Posted in Poverty

Multidimensional and Societal Poverty

The World Bank’s Report on Poverty and Shared Prosperity 2018 is titled: Piecing together the Poverty Puzzle.

In his Foreword, the outgoing WB President Jim Yong Kim points out that the world had impressively got its act together in implementing the Millennium Development Goals to bring down extreme poverty from 33% in 1990 to 10% in 2015. He is sure that global efforts will continue under the new Sustainable Development Goals, to reduce extreme poverty to less than 3% percent by 2030.

He goes on to point out that most of the world’s poor now live in middle-income countries, and research indicates that those countries tend to have a more demanding view of poverty. Drawing on national poverty lines, the World Bank now also report poverty rates at two higher thresholds—$3.20 per day and $5.50 per day—which are typical of standards in lower-middle-income countries, like India, and upper-middle-income countries, like China.  

These higher-valued poverty lines reflect social assessments of what defines minimum basic needs in countries at these income levels. As may be expected, these two standards for measuring poverty portray a less encouraging picture of the level of well-being in the world relative to the measure of extreme poverty, which is forecast now to be in single digits. Nearly half the world (46 percent) lives on less than US$5.50 per day, a standard that defines poverty in a typical upper-middle income country, while a quarter of the world lives on less than US$3.20 per day.

The Societal Poverty Line (SPL) to measure poverty relative to the standard of that society is a combination of the absolute income-based poverty line (IPL), and a poverty line that is relative to the median consumption (or income) level of each country. Specifically, it is equal in value to either the IPL or US$1.00, plus half of daily median consumption in the country, whichever is greater. This means that, for the poorest of countries, the value of the SPL will never be less than the IPL, although after a certain point, as countries get richer, the value of the SPL will increase as the consumption level of the median individual in that country increases.

This increasing value of the SPL corresponds with the fact that the value of national poverty lines typically increases as countries grow richer. In fact, the SPL is constructed in such a way that it directly corresponds to the average value of national poverty lines at different levels of (median) consumption for each country of the world. In this sense, societal poverty provides a global measure of poverty that corresponds on average with how all countries of the world define being poor.

When poverty is defined this way, the number of people who are poor stood at 2.1 billion as of 2015, almost three times more than those living under the US$1.90 level.

This Report also presents the World Bank’s first exercise in multidimensional global poverty measurement to account for multiple and overlapping components of poverty. The multidimensional approach highlights how the ways deprivations interact vary widely from country to country, and can be extended to include, in addition to education and access to basic infrastructure services, two other dimensions: health and nutrition, and security from crime and natural disaster. (See: Dimensions of Urban Poverty).

Including additional dimensions of deprivation in measures of poverty can provide valuable insight into how policies can be directed to have the most effect on poverty. The profile of the poor can change as we take a multidimensional view of poverty – as becomes starkly evident in the South Asian Region.

In this regard, the World Bank was anticipated by pioneers of the Sustainable Livelihoods approach, which looks at 5 types of capital available to an individual or a community, and it is the sufficiency or insufficiency of these ‘capitals’ which determine the extent and expanse of one’s livelihood polygon. This can be a great tool to decide the relative focus on various aspects of a poverty alleviation programme. In slum rehabilitation for instance, emphasis seems to be on providing basic physical infrastructure (water, roads, drains) while totally neglecting human development aspects of health and education. As a result, the livelihood polygon of the slum-dweller remains narrowly restricted, and the poverty becomes endemic as it passes from generation to generation (See Sustainable Livelihoods).

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Posted in Poverty

Poverty now an ascribed status?

While I was writing a piece on understanding urban poverty for a newspaper, I was struck by the fact that being poor has become as much an ascribed status in South Asia, as caste, class, race or gender.

In other words, you live and die with what you are born into – an accident of birth that marks you for life. And you start ‘paying’ for this accident in the womb itself – with a malnourished mother giving birth to a chronically undernourished child.

