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This book looks at developmental pathways to poverty reduction that emphasize employment-centred structural change, social policies that both protect citizens and contribute to economic development, and types of politics that support economic transformation and participation of the poor in growth processes.



Development Strategies


1. Developmental Pathways to Poverty Reduction

Poverty reduction has gained much prominence in international development policy. In 2000, governments made a commitment through the adoption of the Millennium Development Goals (MDGs) to reduce poverty and hunger by half by 2015. Low-income countries that seek help from the international financial institutions (IFIs) are now required to prepare poverty reduction strategy papers (PRSP) that will inform their economic and social policies. Bilateral aid is also increasingly tied to progress made in poverty reduction. However, there are concerns that many countries will be unable to make meaningful dents in their poverty. At the centre of these concerns is whether countries are following the right development paths. Critics affirm that current anti-poverty strategies have not overcome the constraints of the stabilization policies of the 1980s which contributed to a deepening of poverty or generated growth with limited employment in loan-recipient countries; and that lessons have not been drawn from the development strategies of newly industrialized countries that drastically reduced poverty in relatively short periods.
Yusuf Bangura

2. Employment, Economic Development, and Poverty Reduction

Economic development that improves employment opportunities is more egalitarian than growth regimes in which the quality of employment stagnates, or deteriorates, over time. Moreover, unequal access to decent work and persistent labour market inequalities frustrate efforts to reduce poverty. Employment opportunities generated in the course of economic development depend on the current structure of the economy, and how that structure changes over time. However, economic structures are diverse and the nature of structural change, or the absence of such change, creates distinct employment patterns with important implications for social and economic well-being.
James Heintz

3. Taxation, Developmental State Capacity and Poverty Reduction

There is a general consensus that sustained economic growth is a necessary condition for sustained reduction in poverty (Page, 2005; Ravallion, 1997). Sustained economic growth and structural transformation is necessary for sustained increases in salaried employment, which historically is the main source of increases in the incomes of low-income groups as well as improving the empowerment of women (Sender, 2008). In turn, the construction and consolidation of a state that has the authority and legitimacy to secure property rights over growth-enhancing activities, maintain public order and mobilise resources is a necessary condition for growth. Much of the recent literature on the developmental state examines how successful late developers have intervened to promote growth, but has neglected to identify where the power and legitimacy of a state to enforce and change the rights and institutions, and to extract and mobilise the resources required to sustain development and growth comes from in the first place (Kohli, 1999).
Jonathan Di John

4. The Effectiveness of IMF/World Bank-Funded Poverty Reduction Strategy Papers

This chapter assesses whether the macroeconomic content of the Poverty Reduction Strategy Papers (PRSPs) supports the ultimate objectives of sustainable growth and poverty reduction or, instead, merely reflects typical macroeconomic policies embodied in IMF-based stabilization programmes. In particular, the chapter takes a dynamic perspective by making a distinction between first- and second-generation PRSPs and looks at how they have evolved over time. In doing so, it asks the questions: how much have they changed in response to feedback and criticism, and how much have they de-coupled from the traditional IMF type of stabilization programmes, and become more pro-poor, pro-growth? Finally, the chapter aims to contribute to our understanding of what forces shape the design and implementation of the macroeconomic policies contained in the PRSPs. It asks the questions: to what extent are PRSPs top-down, IMF driven, and to what extent is the design of their macroeconomic components mediated by actions from other actors thereby contributing to a more balanced design and implementation process? What are donor governments doing to ensure that the macroeconomic framework does not constrain aid spending? The ultimate aim is to shed light on how institutions, policies and politics interact with each other and how, through this process, each contributes to the shaping of poverty outcomes across developing countries.
Ricardo Gottschalk

5. Poverty Reduction and the Politics of Bilateral Donor Assistance

The last 15 years have seen a reorientation of the international development industry, resulting in a change from economic growth as the principal objective of development towards a focus on poverty reduction, as embodied by the Millennium Development Goals (MDGs). At the same time, recognition of the failings of the policy conditionality associated with structural adjustment has seen donors place an increased emphasis on “national ownership” of policies by developing countries as a key determinant of development success. This chapter assesses the implications of these changes by analysing the role now played by donors in policy-making processes in recipient countries, the mechanisms through which they exert influence and changes in the sectoral allocation of development aid. The analysis draws on statistical data on aid allocations as well as examining the politics of bilateral donor assistance in two illustrative case studies.
Tom Lavers

