Ethics in poverty eradication

Challenging the Injustice of Poverty.
By Rehman Sobhan.

Sage Publications; 486 pages, Tk 670.

Conventional economic theories, particularly those based on the principles of positive economics have literally no room for economic justice. Normative economics, on the other hand, that has had a close association with political philosophy; notably the moral theory of Contractarianism, has paid a great deal of attention to the issues of distributive justice and ethics in moulding economic thoughts. A large number of political philosophers and economic thinkers have played a key role in integrating moral values into economic and political thinking. Adam Smith's Theory of Moral Sentiment, John Rawl's A Theory of Justice and Amartya Sen's The Idea of Justice are some important works in this regard.
Professor Rehman Sobhan's latest book -- Challenging the Injustice of Poverty -- is greatly influenced by three thousand years old philosophy of justice. The noted economist of South Asia has added a new perspective to the understanding of the root causes of poverty.
Neo-liberal economic policies, devised in line with neo-classical economics, have got many things right. However, on the question of the poor's access to basic needs, market-based solutions have proven to be less effective. Recognising the limitations of markets, the author has searched for a solution to existing deprivation without totally denouncing the laissez-faire system, but by trying to give it a human face. His target is ending poverty instead of merely reducing it.
The author has redefined poverty as “a process which excludes significant segments of the population from opportunities to participate on equitable terms in the opportunities for development and decision making in society”. This, according to the writer, is largely due to the unjust nature of a social order that creates and perpetuates deprivations and inequality.
The geographical focus of the book is South Asia, a region that presents a depressing paradox when it comes to economic growth and deprivation. Nevertheless, the application of Professor Sobhan's thinking is universal. Despite impressive economic growth and scores of poverty reduction programmes, South Asia remains home to the world's largest population of the poor, hungry, malnourished and illiterate. Indeed, an interesting development in recent decades is the changing dynamics of the geography of poverty. A study shows that more than 70 percent of the world's poor now live not in low-income but in middle-income countries.
The author acknowledges that some of the existing poverty alleviation programmes have helped in expanding the financial capabilities of the poor. However, none of the programmes -- be it the Poverty Reduction Strategy Paper (PRSP) or transfer payments -- address the structural injustices that reproduce poverty.
The next point to ponder is why the poverty eradication rate is lower than its desired level. The writer has questioned the objectives of various programmes as most of them aim at alleviation of poverty, not the end of it. He has identified the sources of structural injustice of poverty in South Asia. They include asset poverty, access to the market, productivity gap and an unjust governance system.
A large part of the book is devoted to three aspects of structural changes -- agrarian reform, enhancing market power of the excluded and democratising education opportunities. One important point to note here, particularly to reinforce the author's position regarding the need of an egalitarian land reform, is that contrary to the conventional view the experience of poverty alleviation in China is not so much due to the forces of globalisation. The Middle Kingdom has lifted over 500 million people above the poverty line in less than a quarter century.
Pranab Bardhan of the University of Berkley, for instance, has argued that in China, internal factors that include an institutional change in the organisation of agriculture, the sector where poverty was largely concentrated and an egalitarian distribution of land-cultivation rights, which provided a floor on rural income earning opportunities have been major catalysts in alleviating poverty.
In addition, according to Shahid Javed Burki, former vice-president of World Bank, apart from agrarian reform the then Chinese leader Mao Zedong got at least three things right -- universal education, healthcare and women empowerment -- as far as poverty eradication is concerned. The volume allocated a lot of space to some of these pressing issues.
The access (or lack thereof) to education is perhaps the biggest source of inequality in South Asia today. Indeed, several scholars have noted that the inequality in human capital is much more than in physical or financial capital. Professor Sobhan's suggestions concerning democratising education opportunities are achievable if public policies are formulated in line with his thinking.
The author's analysis of the market power to the excluded, including a large number of case studies, is an intriguing read that primarily focuses on four aspects of the poor's access to the markets: the poor as price takers, position of the poor in the value chain, collective action and the poor as a micro-entrepreneur. The author offers an agenda to enhance the market power of the excluded.
To promote structural change the volume has outlined some policies focusing on various institutions. On budgetary policies, the author's view is that both public and civil actions are essential in order to devise more inclusive and accountable programmes for the poor.
While the degree of financial sector development in South Asia varies widely across the region, one common characteristic is that there is a significant market failure that denies the financial services of the poor. Indeed, Nobel laureate Muhamamd Yunus has long been arguing that the poor need to be integrated into the global financial system. To address the market and government failure, microfinance institutions like Grameen and BRAC in Bangladesh and self-help groups in India, have made pioneering contribution in South Asia.
Acknowledging this success, the writer laments that poor people's credit needs remain peripheral. He rightly points out that there is a need for diverse financial instruments for the excluded, notably insurance products.
Professor Sobhan has put forward a roadmap of how the excluded can be empowered through collective action. He had stressed that by giving the ownership to users, consumers etc., an equitable distribution of wealth can be achieved. In this connection, he discusses the role of social institutions.
One cannot disagree with the writer that the prevailing injustices need to be addressed as far as South Asia's poor governance, among others, is concerned.
There are two problems, however. First, there is little discussion about urbanisation and urban poverty. Given the rapid urbanisation in the region, a systemic analysis between their nexus would have enhanced the value of the book.
Second, the real hurdle to achieving a just society by implementing the suggestions made by the author is the complex political economy of the region. The vast masses of the people in South Asia are poor (and in the lower-middle income bracket) but power is concentrated in a small group of people. As a result, it is often difficult to adopt (implement) pro-poor development policies. This paradox prevails despite the spread of democracy in the region. Moreover, our understanding of political economy remains very poor given the lack of adequate literature. This was also confirmed by Nobel Laureate Economist Michael Spence when I had an opportunity to interact with him recently. While there is a short section on the political economy of structural change, perhaps because of the limitation that we discussed and scope of the book, it is unclear as who will really bell the cat. That is, who will initiate the measures that are called for.
That said, with the existing highly skewed political power one may not expect a dramatic change as far as the region's poverty and inequality are concerned. However, the growing divergence between growth and deprivation and the resultant social tensions across the region compel us to think of alternative solutions. This timely intervention by Professor Sobhan offers some agendas for inclusive development for policy makers. Also for graduate students and academics, the 486 page volume is an excellent reference.

The writer is a research associate at Institute of South Asian Studies, National University of Singapore. He can be reached at [email protected]