Look at the state of children today – at the forefront of every conflict, born and growing up with the sound of rockets and bombs in their ears – not their mother’s lullabies. Escaping war only to succumb to entirely treatable diseases like cholera, ravaging their malnourished little bodies. All across the world, what begins as politics and resource grabbing, ends up as another humanitarian crisis where the children of the poor continue to pay the price for being born at the wrong place at the wrong time: whether in Syria, Yemen, Gaza, or Myanmar.

If a child of a poor household escapes being born in a war zone, it will have other conflicts to endure – child labour, trafficking, slavery, sexual exploitation, little food and less education. In other words, no aspiration or escape from the terrible conditions he or she is born into – only a childhood lost forever.

The Sustainable Development Goals may speak of ending poverty in the next decade or so, but see how the world is treating its future generations: children make up the majority of those living in extreme poverty. In 2013, an estimated 385 million children lived on less than US$1.90 per day. Still, these figures are unreliable due to huge gaps in data on the status of children worldwide. And this income data by itself is far from sufficient to truly gauge the depth of deprivation among poor children worldwide.

Gone are the days when poverty, especially urban poverty was measured merely by the lack of income, or resources. As Robert McNamara pointed out as far back as 1980: the deprivations of the absolute poor “… go beyond income. And in many cases, even if their income were higher… they could not by that fact alone free themselves from their difficulties. The reason is that absolute poverty is a complicated web of circumstances, all of them punitive, that reinforce and strengthen one another.”

And the reinforcement covers all dimensions like low income, little or no access to credit, lack of security of tenure, unsanitary living and working conditions, malnutrition and poor health, low learning capacity and lifelong unemployment and underemployment.
Trapped in this vicious circle, can the poor ever break out on their own?

Cycle of Poverty

Obviously not. But there are several points at which a government can break the cycle, provided it has the political will not to sell out to the rich, and to agree with McNamara when he says: “To reduce and eliminate massive absolute poverty lies at the very core of development itself. It is critical to the survival of any decent society.”

Governments, especially those in South Asia, need to realize that the universalization of primary and secondary education is key to all future development – social, industrial and economic. Schools themselves can become an agency to monitor the nutritional status of children and their immunization against the deadliest childhood diseases besides spreading the message about hygiene and sanitation.

With the basic education structure in place, social evils like child and forced labour can be eliminated from society, and the future workforce can continue learning long enough to move to vocational and professional education, which will enable employment in the formal sectors of the economy and gradual formalization of the tiny, micro and informal sectors through proper registration, record and regulation by the government.

South Asian countries must also put in place a representational system for all assets, liabilities, and inventories of the poor to give them access to institutional finance. The absence of such a system is one of the reasons that the poor and their assets cannot be mainstreamed into the local, regional and national economies in these countries, resulting in huge losses to governments in terms of unassessed and uncollected taxes.

But these things have been said again and again and nobody seems to care anymore.

I hang my head in shame…

Posted in Poverty

Dimensions of Urban Poverty – Revisited

My rather long absence from the blog was meant to be an assessment of the usefulness and direction of what I have been writing on issues of development and governance, and it is quite gratifying to learn that the traffic on the site holds steady, and the readership has now extended to 115 countries… What is rather surprising, is the continuing popularity of the ‘dimensions of urban poverty’ post I put up almost two years ago.

I had then optimistically hoped that with a new government, which came to power in India on a promise of ‘Development for All’, the following issues would receive serious consideration:

  • Ending the rural-urban bifurcation
  • Tertiarising the rural economy to stem distress migration to cities
  • Assuring food security for all: rural and urban
  • Providing a place of business that is legitimate, affordable and secure
  • Moving towards urban housing that is formal, affordable and secure
  • Putting in place a representational system for all assets, liabilities, and inventories
  • Augmenting access to institutional finance for all, not just rich industrialists
  • Vigorously enforcing the Right to Education
  • Giving easy and universal access to immunisation and health care
  • Guaranteeing public goods and services on the basis of equity and inclusion
  • Putting in place a social security net to cope with the unexpected

However, recent events in India force me to revisit this subject, and perhaps add a refinement or two to the original enunciation. I have been covering the different dimensions in various posts, and wish to bring them together only to underline one sad reality: that a country cannot progress, no matter how many missions are launched to make it SMART, digital or business-friendly, unless the various dimensions of poverty, especially urban deprivation, are addressed with long-term, cogent, inter-related, holistic policies and programmes.

