Poverty Alleviation and Poverty Statistics

By Kevin J. Barr

The Poverty Alleviation Unit estimates that in recent years $1.5bn has been spent on poverty alleviation programmes yet poverty does not seem to decrease. Rather it seems to be on the increase. Why is that?

My opinion is that while government is spending money on poverty alleviation programmes for urban and rural areas:

1. It is not sufficient for the needs;
2. Many of the policies government follows negate the effects of the poverty alleviation programmes.

At the outset it would be important to disaggregated the $1.5bn that is estimated to have been spent on poverty alleviation. To justify the figure the breakdown of that figure needs to be given in terms of budgetary allocations over the years and how they were specifically targeted towards poverty alleviation. There would be some problems in terms of funding provided during the Qarase regime for affirmative action policies which were based more on ethnicity than on real evidence of poverty.

However in this paper I wish to elaborate on (b) above.

1. Over 20 years ago the World Bank suggested the separation of the Public Rental Board from the Housing Authority and saddled the PRB with the debt owed by the previous combined entity. Both were to be commercial entities and, while not required to make big profits, they were to recover the costs and hence pass on these costs to their clients. Economic rents were to be charged etc. In fact this meant that for many years PRB was very restricted in its ability to build new rental housing. It also meant that HA costs rose. The effect of all this was that the housing stock for Fiji generally became less available and less affordable. (Government did provide subsidies for disadvantaged people in the PRB.) According to the research of Donovan Storey 80% of all housing put up in Fiji between 2001 and 2006 was put up in informal settlements – not by official housing entities.

2. In 1992 VAT was introduced on the advice of the World Bank and IMF. It began at 10% and increased to 12.5% and at the beginning of 2011 was increased further to 15% even though the level of poverty was high. All economists know that VAT is a regressive tax and causes more hardship for the poor than for better off citizens. There were other options to increase revenue – especially when company tax was decreased and capital gains tax remains low.

3. In line with the policies of the Asian Development Bank and other International Financial Institutions there has been a move to privatisation and corporatisation of various public enterprises. The ADB had its famous slogan – “poverty alleviation through private sector development. There may be some merit in some degree of privatisation and corporatization but there has been a strong outcry against privatising or corporatizing basic services. Despite many protests from well-informed NGOs and others, government went ahead and corporatized the supply of water in Fiji under the Water Authority of Fiji (WAF). This has meant a hugh increase in the supply of water connections sewerage etc which has increased the costs of housing.

4. Many are also complaining about the rising costs of electricity.

5. Also, at the suggestion of the IFIs the Fiji dollar was devalued by 20% in 2009. According to statistics from the FBOS this meant that food actually increased by 38% and building costs to 29%. Although the Reserve Bank of Fiji glibly says that the devaluation “has been absorbed by the economy” and brought benefits in terms of foreign reserves, it has also had a huge effect on the cost of living for many people in the country – especially the poor and low income earners.

6. Wages also are a key issue for the alleviation of poverty. Many studies on poverty in Fiji have stressed this. Currently 60%-70% of our workers are earning wages below the current poverty line. It is no wonder that we have so much poverty and that so many are unable to afford the education costs for their children, cannot properly feed their families and provide health care and have to live in substandard housing in informal/squatter settlements. While the IMF team in 2010 were astonished at the low level of wages in Fiji, other IMF teams seems to ignore the plight of workers and increase their burden. Moreover government has now twice deferred the wage increases set by the Wages Councils because of complaints of employers (many of them living in luxury).

There are some other examples which could be given but what I want to show is that, while government may have introduced some programmes to alleviate poverty in the country, many of the policies it has also introduced (at the behest of the International Financial Institutions) has actually increased poverty in the country. It is like someone driving a car. One foot is on the brake to reduce poverty while the other foot is on the accelerator to increase hardship and poverty. With one foot on the brake and one foot on the accelerator it is no wonder that we are not making much progress in alleviating poverty. It is no wonder that we don’t see many benefits from the spending of $1.5bn on poverty alleviation programmes over the years.

