reduce interpersonal risks. The mechanisms by which this happens, as we discover in this section, are much debated.

In Chapter 5, Geof Wood examines the role of welfare regimes within the context of a ‘search for security’, one of the key aspects of the poverty analysis adopted in the World Development Report and of Wood’s own previous writing. He argues that, in an environment where both well-functioning markets and effective state intervention are lacking, ‘the poor are exposed to the weaknesses of social capital, without any prospect of meaningful social resources to compensate . . . thus without social options to manage risk, they have to rely more heavily on their family and less on transactions with others’. This interpretation grows into a critique of the World Development Report based on its lack of attention to what Wood calls ‘the institutional aspects of risk: risks induced by class relationships, inequality and social exclusion’, and to the conclusion that, since social policy ‘cannot (at least in Africa and low-income Asia) engage with the common man or woman via fiscal instruments’, it must do so alternatively by developing other instruments for the poor by way of institutional reform. How it should do so is an issue to which the essays in Part III try to speak.

For both Holzmann and Wood the concept of social capital is key, indeed one of Holzmann’s arguments (Chapter 4, page 54) is that this new approach ‘would adopt an extended view of instruments and institutions to be used under social risk management, including the broad concept of “social capital”’. This broad concept, as we have seen, is already used as a linking thread for many of the new poverty strategies, and the next pair of essays is explicitly concerned with this theme. They could not be more contrasted. Whiteley (Chapter 6) tests a Mankiw-Romer-Weil ‘new growth theory’ model across a mixed sample of industrialised and developing countries to derive the conclusion that social capital has at least as much leverage in the explanation of growth as physical and human capital, using a World Values Survey (‘how much do you trust your family/ community/fellow-countrymen . . .’) definition of social capital. Campbell (Chapter 7) examines, with reference to the anthropological literature on Africa, the origins of associations widely believed to provide the institutional basis for social capital, some of which are examined in Part IV of this book. The formation and activities of such voluntary associations, he reminds us, are influenced by ‘local government policy and the availability of employment, but also by demography and national policies’. Although articulated in relation to Africa, this statement has equivalent relevance to the North, and the role of government policy in forming social capital has been emphasised by Maloney et al. (2000; see also Chapter 10, this volume). But Campbell also argues that the social capital concept is ‘limited by insufficient attention to differences of culture, history and politics between western and non-western societies’ and that the term social capital ‘operates as a metaphor rather than an analytical construct’. Other contributors to this volume, however, not only academics such as Whiteley, but practitioners such as Jo Henderson (Chapter 13), continue to use social capital as, precisely, an analytical and operational construct.

An underlying theme of the conference as a whole, echoed in de Haan’s paper, is that the processes which create poverty and inequality can perhaps better be understood in terms of global and country-specific exclusionary processes rather than by examining the North–South divide, and Part III of this book examines aspects of this process. In Chapter 8 Fran Bennett, policy adviser to Oxfam UK, describes the manner in which Oxfam’s perception of poverty-causing processes has changed in this direction over the last few years. She describes the rationale for creating the UK poverty programme as being motivated by ‘pressure from southern partner organisations asking what Oxfam was doing about poverty in its own backyard’, and emphasises, much as the World Bank did in commissioning its Voices of the Poor study, the importance of involving people with direct experience of poverty in defining poverty and policy solutions to it. By contrast, she argues, in most UK government processes ‘participatory approaches to policy-making on poverty issues are underdeveloped’ and ‘the government tends to see the strategy as belonging to the government itself ’ – by contrast with the procedure in the South where participatory poverty assessments are a precondition of aid money for debt relief being granted. In seeking to change this collective mindset Oxfam hopes that eventually ‘we will stop talking about North/South . . . and instead begin to talk about creating a global alliance against poverty worldwide’.

In Chapter 9, with assistance from Jane Tate, the administrator of HomeNet International, Mosley examines the role of homeworkers – a mainly female and low-income group on the lower fringe of the labour market. The role of homeworkers is discussed, first in Yorkshire, then in Europe, and finally in relation to the global economy. These workers have (as a totality) been both enriched in the sense that their numbers (sometimes their real incomes also) have increased, and disempowered in the sense of their incorporation in the global labour market, producing ever more specialised components of globally tra...