Under the Income Dimension of urban poverty, we had noted that its commonest manifestation was the daily cash transactions that constitute the economy of the poor. Nowhere was this point better illustrated than in the furore and hardship caused to the urban poor and middle classes, by the Indian government’s decision to demonetize 86% of the country’s currency in one fell swoop. Venezuela too tried something of the sort, leading to riots in the streets.

Another side effect of the demonetization was that it turned the focus on the urban informal sector (again marked by cash transactions) which is on the verge of choking the formal economy to extinction, as mentioned in my previous post. It emerged that it is this informalisation of the urban economy (unchecked over the years) which results in tax evasion on a massive scale, though in a myriad petty ways, by the poorer classes of middle India. And I iterate that unless these informal sectors are formalized through cooperatives, labour collectives and self-help groups, with a user friendly tax regime to back it, the transactions of the average Indian consumer will continue to be in cash, unrecorded and therefore untaxed.

Under the Health Dimension of urban poverty, we had noted the pernicious impact of chronic malnutrition, and how it debilitated a nation’s human resources, bringing India’s demographic dividend to naught. It is also well documented that in a food deprived household in a largely patriarchal society like India (with a marked son-preference), the meagre resources go to feed the men in the family – the male ‘breadwinner’ and the beloved son; and the girl child is doomed to a lifetime of malnutrition and anemia.  In such a scenario, any attempt to introduce a fixed basic income cash transfer to replace subsidized food grains under the Public Distribution System, would be tantamount to condemning vast swathes of the population to virtual starvation, as the direct cash transfer is unlikely to feed an individual buying food on the open market. So much for the basic human right of food security. This does not augur well for the future of India, which is already home to 25% of the world’s hungry.

Under the Education Dimension, we had noted how the lack of access, facilities and quality in primary education doomed the urban poor to a lifetime of deprivation – generation after generation. The Indian Government has made no new investments in primary and secondary education and even the Prime Minister limits himself to the children of the well-heeled in his frequent radio and TV broadcasts to motivate them about such earth-shaking things as Yoga! Of course, the worst thing this government has done to the children of the poor, is to virtually legitimize child labour by permitting it in ‘family’ businesses. The same absence of policy results in a total failure to take concrete steps along other dimensions of urban poverty like housing, security and empowerment.


The single-minded pursuit of higher economic growth in a globalized world, has only resulted in increasing inequality and disparities, the flip side of which is the growing marginalization of the world’s poor, and a cold disregard for the UN’s recently announced Sustainable Development Goals.  This graphic from Statista, based upon the latest Oxfam Report on disparity, says it all:

world-inequality-in-oxfam-report

What an irony then, that the move away from globalization to a more insular and protectionist mode has begun in the West, where it was born; and its strongest defendant today is the President of Marxist China addressing the world at Davos…

Posted in Poverty

Housing Dimension of Urban Poverty

UN Habitat estimates that 1.6 billion people today live in inadequate shelter around the world, and 1 billion of those live in informal settlements or slums. An additional 100 million people worldwide are homeless. It goes on to state that by 2030, an additional 3 billion people or 40% of the world’s population, will need access to housing. This translates into a demand for 96,150 new affordable units every day and 4,000 every hour. By 2050, 70% of the world’s population is projected to be living in urban areas, causing slums and unplanned settlements to swell. About one in four people on this planet, live in conditions that harm their health, safety, prosperity and opportunities. Estimates of homelessness in the richest country on earth, the United States, vary from 1.6 million to 3 million people. Most studies conclude that about one-third of the homeless are children.

In one of the most popular posts on this blog – Dimensions of Urban Poverty – it was pointed out that urban poverty had many dimensions such as income, education, health, housing and security and alleviation of urban poverty can only happen if all these dimensions are addressed synchronously. That has not happened. While globalization may have put more money in the pockets of the urban poor  (especially in the burgeoning and untaxed informal sector), the access of the urban poor to education and health remains questionable in both developed and developing economies, and of course, housing remains a major problem from Santiago to Shanghai.

