Poverty and Inequality
Poverty - The origin and target of development studies
by NOGAMI Hiroki
Agargaon slum in Dhaka, Bangladesh
1.
How
we
view
poverty
When
discussing
poverty,
the
term
"absolute
poverty"
is
used
when
focus
is
on
the
living
standards
and
basic
needs
in
any
given
society.
In
contrast
is
the
term
"relative
poverty",
where
the
definition
of
poverty
changes
according
to
each
society’s
way
of
life
and
phase
of
economic
development.
"Vulnerability"
is
also
a
consideration
these
days,
when
a
person
does
not
have
the
means
to
protect
him
or
herself
from
serious
damage
to
livelihood
and
is
weak
to
various
risks,
shocks
and
stresses.
There
is
also
emphasis
now
on
"transient
poverty,"
or
poverty
caused
by
short-term
economic
changes,
as
opposed
to
"chronic
poverty,"
which
is
brought
on
by
long-term
problems
in
social
and
economic
structures.
2.
Poverty
Indicators
To
determine
what
poverty
is,
there
is
a
need
to
decide
on
what
barometer
for
living
standards
will
be
used.
In
general,
real
consumption
values
are
used.
The
poverty
headcount
ratio
and
poverty
gap
ratio
are
typical
poverty
indicators.
More
concretely,
one
method
used
is
to
look
at
the
poverty
line
and
basic
consumer
spending;
that
is,
the
amount
of
spending
required
for
the
amount
of
food
necessary
for
basic
energy
intake
plus
basic
non-food
items.
Anyone
whose
consumption
level
is
below
this
is
regarded
as
being
among
the
poor.
Reference
is
often
made
to
the
measure
of
a
dollar
a
day
per
person
as
marking
the
poverty
line.
In
this
case,
each
country’s
household
consumption
according
to
survey
results
is
converted
according
to
purchasing
power
parity
so
that
the
amount
of
goods
that
can
actually
be
consumed
is
equalized.
The
ratio
of
the
population
that
is
earning
(or
consuming)
an
amount
below
the
poverty
line
is
the
poverty
headcount
ratio.
We
can
tell
how
big
the
population
of
the
poor
is
according
to
this
indicator,
but
we
cannot
tell
how
serious
each
individual’s
circumstances
are.
With
income
transfers,
the
poverty
headcount
rate
can
easily
be
lowered
by
granting
such
payments
to
those
whose
income
levels
are
not
that
low,
and
this
may
be
preventing
the
poorest
of
the
poor
from
receiving
relief.
In
contrast
with
this,
the
poverty
gap
ratio
expresses
the
amount
of
income
the
poor
are
lacking
to
make
it
over
the
poverty
line,
which
is
useful
in
order
to
grasp
the
severity
of
the
problem.
The
poverty
gap
ratio
is
calculated
as
follows:
In
other
words,
"Σ"
is
determined
by
the
poor
(those
whose
consumption
levels
are
below
the
poverty
line).
Under
this
method,
if
consumption
levels
of
the
poor
are
reduced,
the
poverty
indicator
increases,
reflecting
the
situation
of
the
poor.
This
makes
it
a
better
indicator
than
the
headcount
ratio.
The
squared
poverty
gap
ratio
is
another
suggested
method,
which
squares
the
amount
of
the
gap
between
consumption
levels
of
the
poor
and
the
poverty
line
and
sum
up
them.
By
squaring
this
amount,
the
situation
of
the
poorest
is
better
reflected
in
poverty
indicators.
In
grasping
poverty
by
looking
at
consumer
spending,
emphasis
is
on
the
goods
and
services
necessary
for
daily
life.
It
is
important,
however,
in
understanding
poverty
to
actually
know
about
people’s
being
and
what
they
are
doing
(what
Amartya
Sen
refers
to
as
"functioning")
through
goods
and
services.
This
is
where
social
indicators
such
as
health
and
life
expectancy
and
literacy
prove
useful
in
understanding
poverty.
