Addressing inequalities and poverty should be the main concern of the new government that even before assuming power must have realised that both with high and low growth inequalities have increased in the society.
Addressing inequalities and poverty should be the main concern of the new government that even before assuming power must have realised that both with high and low growth inequalities have increased in the society.
Planners must realise that unless there is sufficient change in distribution, people who have a larger initial share of the pie tend to gain a larger share in the pie’s expansion. Among growing economies, the median rate of decline in the $1-a-day headcount index is only about 1 percent a year for those countries for which growth came with rising inequality.
By contrast, poverty declined about 10 percent a year among countries that combined growth with falling inequality. Either way, poverty tends to fall, but at very different rates. Equitable growth is the fastest way to reduce poverty. Government policies must aim at leaving no one behind.
If one focuses solely on the period since the early 1990s to date, there are signs that a positive correlation is emerging between rising inequality and economic growth. It appears that the recent growth processes seen in many reforming economies, including Pakistan have put upward pressure on inequality.
There are exceptions, in that growth since the early 1990s has accompanied falling inequality in some countries, but Pakistan is not among those countries.
The extent and distribution of poverty stems from a lack of access to resources and opportunities. Also, dependencies, corruption and other governance failures, and poor people’s lack of rights in the face of traditional local power structures, as well as the lack of education and health care, are all key factors explaining poverty and hunger.
Given that the majority of the poor live in rural areas and depend on labor or earn their living as small farmers, the effects of globalisation on employment and small-farm competitiveness are central to determining its impact on poverty.
From the experience of the last four elections, the political elite have to understand that poor hungry people cannot wait for long-term solutions, such as the economic progress that globalisation offers. This is the reason that all elected governments in the last two decades were booted out of power.
The main reason was that the inequalities increased sharply in the tenure of all regimes. All regimes strived for high growth and thought that benefits of growth would trickle down to grass root level.
The benefits do trickle down, but were overcome by an even higher increase in the cost of living. Overcoming poverty through economic growth alone would require decades, even with a high growth rate.
To bridge the time issue and to cope with emergencies, social policy is called for. The new regime would have to come up with a social policy aimed at mitigating the miseries of the poorest of poor.
More rapid income and poverty reduction require both a more rapid pace of growth and a more pro-poor pattern, which implies a reduction of the inequalities that limit the prospects for poor people to share in the opportunities created by economic growth.
Creditable research has revealed that the poverty impact of growth has been shown to be more than 10 times higher in those countries that combined growth with falling rather than rising inequality.
The writer is a staff member