Recently introduced poverty alleviation programs are certainly appreciated:

• Free bus fares for school children whose parents combined income is below $15,000;
• The provision of free text books of certain categories over the next few years;
• The food stamps system for those on FAS plus 10,000 others;
• The proposed reduction of fees set by schools for building, sports etc;
• Reduced or free bus fares for the elderly (over 60) and those with disabilities;
• The price controls set for certain building materials and foods.

However the effects of devaluation of the Fiji dollar by 20%, the increase of VAT to 15%, the failure to increase wages for 60% of those in full-time employment, the increase of many food prices even for local foods etc – all these have negated or more than negated the desired effects of the above poverty alleviation programs.

There still seems that there is a confusion about poverty. Poverty covers a much larger group of people than that small percentage of people on the Social Welfare’s Family Assistance Scheme (FAS). In fact the FAS only addresses in a very limited way the situation of the poorest of the poor (or the destitute) in Fiji. The bulk of the poor in Fiji are workers (“the working poor”) and farmers (“the rural poor”). Different categories of the poor in Fiji require specific policies to target them.

Moreover there is a need for a more participatory approach to poverty reduction where the voices of the poor are heard rather than top down policy decisions formulated by the so-called “experts”.

Years ago Ian Robertson (1977:254) expressed in very clear terms why there is so much opposition to reducing poverty and inequality in Fiji and elsewhere:

“Poverty exists because our society is an unequal one, and there are overwhelming political pressures to keep it that way. Any attempts to redistribute wealth and income will inevitably be opposed by powerful middle and upper class interests. People can be relatively rich only if others are relatively poor, and since power is concentrated in the hands of the rich, public policies will continue toreflect their interests rather than those of the poor.”

Over the years, Fiji has been following the policy directives of the World Bank, the IMF, and the Asian Development Bank despite the fact that these policies (based on neo-liberal capitalism) have created greater poverty and inequality in other countries. The findings of the Melzer Commission of the US Congress (2000) are worth repeating: 

 

“Neither the World Bank nor the regional banks are pursuing the set of activities that could best help the world move rapidly toward a world without poverty or even the lesser, but more fully achievable goal of raising living standards and the quality of life, particularly in the poorest nations of the world.”

We currently have a rather strange situation in Fiji. The World Bank – one of the IFIs whose policy advice has created more poverty – is now piously involved in working with government about refining its poverty reduction programs. Also while one IMF team was appalled that such a high percentage of our workers earned wages below the poverty line, another IMF team advises us to increase VAT which will make life more difficult for the poor. The IFIs also advise us to outsource basic services to private companies when they know this will increase the financial burden of the poor.

We need a radical policy change. As Mahbub ul Haq (1998) observed:

            “Let us honestly realise that poverty is not merely a flu, it is more

like cancer. We cannot leave intact the model of development that

produces persistent poverty and wistfully hope that we can take care

of poverty downstream through limited income transfers or discrete

poverty reduction policies. ... A few technocratic programs

downstream are not the real answer. The real answer lies in

changing the very model of development, from traditional economic

growth to human development, where human capabilities are built

up and human opportunities enlarged, where people become the real

agents and beneficiaries of economic growth rather than remain an

abstract residual of inhuman development processes.”

What we need is not “neo-liberal free-market capitalism” (which has been largely discredited by the recent economic crisis) but what recent commentators have called “social capitalism” or “moral capitalism”. They want to see capitalism with a human face. Others might prefer to use the term “democratic socialism”. Whatever we call it, we must work for a more just, compassionate and inclusive society. As John Rawls (1971) stated so well:

“A just society must be one that cares for the wellbeing of all – not

just a few. The economic system it adopts must work for the good

of all – not just for some to the detriment of others.”

