Tuesday, 9 March 2010

How to achieve poverty reduction

John Mangun
Outside the Box
Business Mirror

Poverty reduction is potentially one of the most important economic issues for a country like the Philippines. Unfortunately, it is also a topic that is always discussed with the heart and emotions and not enough with the brain.

And, of course, during the election season, speaking of poverty is a no-lose situation for the candidates because, on one hand, they might pick up some “poor” votes and, on the other, it makes them look friendly and properly sympathetic to the ears of the “rich” voters.

It is also a topic that is boring to talk about because there does not seem to be a positive solution. We who are “rich” feel a bit guilty for our poorer citizens and yet are somewhat as clueless what to do about poverty as much as the “experts” in and out of government. Yet we all know that in both the short and long term, poverty and poor people cost each one of us as well as the nation. We all pay for too much poverty in many ways. There is no question that increased poverty equates with increased crime in the urban areas. A nation with a high level of poverty is unhealthier than richer countries, and that causes both increased illness throughout the population as well as increased taxpayer cost to provide for a sicker population.

Poorer people are less educated, thereby straining the work force to find acceptable employees. A nation which has too many poor people usually suffers from an education system of lower quality.

Regarding education though, the “chicken-or-the-egg” argument arises. Is the nation poorer because its education system is bad? Or is the education system bad because there are simply too many people who must rely on public education in a country like the Philippines?

This is important since, for example, Indonesia is cited as a neighbor that has done a better job of reducing poverty. Yet, Indonesia spends $110 per student per year, compared to $491 in the Philippines.

The traditional approach to talking about poverty reduction is to blame the rich. If the rich did not have so much wealth, there would be more for the “poor.” This is incredibly false because it assumes that there is a limit to the total amount of wealth and, therefore, wealth needs to be redistributed, the “Robin Hood” or steal-from-the-rich-to-give-to-the-poor idea.

It also assumes that the rich got their money from a secret “money tree” that apparently the poor do not have access to, instead of through labor. And there has never been an example of wealth redistribution doing anything to successfully relive long-term poverty trends and incidence. Yet that is always the easy, lazy and incorrect solution to poverty reduction.

It is almost impossible to find an unbiased, objective, scientific study that does not reach the same conclusion about poverty reduction; there is a direct correlation between economic growth and reducing poverty. Every success story of a country which has made great inroads into poverty reduction was also a nation that created high, sustained economic growth. From a study by Arne Bigsten and Jörgen Levin, Department of Economics, Göteborg University: “Poverty can be reduced if there is sufficient economic growth.”

For the last several months, expert after expert has lamented the fact that despite increased economic growth in the Philippines over the last decade, poverty has not gone down to acceptable levels, and the incidence has actually increased. But here again, without any basis in fact, the rich are to blame. The latest is from one of the government’s economic advisers who says that only the rich and the powerful have benefited from this economic growth. That is an emotionally driven nonsense, but there is still too much poverty in light of the economic growth. Because these experts are intellectually lazy, they always call for either direct wealth redistribution or increasing government antipoverty programs, both of which are failures, as proved by the poverty numbers.

But the answer to poverty reduction is available. From a study by Anuradha Joshi Department of Urban Studies and Planning, Massachusetts Institute of Technology, and Mick Moore, The Institute of Development Studies, University of Sussex: “Antipoverty interventions in poor countries will tend to work better if intended recipients can increase their influence over the implementation stages through collective action of various kinds. Antipoverty programs should be designed and managed such that they either [a] positively stimulate among intended recipients the collective action that is needed to make the programs more effective or [b] less ambitious, at least do not discourage and frustrate collective action.”

In simple terms, Poor People Power. Government programs fail because of the same elitist mentality that says that government and the “experts” know how to do things better than the average person, especially the poorer person. This liberal-elitist attitude says you are poor and stupid and we know how to help you better than you know how to help yourself.

Those programs that give power to the recipient always work best. Witness the “Adopt a School” and “Adopt a Barangay” programs from local corporations and service groups. These work well. Microfinancing programs that give poor individuals control along with direct financial and technical assistance have proved to be an unqualified poverty-reduction success story.

I know this topic is boring. But it is critical to every hard-working man and woman and company. A nation is only as economically strong as the weakest in that nation’s society.

The religious, political, academic and government liberal elites have failed miserably to make the Philippines a better nation through their poverty-reduction ideas. It is vital that the majority who are not in poverty demand that more practical and sensible solutions be implemented.

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1 comment:

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