It is now acknowledged by all development agencies, that housing poverty (especially in the world’s metros) has little to do with a lack of income, and everything to do with lack of access to land. In former colonies like India, urban land remains inaccessible to the poor for a variety of reasons:

  1. Retrograde laws and practices inherited from the former colonial rulers
  2. A preference for low form urbanization (again, an inherited western bourgeois aesthetic)
  3. Extremely stringent and outdated development control rules which militate against traditional forms of construction
  4. Absence of a reliable land record system rooted in the local ethos
  5. An inherent disconnect between western educated urban planners and ground realities
  6. Failure to reign in the avarice of private developers
  7. Rampant corruption in the housing sector, from the grant of building permissions, to undervaluation, to issuance of completion certificates, to housing loans and subsidies, to transactions under the table to avoid high registration fees and stamp duty.

And this denial of access to urban land continues to divide Indian cities into the haves and have-nots, even when the differences in income, services and assets between the ‘slum-dweller’ and the average urbanite are dwindling away, as these statistics from Census India 2011 clearly indicate:

Slum assets Census India 2011

Clearly, inadequate housing is the problem. Not inadequate income.


Activists across the world have taken a ‘rights’ approach to housing, but unfortunately, such ‘leftist claptrap’ doesn’t sit well with the Government in Delhi… Perhaps housing in urban areas will get more attention from the present government if its economic benefits are pointed out, as UN-Habitat does:

  • Adequate shelter is a critical foundation for breaking the cycle of poverty
  • Adequate housing is vitally important to the health of the world’s economies, communities and populations.
  • Home ownership is a form of wealth accumulation through equity and forced savings from mortgage repayment.
  • Good housing attracts economic investment and development.

Not to mention that in an India increasingly riven by social unrest, insecurity and increasing violence against women, decent shelter makes for safe homes and neighborhoods that help to build social stability and security.

 

Posted in Poverty

Poverty in South Asia

With the viewership of this blog now touching 95 countries, the most views appear to be on issues of poverty and human development and so I thought it was time to revisit some aspects of income poverty, especially in the South Asian Region, which is home to the largest number of poor people: 43 per cent of the developing world’s 1.4 billion poor people live in South Asian countries.

Although the three largest countries in the region, India, Bangladesh and Pakistan, have managed to substantially reduce extreme poverty in the last 2 decades, their vast populations add up to frightening absolute numbers of the absolute poor (< US$ 1.25 per day per capita). What is more challenging for the governments in this region however, is the proportion of their populations in the next slab (US$ 2.5-US$4) – just escaping being labelled as the absolute poor, but still seriously deprived in all aspects of life such as health, education, shelter and livelihoods.

poverty post 1

So who are these people? The small land-holder, share-cropper or farm labourer in rural areas; and the stalwarts of the informal sector in urban areas. This group may have just enough primary education and basic food security to cross the official poverty line, and ironically, are doubly deprived because they miss out on the meagre subsidies earmarked for those below the poverty line.

Neither the governments in the region, nor the formal sectors have the will or incentive to address this type of poverty. In fact, it is universally acknowledged that it suits and profits the private sector to maintain a large informal sector, especially in the urban areas, as this unorganised sector has no collective identity and therefore no bargaining power and can be exploited at will, relentlessly and for ever.

Another factor brought out by various UN reports and databases is the growing disparity in the countries in South Asia.

South Asia disparity

Income inequalities have grown steadily in South Asia since the early 1980s, in both urban and rural areas. This income inequality does not follow the classic ‘have’ and ‘have-not’ dichotomy across the country, but is further compounded by disparities between regions in the same country. For example, studies of long-term trends indicate that while the share of the total number of India’s poor in the southern states of Andhra Pradesh, Karnataka, Kerala and Tamil Nadu decreased from 18% in 1993-1994 to 15% in 1999-2000; the share in the total number of poor in the states of Bihar, Orissa, Madhya Pradesh, Uttar Pradesh and West Bengal jumped from 57% to 63% during the same period. Therefore, although there has been a steady decline in the incidence of poverty in India, the efforts of the Government have not resulted in a uniform impact across regions.