The
UNDP’s
Human
Development
Index
(HDI)
is
one
such
indicator.
3.
Measures
to
Reduce
Poverty
In
the
1970s,
when
efforts
to
deal
with
poverty
began
in
earnest,
"Redistribution
with
Growth"
(Chenery
et.
al.
1974)
was
proposed.
The
concept
of
Basic
Human
Needs
(BHN)
was
also
advocated
at
the
1976
ILO
World
Employment
Conference.
Under
this
view,
it
is
not
just
growth
that
is
needed
to
meet
people’s
basic
needs;
redistribution
of
wealth
and
institutional
reform
are
also
necessary.
In
addition
to
basic
consumption,
adequate
food,
housing,
and
clothing,
BHN
includes
access
to
safe
drinking
water
and
public
health,
use
of
public
transportation,
medicine,
education,
employment
and
the
protection
of
human
rights.
In
the
1990s,
interest
in
poverty
relief
was
high,
and
having
undergone
structural
adjustments
in
the
1980s
and
reconsidered
the
meaning
of
development
aid,
focus
was
particularly
on
institutions
and
governance,
non-income
related
poverty
(human
rights
and
social
exclusion),
participation
in
the
local
community,
and
self-initiated
public
action
(Drèze
and
Sen
1989)
.
Tremendous
impact
could
be
seen
particularly
in
the
1990
and
2000/2001
World
Development
Reports
and
post-1990
Human
Development
Reports
(UNDP)
.
World
Development
Report
2000/2001
considered
poverty
reduction
by
looking
at
three
dimensions
-
encouraging
opportunity,
empowerment
and
social
security
to
deal
with
risks
that
people
face
-
and
emphasized
institutions
and
governance.
Human
Development
Report
is
based
on
the
concept
of
expanding
people’s
choices
in
life
by
promoting
development
policies
that
are
people-centered.
According
to
Drèze
and
Sen,
included
in
poverty
reduction
and
social
security
are
promotional
measures
to
consistently
improve
people's
income
and
skills,
and
protective
measures/safety
nets
to
guard
people
in
emergency
situations
(e.g.
disaster
and
economic
crisis)
(Drèze
and
Sen
1989).
This
includes
safety
net
measures
and
the
provision
of
assets,
as
well
as
improvements
to
"entitlements"
of
low-income
earners.
With
the
current
emphasis
on
targeting
(determining
policy
beneficiaries
by
looking
at
specific
indicators)
arise
the
issues
of
its
effect
on
the
information
gap
between
government
and
society,
administrative
costs,
and
incentives.
People
who
are
not
suffering
from
poverty
also
benefit
if
limits
are
not
established,
but
a
strict
means
test
for
beneficiaries
greatens
the
administrative
costs
involved,
thereby
increasing
the
burden
on
the
poor.
There
is
also
the
use
of
variables
closely
correlated
with
income
as
relatively
easy
indicators
to
determine
beneficiaries
(area,
ethnic
group,
gender
of
head
of
household,
housing
situation,
access
to
resources
such
as
drinking
water).
There
is
also
"self-targeting",
whereby
a
framework
is
created
that
non-poor
will
not
fit
into,
leaving
only
the
poor
(by
setting
the
wage
levels
in
public
job
creation
programs
close
to
the
minimum
standard
of
living,
those
whose
living
standards
are
supported
by
more
than
minimum
wage
do
not
take
part).
Inequality - Reducing inequality for a future of coexistence and cooperation
by NOGAMI Hiroki
An industrial park in Narayanganji, Bangladesh
1.
The
Merits
and
Demerits
of
Inequality
Debating
the
merits
and
demerits
of
inequality
is
surprisingly
not
easy.
Inequality
is
not
just
about
economics;
it
relates
to
many
dimensions
of
human
life
(gender,
generation,
community,
ethnicity,
etc.)
and
there
is
no
consensus
as
to
which
aspect
of
discrimination
is
more
important
than
another.
