POVERTY

POVERTYPoverty is a condition where basic needs for food, clothing and shelter are not being met.

POVERTY TRAPPoverty trap is a spiralling mechanism which forces people to remain poor. It is so binding that it does not allow poor people to escape it. It is normally found in developing and underdeveloped countries.

DIFFERENT VIEWS ON FOREIGN AIDJeffery Sachs , an advisor to United Nation specifies that poor nations are poor because they are poor. They require some support in terms of foreign aid.Some of the economists like William Easterly and Moyo specify that foreign aid makes people more lazy. But both the views lack ground reality and is largely based on assumptions.

WHEN THERE IS POVERTY TRAP?There is a poverty trap whenever the scope for growing income or wealth at a very fast rate is limited for those who have too little to invest. This expands dramatically for those who can invest a bit more.On the other hand, if the potential for fast growing is very high then poverty trap can be reduced.

YARDSTICKS FOR POVERTYA single graph cannot solve the problem of poverty trap. It requires qualitative and quantitative data to find out not only the causes of poverty , but also how poor people think on various policies. This is why RANDOMIZED CONTROL TRAILS[RCT], is done.

RANDOMIZED CONTROL TRAILSIn this randomized control trails, different programs like how poor people use bed nets can be compared with different assumptions. It can also make one clear about awareness of poor people.

TYPES OF POVERTY

POVERTY TRAP AND ITS CURVES

POVERTY AND ITS DIFFERENT MEANINGS

HUNGER BASED POVERTY TRAPSome of the experiments on hunger based poverty trap specifies that when people were given wheat and rice at subsidized rates, they consumed both wheat and rice in small quantities, and went for meat and beef additionally. This means people are spending on highly tastier items ,than highly nutritional items. There is nutrition based poverty trap.

NUTRITION BASED POVERTY TRAPThe previous slide specified an experiment. But there is no problem of intake of calories. But there is a problem of intake of nutrition. Here the problem mainly lies in use of micronutrients. Essential micronutrients like both IODINE and IRON are very important for not only children but also pregnant ladies. Now this specifies that there must be change in food policy based on nutrition rather on calories.

WHY DO POOR PEOPLE REMAIN HUNGRY?In South East Asian countries like India or other countries from Africa, though poor people are provided with both subsidies and concessions on food. But for these people there is something more from food like cell phone, television, newspaper etc. Have become more essential that decides the income spent on food. Even huge spending on customary practices on many occasions decide the budget on food.

EDUCATION AND POVERTYIlliteracy is one of the causes of poverty.There are lot of questions relating to education.Where should education be given?How should it be given?What is its benefit financially?These questions have a different views and answers.

THE DEMAND WALLAHS CASEThe demand wallahs a set of critics believe that there is no point in supplying education unless there is a clear demand for it. When the benefits of education increase, enrolment will increase. These critics specify to bring an investment and business pattern to education and labour pattern to increase competitiveness and increase demand for it.

CURIOUS CASE OF CCTThe demand wallahs projection will not work when state capacity is more limited and compulsory education cannot be enforced. Here governments must make it financially worthwhile for parents to send their children to school. This brought in a new idea called CONDITIONAL CASH TRANSFER[CCT]. This was introduced by SANTIAGO LEVY a former professor of economics at Boston university.

CONDITIONAL CASH TRANSFER (CCT)By linking the receipt of welfare payments to investment in human capital(health and education) it can be ensured that money spent on today could eradicate poverty not only in short term, but also in long term. This inspired program of PROGRESA. PROGRESA was the first CCT program. It offered money to poor families, but only if children regularly attended schools.

CCT and its objectivesTo make the program politically acceptable payments were presented as compensation to the family for the wages lost when their child went to school instead of working.But in reality, the goal was to nudge the family, by making it costly for the family to send their children to school regardless of what they thought of education

CCT and its successFor making the project successful Santiago Levy set up a pilot project in a randomly chosen group of villages. The program demonstrated without doubt that it had substantially increased school enrolment. The success of CCT spread like wildfire. It had brought positive changes in education policy. But it must have proper administrative wing to run this policy.

PRIVATE SCHOOLS AND ITS EFFECTSPrivate schools play an important role in the process of filling the gaps in education system. The RIGHT TO EDUCATION which was called the voucher privatisation where government gives citizens vouchers to pay private-school fees. Slowly after new industrial policy 1991, people started to turn up to private schools. Students in private schools are better in literacy than government school kids.

IDENTIFYING TALENTStories about great scientist Albert Einstein and math genius Ramanujam is well known. The problem is there is no straightforward way to identify talent until one is spending a lot of time doing what the education system is doing. Education system in developing countries fail in 2 aspects; sound basic set of skills and identifying talent. Moreover the job of getting quality education is getting harder.

TESTING CENTRESIndias IT giants Infosys had kept testing centres where people including those without much formal education can walk in and take a test that focuses on intelligent and analytical skills. This alternative route is source of hope for those who fell through gaping holes in the education system.

IS CORRUPTION A POVERTY TRAP?Corruption is of course a poverty trap Poverty causes corruption and corruption causes poverty. One of the suggestions is to break the trap by focusing on making people in developing countries less poor.Aid should be given for specific goals(malaria control, food production, safe drinking water, sanitation)that can be monitored.

IMPORTANCE OF POLITICAL AND ECONOMIC INSTITUTIONGood economic institutions will encourage citizens to invest, accumulate and develop new technologies as societies will prosper.Bad economic institutions will have the opposite effects.It is the responsibility of the rulers to shape a responsible political and economic institutions for people of a nation.

SOLUTION FROM AN EXAMPLE.One possible way to break the vicious cycle of bad institutions is to import change from outside. If you cannot run your country sub contract it to someone who can better run it.Inspired by great example of Hong Kong, developed with great success by British and then handed back to China. This is concept of Charter cities where an empty strip of territory is given to foreign power for time period to develop new cities.

ATTEMPTS SUCCESSFUL TO STOP CORRUPTIONIn Indonesia, which had one of the corrupt institutions, World Bank had given aid to some villages for building their own infrastructure. But the money given was wasted on giving extra wages and bad quality materials was purchased. Government leaders in charge of this program told the village leaders that the villages work was monitored by the auditors and special officials. From next month, this was controlled. To solve corruption bigger institution is not required some strict evaluation with transparency is need of the day.

MAIN POINTS IN CORRUPTIONWhen the grocery owner is selling something to us, we are not only paying for the good, but also for the social value she is delivering.Similarly, there is no easy way of assessing the performance of the most people who work for government.The temptation to break rules is ever present both for bureaucrats and people, which mainly leads to corruption.

RULES FOR INSTITUTIONS The rules framed for the institutions had three Is as their problem [Ideology, Ignorance, Inertia]Large scale waste and policy failure often happen not because of any deep structural problem, but because of lazy thinking at the stage of policy design.Good politics may or may not be necessary for good policies; it is certainly not sufficient.

ConclusionCareful understanding of the motivations and constraints of everyone(poor people, civil servants, taxpayers and so on) can lead to policies and institutions that are better designed and less likely to be perverted by corruption or dereliction of duty.These changes will be incremental, but they will sustain and build on themselves for a new healthy change