In 2003, the United Nations published a Report called The Challenge of Slums which provided to the world the first serious overview of urban poverty and squatter settlements on a global scale and indicated that the cause of all this was the damage done by 30 years of structural adjustment and privatisation policies of the IFIs as well as the crisis of debt caused by these policies.

Also Mike Davis in his book The Planet of Slums (2006) paints a picture of the massive explosion of informal settlements all over the world and outlines the scale of world urban poverty today. He states that slums grew in so many cities around the world because post-Independence governments tended to abdicate responsibility for the poor in order to rule in the interest of local elites and those with wealth. He adds that the situation exploded with the imposition of the IMF-World Bank Structural Adjustment programmes which had far-reaching effects in rural and urban areas. These structural adjustment policies included labour “reforms”, tax “reforms”, privatisation, reducing social expenditure etc Most slum dwellers or squatters are now forced to provide cheap labour in the formal economy or to work in the informal sector where conditions are harsh.

And so:

• When are we going to serious name and blame these IFIs for the problems we know they have caused us in Fiji?
• When are we going to realise that the advice of the IFIs (based on neo-liberal capitalism) has increased poverty and inequality all around the world?
• When will we stop listening to them and introduce policies (not only token programmes) which will benefits and not burden the poor?
• When are we going to address the key issue of just wages for our workers in Fiji?
• When are we going to provide subsidies to house the poor - not middle income earners who are first home buyers at Waila city?
• When are we going to listen to the voices of the poor?

A Note on Poverty Statistics

In a presentation at the Squatter Summit it was mentioned that from the 2009 HIES it is estimated that 26% of poverty is in urban areas and 46% of poverty is in rural areas.

It has always been know that the percentage (or extent) of poverty in rural areas is greater than urban areas BUT what is not always acknowledged is that the depth of poverty in urban areas is much greater in urban areas than rural areas. It is like a puddle of water. One puddle can cover a large area but is only one inch deep while another puddle may cover a small area but be eight inches deep.

Policies based on such statistics need to take account of such clarifications. Also it is important to note the increase in urbanisation – the numbers of people moving from the rural to the urban areas. While current policies to improve infrastructure, health care and education in rural areas are welcome and long overdue, they may lessen the urban drift but not stop it. This has been the experience of other countries.

Conclusion:

I have tried to provide an explanation for the frustration expressed by the Poverty Alleviation Unit in the Prime Minister’s Office that government has spent well over a billion dollars on poverty alleviation programmes yet it has had little impact on poverty levels in the country. In fact, poverty has increased.

My suggestion is that while all these poverty alleviation programmes have been well intended and have helped to some extent, the economic policies government has been following (often under the direction of the World Bank, the IMF and the ADB or local economists trained by these entities) have negated the effectiveness of these programmes.

We need a radical policy change which reflects a new model of development.

I repeat the words of Mahbub ul Haq:
  
          "Let us honestly realise that poverty is not merely a flu, it is more

like cancer. We cannot leave intact the model of development that

produces persistent poverty and wistfully hope that we can take care

of poverty downstream through limited income transfers or discrete

poverty reduction policies. ... A few technocratic programs

downstream are not the real answer. The real answer lies in

changing the very model of development, from traditional economic

growth to human development, where human capabilities are built

up and human opportunities enlarged, where people become the real

agents and beneficiaries of economic growth rather than remain an

abstract residual of inhuman development processes.”

If we need any further confirmation, we have the call from David Cameron (the British Prime Minister) at the 2009 World Economic Forum in Davos for “moral capitalism”. He said that capitalism needs to be overhauled and given a conscience – a moral framework to repair the damage done by decades of reckless greed. He said that the economic crisis had exposed the failings of a system that benefited the super-rich but left the poor feeling marginalised and he called for markets to be bound by clearer rules “even if that means standing in the way of global corporate juggernauts”. He added that when many people look at capitalism today they see: “Markets without morality, globalisation without competition and wealth without fairness. It all adds up to capitalism without a conscience and we’ve got to put it right”.