The development economics of post world-war two era; Nurksian balanced growth, vicious circles of low saving, small markets, low investment and low incomes; Rosenstain Rodan’s Big Push, Leibeustein critical minimum effort, perhaps all declined to gestate desired results.
The presumptions behind ill economies held by other development economists like Arthur Lewis, Myrdal and Mandelbaum, had been that poor nations had large surplus of rural labour and were yet plagued with low marginal productivity.
Industrialization was believed to be a solution where surplus labour could be used with gradually increased productivity; certainly through more education and technical training. Whereas; industrialization which was hampered by lower domestic demand on demand side and capital shortage on supply side, could be, in their view accomplished through international aid.
So to propagate aid-giving process, some rigorous efforts were instituted through the World Bank, the IMF and other donor countries. All with a brainwave that aid would breed the capital-starved sectors and consequently, an increased respective GNP and per capita income would afford a better economic status to poor nations.
On the other hand, poor nations were prescribed to improve infrastructure and mechanization so as to pave the way for rapid industrialization. Aid being plenty, poor were more than happy with the measure. By and by, despite succumbing to the donors’ heavenly prescriptions to their level best, the poor nations could curb neither poverty nor the momentum of ever-widening gap between rich and the poor.
World’s poorest 1 billion who once shared 2.3 per cent of the global income in 1960, were left to share just 1.1 per cent, i.e., almost 50 per cent by the year 2000, and the rich-poor gap doubled together. The aid once perceived as a panacea, surfaced to be at later stage as a quagmire and even not a soother.
Mr. Stiglitz, former chief economist of the World Bank, criticized that global poverty increased due to WB-IMF flawed policies. However, after his removal he was adjudged as Nobel laureate. The endeavour in the last half a century is marked with donors’ remedial packages and the deteriorating economic standing of the poor. In recent past, in 1996, the same champions (the World Bank, the IMF and the like) put in another effort with reference to poverty elimination.
Here the IMF created a fund for heavily indebted poor countries (HIPC), it was further expanded in 1998 through NGOs, churches, civil societies etc., with enhanced objectives such as deeper, broader and faster debt relief for its member countries and establishing stronger links between debt relief and poverty reduction through poverty reduction strategy papers (PRSP).
By Oct 2001, 23 countries had reached decision point, getting relief of more than $34 billion with $20.7 billion in NPV terms. So did Uganda, Bolivia and Mozambique; where the fund curtailed their debt by 2/3rd and debt servicing by 1/3rd. It further enabled their ratio of debt service to exports drop from 17 per cent to 8 per cent, debt service to GNP from 3.7 to 2 per cent and to government revenue from 27 to 12 per cent; which is further expected to dwindle to 10 per cent by 2005. Social spending also crossed an average of $1.7 billion per year, in its member countries. Yet it is targeting Ghana, Ethiopia, Sierra Leon, Bosnia, Burkina Goanna, Mali, Senegal and Tanzania. Fund’s cost of debt equals $31billion, $20.7 billion being NPV. So steps have continuously been popping up.
Nevertheless, the UN Secretary-General Kofi Annan has not fallen short of venturing to line up the resources for poverty alleviation; here the UN’ 189 members participated in the 2000 millennium summit in New York. The significance of this (Monterrey) meeting was that it sensitized the wealthy nations to provide more development aid and slash trade barriers. On the other hand, poor nations were obliged to make sure the money was well spent.
The Monterrey declaration envisioned freer trade perhaps in a forlorn hope to undercut the adversities of the WTO (ironically phrased as Western Trade Organization), foster foreign investment, debt relief and efficient government as well as affording extra aid to nations needing outside help.
In a similar gush, South Asians have also tried to rise to the occasion. In April 2002, Saarc members held a meeting to alleviate poverty in its member countries. They devised a sixteen-point policy for the purpose.
These included improvement in good governance, macroeconomic management, quality and pattern of growth, human development, socio-economic and environmental situation, microfinancing, tourism, multiculturism, pluralism, mass education, expanded social safety nets, financial devolution, interregional trade, complying with SAPTA and SAFTA, further; reducing multilateral borrowing and debt swap, increasing debt relief for non-HIPC countries; and building physical assets for the poor.
The question among many others is, how the hand-to-mouth poor in LDCs can think of building physical assets, where their physical existence is at the stake? According to WB’s report (Poverty in Pakistan in the 1990s, January 2002);
“...notwithstanding tripling of per capita incomes over the last fifty years, Pakistan’s human development remains behind that in countries with similar levels of income.”
As a matter of trend, although the sustained growth has been negatively correlated with (income or consumption) poverty, yet the gains have scarcely been translated into ‘capability’; reflected by Human Development Index.
For poor in Pakistan, one third earn less than one dollar and two third less than two dollars per day, only 52 per cent have access to electricity and 24 per cent people have to rely on potentially unsafe drinking water.
Our Gini’s coefficient rose drastically during 1996-97 and 1998-99 from 27 to 31, reflecting an increased incidence of poverty equal to 33 per cent. Our poor spend 53 per cent of their budget only on food, and other 11 per cent on shelter and clothing (total 64 per cent) what’s left for other necessities, or for investment to cater the blissful charms of investment multiplier. Almost all LDCs experience an analogous plight.
Thwarting enough, the global economic scenario is even much gruesome despite all and sundry attempts to garnish it. The matter of the fact is that today world’s 80 per cent income is usurped by the 20 per cent richest, and a meagre 20 per cent income is shared by massive 80 per cent of the world population.
More than 1.3 billion live on less than one dollar and 168 million on less than two dollars per day whereas 1.2 billion people live in extreme poverty. More than 3 billion people live without sanitation, and 2 million lives are destined to be devoured by HVI/AIDS next year.
More than 800 souls starve with hunger alone in Sub-Sahara Africa, and nevertheless the World Bank aspires to reduce poverty to half by 2015.
Despite these efforts on the part of international donors, debt and aid have not lessened poverty if not exacerbated; and have abortive towards churning out the phenomenon of less unequal income distribution. As for debt, some economists concede poor nations have already paid back their principal in the form of interest; yet debt is not to be shaked off.
Furthermore, aid whatsoever received, has been gulped down by big giants like debt servicing, budget deficits, structural rigidities and other fiscal imbalances and poverty, in the backdrop of broke economic management in poor nations, has kept on sucking blood of their poor; the governments borrow and only the poor payback.
So banking upon external gurus’ aid-blended prescriptions should have been internalized with circumspection and vigilance, gauging their viability and feasibility, both in the short and long run.
Concomitantly, internal measures to bring about structural augmentations would more than hoist the underprivileged economies. Only one’s own feet, and not the clutches get one the respectable destination of self-reliance, self-sufficiency and self-respect.