If
we
just
take
the
economic
aspect,
inequality
and
growth
are
mutually
related,
and
it
is
difficult
to
select
distribution
and
growth
promotion
policies
independently
of
each
other.
2.
Measuring
Inequality
A
straightforward
way
to
measure
economic
inequality
is
to
look
at
the
share
of
society’s
income
taken
up
by
the
high
(or
low)
income
population.
Statistical
measures
such
as
the
Gini
coefficient
and
Theil
index
are
often
used
in
specialist
research.
3.
Economic
growth
and
Inequality
Regarding
the
relationship
between
economic
growth
and
income
inequality,
there
was
a
hypothesis,
the
trickledown
theory,
suggesting
that
the
results
of
economic
growth
will
eventually
permeate
the
poor
segments
of
the
population.
Kuznets
has
argued,
based
on
the
historical
experience
of
developed
countries,
that,
“in
the
first
stages
of
economic
development,
the
gap
in
income
distribution
is
large,
but
at
a
certain
level
of
development,
the
inequality
lessens"
(Kuznets
1955).
The
most
important
aspects
of
Kuznets’
argument
involve
the
gap
between
urban
(industry)
and
rural
(farming),
and
movements
of
labor
and
establishment
of
social
security
mechanisms.
Kuznets’
theory
also
faced
criticism,
and
it
can
be
thought
that
by
providing
opportunities
for
the
poor
to
participate
in
economic
activity,
the
economic
growth
that
comes
with
equality
can
be
fostered.
Examples
include
the
provision
of
public
goods
by
the
government
that
support
production
activities
of
the
poor
and
improving
the
functions
of
the
credit
and
insurance
markets
to
reduce
risks
faced
by
the
poor.
Human
capital,
such
as
health
and
hygiene
and
education
are
particularly
emphasized
as
linking
growth
and
inequality.
Also,
with
parameters
between
economic
growth
and
inequality
(factors
obstructing
movement
in
the
market
such
as
segmentation
in
the
labor
market,
technological
disparity
and
poor
quality
of
public
institutions),
it
is
possible
to
achieve
growth
and
equality
through
correcting
failures
of
the
market
and
improving
the
quality
of
institutions.
If
we
take
political
stability
and
social
harmony
under
the
wider
meaning
of
public
goods,
aiming
to
reduce
inequality
by
creating
a
social
foundation
that
promotes
these
factors
can
also
be
included
in
the
role
of
development
policy.
An
equal
social
environment
improves
social
efficiency
by
promoting
the
norm
of
reciprocity
and
cooperation,
and
there
is
also
a
perspective
that
considers
this
as
“social
capital”
-
a
factor
along
with
physical
and
material
capital
that
contributes
to
growth.
4.
New
Developments
in
Measures
to
Reduce
Inequality
The
UNDP's
Human
Development
Report
aims
to
avoid
conflict
and
social
antagonism
by
calling
for
redress
of
the
horizontal
inequality
of
gaps
in
freedom
and
living
conditions
brought
on
by
differences
among
people
who
belong
to
different
genders,
ethnicities,
languages
and
religions,
in
addition
to
inequality
from
the
one-dimensional
perspectives
of
income
and
skills
(vertical
inequality)
(Stewart
2000, pp.252-255)
(Horizontal
versus
Vertical
Inequality,
UNDP
2000,
p.62,
Box
3.4).
Human
Development
Report
2005
appeals
for
public
policies
to
correct
inequalities
in
working
towards
achieving
the
Millennium
Development
Goals
(UNDP
2005,
pp.55-64).
Further,
regarding
the
term
“pro-poor
growth”
that
has
recently
been
the
subject
of
focus,
Human
Development
Report
2005
proposes
that
rather
than
the
“absolute
definition
of
pro-poor
growth”
(growth
of
income
of
the
poor),
the
“progressive
definition
of
pro-poor
growth”
(which
emphasizes
the
relative
status
of
the
poor
in
a
society)
be
used
instead
(UNDP
2005,
p.65,
box
2.3).