Poverty: Some Points to Ponder

The poverty situation in which we find ourselves in this country is a sad one. Without gruelling about whether a particular index of poverty prevails, aggravation by a few points or amelioration by few points, the nature, the extent, the gravity of poverty in Pakistan is alarming; first, morally; then economically as well as politically. Continuity of such a condition in this country, or for that matter in any country, is intolerable. If there are no timely responses from the policy-makers  — those who count — the history has its own laws of retribution and revolutions, explosive situations. The major convulsions in history have a lesson for us. It would not be far wrong to say that poverty anywhere is a threat to prosperity everywhere.

To move from the domestic and national to the global scenario, the approach need not be so much statistical. The data is very much before us; its repetition will not be a very pleasant experience. It seems worthwhile to take this opportunity and raise questions to identify certain issues and to allude to some of the strategies that might be helpful in coming to grips with this problem. There is no denying the fact that poverty today prevails all over the world. It is not merely a Pakistani or a Third-World phenomenon, though people here are suffering more from the rigours of poverty; this is a global phenomenon: one in every five persons in the world lives below poverty line. If we look at the situation even in the developed countries of the West, we find poverty and affluence coexisting. The USA has less than 6 percent population and more than 25 percent of the GNP of the world, yet between 12 and 14 percent of its population lives below poverty line. In most of the European and other rich countries too, we find existence of poverty. We also find that differences in income, in wealth and in assets are becoming more and more inequal. The latest report of the Federal Reserve Bank of America (as reported by The Guardian) reveals that one percent (1989 figures) of American households, with $ 2.3 million each, own nearly 40 percent of country's wealth and the top 20 percent own more than 80 percent. Inequalities are increasing which are apparent from the fact that the average male earning has fallen to $30,007 a year from $34,048 a year, from 1973 to 1993. If the earnings of all men and women are taken on the household basis then the fall is 7 percent, while in respect of male population it is 11 percent. According to a survey, quoted again in The Guardian of 4 December 1995, which refers to the gap between factory workers and top management 20 years ago, a typical chief executive of a large corporation earned 40 limes as much as a typical worker. The 1993 figures provide 190 times differential.

So, poverty is not distinctly a Third-World phenomenon. It is a human problem, a global problem and a universal problem as even the richest, most advanced and most industrialised countries of the world are also facing poverty. Of course, there is: that question of absolute poverty and relative poverty, but this whole scenario has to be kept in mind. An important question is: have the poor of today always been poor? What is the historical context? Although dependable statistics are not available yet dependable and comparable estimates are there. Some 10 years back, International Economic Association held a conference, whose proceedings have been published, comparing the economic situation obtaining in the Third World and the industrialised countries of, today, for the periods 200 years back and now. Then, most of the underdeveloped countries of today were either developed countries of that era, or at least were at par with respect to per capita income, the capital stock position, participation in international trade and measures of poverty profiles. The situation in most of the Third-World countries was either comparable or better. Looking to India, for example, whatever data is available, reveals that 300 years before independence throughout this century the real per capita has remained constant. So, when we are exploring not just the data on poverty but the causes of poverty and factors responsible for generating poverty — both current and historical — this global perspective cannot be ignored. I do not want to spread some kind of a guilt. There is no sense in simply blaming the colonial background, yet historical realities and historical forces which are still operative need to be acknowledged. The fact remains that Africa was plundered through slave trade for 400 years, during the early and the middle colonial periods, and actual transfer of resources continued upto the mid-20th century. Between 1945 and 1965, in case of only the British empire, whatever was left of that, the sterling balances which were provided by the poor Third-World countries to support the mother country were over a billion pounds. So the way poverty has been created in Africa, in Asia and in Latin America and the role transfer of resources has played over the last six centuries and its cumulative effect on the world economic situation today, is an area which cannot be ignored when we are considering the global dimensions of poverty.

In all fairness, we need to start with self-criticism, because our own house is not in order. There are very important factors generating and aggravating poverty within the Third-World countries, including Pakistan and the Muslim lands. The distribution of wealth and income, the control of political and economic power and resources, the stratification of society into groups, classes and vested interests, the monopolisation of power, corruption, despotic regimes, all are responsible for our plight. Unless fundamental changes are made, structural power equation is changed and we seriously address ourselves to these issues, mere cash transfers and decorative social action programmes are not going to materially change the situation.

But we are not living in isolation, we are living in a world where we are part of a global system, we like it or not, that global system is affecting us and we are not powerful enough yet to impress and mould that system. Foreign aid, international transfers are only hollow acts of generosity and fruitless efforts to ameliorate poverty. If we look deeper, we find that in real terms, still there is a reverse flow of resources — material and human, physical capital as well as brain power — from the poorer Third-World countries to the developed countries. These are the issues which the developed countries are not prepared to face. To believe that by doling out the so-called aid and some transfers, international inequities and injustices can be redressed, in fact, is not facing the problem squarely. The development strategies .under whose spell economic developmental efforts have been made by and large in most of the Third-World countries, have been the ones based on the very selective experience of the Western countries and merely tailored to serve the economic and political interests of these advanced economies. That is why in real terms these strategies have not been able to bring about any meaningful change in these poor countries. The failure of economic growth strategies is an area which must be closely examined. Economic growth is a necessity. Without enlarging the cake we cannot have better distribution. Why this growth has not taken place and what have been the domestic and external factors responsible for retarded and frustrated growth, is very closely related to the idea of poverty and poverty alleviation. Without going into this aspect — both theoretical as well as practical — it will be hard to understand the causes of our failure. This is another very important aspect of the global scenario.