So the writing is on the wall in all the countries of the region. Address the issues of deeply entrenched poverty – extreme and relative deprivation – or else pay the price through increasing social unrest, growing extremism, and the endless cycle of violence and state oppression… And the time is definitely running out on this clock…

 

 

 

 

 

Posted in Poverty

Part II: Why poor people remain poor

As I have devoted a couple of posts already to the distress among farmers and rural communities in India, I think it is time to take a look at the growing urbanisation of poverty in the country.

In developing countries like India, most urban workers are self-employed in precarious conditions or are employed on a casual basis without a contract and access to social security. The ILO terms such forms of employment as informal. In most cases, informal employment procures lower, more volatile pay and worse working conditions than employment in formal arrangements, and these informal sectors form the bulk of the urban poor in any country.

The situation has greatly worsened with globalisation, which has deeply fragmented production processes, labour markets, political entities and societies, creating a plethora of interest groups and lobbies which have undermined the integrity of civil society and its rights and entitlements across the world. As a result, the number of permanent secure jobs (even in the formal sector) have given way to contractual/temporary employment, with downsizing, rightsizing and outsourcing becoming the new business mantras. This infographic from Statista puts it very plainly.

 

JOBS Post

Sadly, recent Indian governments seeking their place in a global market are so keen to attract foreign direct investment, that they have lost the national sovereignty to make decisions that benefit their own people, and surrendered control to highly mobile international finance capital. To placate these foreign investors we have begun the privatisation of precious natural resources and shredded whatever pro-labour legislation existed in India, and virtually annihilated Trade Unions in a way that would make Margaret Thatcher proud. But whereas Great Britain had a social security system already in place (in terms of unemployment benefits, old age pensions, compulsory education for the children and free health care), low and lower middle income countries have no such security net for those in distress.

Ergo, once a household falls to the poverty line, it is very unlikely to rise much above it – and therefore the poor remain poor generation after generation.

The vulnerability of the urban poor is exacerbated by the inadequate provision of basic public services, as well as by policy and regulatory frameworks that govern land and housing supply and property rights.

Most of the urban poor do not have tenure security because their dwellings are built on public land or on private property belonging to someone else, or built on shared title land. Further, most dwellings of the poor are constructed without occupancy or construction permits from the municipal authority, or rented in slums without formal renting contracts.

The situation is exacerbated by the inadequacy of planning tools like master planning, zoning and development regulations, in making land available to keep pace with rapid urbanisation, resulting in insufficient land supply and increases in land prices. Master plans in many developing countries like India are too centralised, take too long to prepare, are inherently anti-poor, and fail to address implementation issues or the linkages between spatial and financial planning.

The Development Control Rules too are outdated and inappropriate, often opting for low form urbanisation, redolent of the colonial era. All recent attempts at densification have remained a pipe dream, because it is virtually impossible to upgrade the necessary infrastructure in thickly populated neighbourhoods. Unrealistically high standards for subdivision, project infrastructure, and construction make it impossible to build low-income housing legally, and the poor simply cannot afford to build to these specifications. Furthermore, the poor and low income groups have little or no access to credit, again because of the lack of a representational system to formalise their assets and holdings.

Some of the ways in which the problem of housing for the urban poor has been tackled in different countries include:

  • Some form of transfer of ownership rights to the residents building upon public land
  • Greater flexibility in building specifications, construction materials and infrastructure norms
  • Decentralisation of urban planning
  • Simplification of building permissions and occupancy certification
  • Easier access to housing finance for the poor
  • And a simple transparent system of ownership title which will enable the poor to use their houses as collateral for loans to expand their income generation capability

The lack of adequate and secure housing ultimately aggravates all other dimensions of urban poverty like education, health and income. If a family has no rights of tenure and may not even know where it will rest the night, how are the children going to register in schools and get an education? How will the parents earn a livelihood? How will the family draw the rations from the Public Distribution System to feed itself? And where will the sick find succour?