Let us take up two important aspects. One is this strategy of growth through loans, some concessionary but now mostly on market rates. We find that debt burden of the developing countries is increasing. Burden for interest and its rate charged has become a drain on the budgets of the poor countries. Their exports are not enough to meet their own domestic needs as well as cater for these payments. And the snow-balling of debt is taking place. There are reservations even about debt financing in a domestic economy. Even in the US, the richest country of the world, where the national debt was $1 billion in 1901, its domestic debt today is over three and a half trillion dollars and in the budgetary deficit, one of the major causes is the interest payments on this domestic debt. The overall global movement in the present phase of capitalism is from physical economy to financial economic expansion, with the result that during last 20 years by and large, there has been enormous financial expansion not commensurate with the physical expansion of the economy. The whole business of dealing and derivatives is not in value-added and the creation of real assets but trading in claim on assets. This trading is taking place at different levels, with the result that a financial expansion is taking place leading towards greater financial instability all over the world and riching a few. How one investor could make hundred billion dollars, shaking the economy of France and Brazil? What type of distribution of wealth and power is taking place through this process and what are its implications for the Third-World countries and for the whole banking system all over the world?. So this whole debt issue is very much related to economic development, poverty alleviation and future economy of the world.

The other dimension is prices, particularly of primary commodities, mineral resources and even the products of the less developed countries and the attitude of the developed countries towards imports from these countries. The customs unions, the protective walls that have been raised by the developed countries, and not today but throughout the post-World War II period. What have been its implications for the development of the Third-World countries? How have prices of the primary commodities been arbitrarily kept low? Who would deny that prices of petroleum — one of the key resources — were the same from 1923 to 1969, while prices of all other commodities, primary or otherwise, had increased. The oil price was deliberately kept at the same level. How do monopoly buyers of these raw materials control the whole system? How was the Zambian economy destroyed which relied on coffee and tea as primary products?  What  changes have taken  place  in  the  prices  and the  terms  of trade between the developed countries and the less developed countries and what have been their implications for their economies? These are areas very relevant to the global issue of alleviation of poverty.

The question of child labour has been discovered with a gusto very recently. But is it not a fact that, legally speaking, in the US, prisoner workers are given a wage which is 20 times lesser than the average wage and there is no qualm about that. The sports shoes which the multinationals are importing from Third-World countries and on which they spend millions in advertisement make a very interesting case to study. The price for which a pair is sold is above £46; the wholesale price is less than £25 the factory price is less that £10; of which the labour cost is just about £1;. One can go on refering to such cases. What in fact is needed to emphasise here is that all these are very important global dimensions.

During the last 40 years, for example, in most of the developing countries including Pakistan, India and the Latin America, which had a very fast growth between two World Wars, why is it these countries have failed to alleviate poverty? What is wrong with them? Even during the phases of economic development, spread over a few decades, there is no real alleviation of poverty at the grassroots. Why? A sensible suggestion would be that a totally new approach needs be adopted, and for that we will have to realise that economics would have to change its attitude towards man and human welfare and focus has to shift from wealth aggrandisement to human well-being. Economics from becoming the purpose and the sole determinant will have to become only a servant, an instrument and a means. Unless this fundamental change takes place and unless a more ethical, a more justice-oriented and a more man-centered approach is adopted, at the individual, state, society and the global levels, no positive change may be expected. Islamic approach [elaborately covered elsewhere in this book] addresses itself to all these mundane problems from a very different perspective. It is not a one-dimensional approach; it is an approach where moral, material, individual is a deliberate effort, so that a person becomes an active agent inspired by certain values and ideals looking not merely for his own welfare but also for the welfare of others. Unless this transition occurs, and then of course structural changes like redistribution of wealth, income and assets takes place, land reforms are introduced and above all, people, who today are kind of slaves, are in a position to decide their economic future, they are bound to be dictated by others and they will remain poor as they are. So, that change has to take place and it has to be a judicial change; a change at the policy level, but more important, it is a change at structural and institutional levels. It is the institutional approach that is distinct with Islam because Islam on the one hand, mobilises and motivates the individuals and on the other, creates these institutions. These institutions take various shapes: state and otherwise, and all of them play a role in mobilising resources and addressing to the causes of poverty alleviation. It is through this multi-pronged and comprehensive approach that it would be possible to change the situation and establish a society which could be just and about which once again the historian may record that people were searching to give charity but were not finding the needy to receive that. And that was so because the whole concept of charity was so revolutionalised that zakah was never looked upon as charity but as a right. The Qur'an says; In their wealths, the seekers and the deprived have a right. So, it is a question of how we share and fulfil each others' rights. It is only then that grassroots poverty would be eliminated.

Prof. Khurshid ahmad

Source: Poverty Alleviation in Pakistan: Present Scenario and Future Strategy, Mohibul Haq Sahibzada. Republished with permission.