As the National Commission on Urbanisation lamented in its 1988 report: “For the poor, there is simply nothing…”

Posted in Poverty

Part I: Why poor countries remain poor

In everybody’s life there comes a book which is a revelation; a book that explains simply and beautifully a complex process which one finds perplexing… and if (like me) you are a lucky wanderer in the vaults of human knowledge and wisdom, then you are sure to have experienced many such ‘a-ha’ moments.

The book which prompted this post is ‘The Mystery of Capital’ by Hernando de Soto – respected Peruvian economist, political adviser, and reformer. Published in 2000 (a decade into the era of liberalisation, privatisation and globalisation), and based upon extensive field research in Asia, Africa and Latin America; the book poses a simple question – why does capitalism work only in the rich countries of Western Europe and North America?

The reason, according to de Soto, is that the poorer countries simply fail to generate capital. He goes on to show that even in the poorest countries, the poor save – for instance, in Egypt the wealth that the poor had accumulated at the time of publication, was 55 times as much as the sum of all direct foreign investment ever recorded there, including the Suez Canal and Aswan Dam.

However, these assets of the poor are not fungible assets – they cannot be turned into capital, cannot be traded, cannot be used as collateral for a loan, and cannot be used as a share against an investment.

The heart of de Soto’s theory is that the poor countries remain poor because they lack a representational system which documents every parcel of land, every building, every piece of equipment, every store, every inventory, thus making it visible so that it can connect to a larger formal economy, thereby making the vast hidden assets of the poor and informal sectors fungible. But unfortunately, developing such representational systems takes time, resources and a much longer time-frame than a government on a 5-year run can afford.

Take the case of land titles in India.

In the prevalent system, a registered sale deed does not confer title ownership and is merely a record of the transaction. The current system of 7/12 extracts are no more than a caveat emptor or ‘buyer beware’ type of document, conferring only presumptive ownership, which is liable to be disputed.

A proposed amendment to the Registration Act, 1908 would convert land registration into a ‘guaranteed title certification’ and would affect a paradigm shift in India’s land titling system, bringing it in line with other Commonwealth countries which follow the Torrens system of land titling. Under this system, a registered transaction would extinguish all previous rights and become sanctified as a formal title transfer to the purchaser, as prospective land buyers would only need to examine the land register, and purchase from the recorded owner.

However,  such a system is only as good as the Land Register supporting it.

The creation of a land-holdings register requires that land parcels be identified, with clearly demarcated boundaries, through maps of individual land parcels and their location within an area’s land grid. This has to then be correlated to undisputed, litigation-free ownership rights. Both these records then have to be publicly notified before they take effect. But the devil is in the details of course.

As in most developing countries, the land record systems in India are archaic with no provision for regular systematic updates. In fact the terms used in land records (and the Act itself)  hark back to the British colonial era, or even further back to the Mughals! No register, which reliably confirms title, exists anywhere in India; and small experiments in some states to build such registers have not succeeded in achieving comprehensive coverage.

How do you build up a land register in a country where rural land has moved from one power elite to another over thousands of years, and inherited land is often partitioned within the family, without any formal registration?

The situation is much worse in urban areas where the chain of ownership is impossible to trace too far back, and most real estate developers take recourse to unregistered power of attorney transactions, when they build houses for the average middle-class buyer. Such a buyer is naturally kept totally in the dark about any title disputes or encumbrances attaching to the land where he dreams of owning a penthouse on the twentieth floor.

The repeated fragmentation of lands generation after generation, with intractable boundary and ownership disputes can lead only one way – to the courts. It is not surprising, therefore that a vast majority of cases pending in Indian courts deal with land-related litigation, and most of the rural undertrials in Indian jails are there as a result of land disputes violently settled.


So as it completes a year in office and is worried that the economy is not really taking off as expected, the Indian government would do well to listen to de Soto. After all, if 68% of the local economy of Mumbai – India’s commercial capital – is estimated to lie in the informal sector, just imagine what a boost the national economy would receive if the assets of the poor were looped into the formal system. Not to mention the assets back home in a city of migrants, which will come into play for procuring credit for housing and business. The entire country can be rejuvenated, city by city and town by town…

But that will take more than five years, so who’s interested?