6. Politics of Growth and Redistribution in a Democratic Context

Economic growth and redistribution have been central to the strategies of countries that have drastically reduced poverty. Especially when driven by sectors that provide employment to the poor, growth improves incomes and public revenues, and makes the pursuit of redistributive policies less burdensome on governments and taxpayers. Similarly, when redistributive policies are progressive or universal, they may improve the incomes and wellbeing of the poor and reduce social hierarchies and divisions.
Yusuf Bangura

7. Agrarian Social Pacts and Poverty Reduction

Any effort to address poverty must consider the central place of agriculture. Three out of four people in poor countries live in rural areas, most depend on agriculture for their livelihood, and many live in extreme poverty (World Bank, 2007: 1). Recently, the World Bank has taken a renewed interest in agriculture, noting in its World Development Report 2008 that “today’s agriculture offers new opportunities to hundreds of millions of rural poor to move out of poverty” (ibid.). According to the report, gross domestic product (GDP) growth originating in agriculture is at least twice as effective at reducing poverty as growth in other sectors (ibid.: 30).1 Poverty in rural areas declined in the past decade, most notably in China, where rural poverty rates fell from 76 percent in 1980 to 12 percent in 2001 (ibid.: 3, 46).2 Overall, however, rural poverty rates outside China declined only modestly, from 35 to 32 percent in the past ten years. At the same time, gaps between rural and urban income levels have widened (ibid.: 45–7).
Adam Sheingate

Case Studies


8. Economic Development and Poverty Reduction in Korea: Governing Multifunctional Institutions

To fight poverty, it is necessary for developing countries — where a majority of the poor live — to strive for economic development. What makes this task harder is that economic development does not necessarily reduce poverty or income inequality. The challenge here is to combine poverty reduction and economic growth. With this in mind, this chapter examines the Republic of Korea’s development strategy, which transformed one of Asia’s poorest nations in the 1950s into an industrialized country with low poverty rates and reserves of high human capital.
Huck-ju Kwon, Ilcheong Yi

9. Singapore: Growing Wealth, Poverty Avoidance and Management

In its short history as a city-state, since 1965, Singapore has transformed itself from a declining trading post in the twilight of the British Empire to a first world, capital-exporting economy. This economic success has given this city-state a voice in the global economy beyond its small size. Detractors may dismiss Singapore’s economic success on account of both its smallness and its authoritarian political regime. For the more than three decades under the first Prime Minister, Lee Kuan Yew, leader of the People’s Action Party (PAP) which has been in power since 1959, there was ruthless suppression of dissent and opposition in the early days of its ascendancy to absolute political power. In subsequent years, the party modified election rules and procedures, practically ensuring its return to power in the five-yearly general elections. Undoubtedly, the absence of opposition shields the public service and enables the government to set and implement long-term plans without disruptions.
Chua Beng Huat

10. Development Strategies and Poverty Reduction in China

While there is some dispute over the the exact number of Chinese citizens who have been lifted out of poverty,2 regardless of whether one uses old or new measures of poverty, the reduction of poverty in the 1980s under Deng Xiaoping’s reforms is phenomenal. At a minimum, more than 200 million people were lifted out of poverty as per capita grain availability reached levels comparable to those in developed countries (Rozelle, et al., 2002; Naughton, 2007: 212–14; and Zhang, 1993). The decrease in rural poverty has been especially pronounced in the late 1970s and into the 1980s (Ravallion and Chen, 2007).
Jean C. Oi

11. The Unsocial Leviathan: Interests, Institutions and Social Policy in Brazil

The Brazilian welfare system is a large and complex structure that may be characterized as an “unsocial Leviathan”. For a developing country, it is an unusually complex administrative machinery and very comprehensive in its scope. This system is made up of a vast array of large institutions that absorb a considerable part of the state’s general revenue. Having reached 26 percent of GDP in 2008 (when it had doubled its 1992 value),1 the level of social spending in Brazil has remained the highest in Latin America, surpassing that in countries with a higher per capita income and older populations such as Argentina, Chile or Uruguay. The per capita value of social spending of US$1,026 is also very significant — it is the fourth largest in Latin America (behind Argentina, Chile and Uruguay). At 9 percent of GDP, social security expenditure in Brazil is similar to the average OECD rate. It is the highest rate in Latin America, however, and it is almost three times the regional average of 3.4 percent (figures for 2008). This is not a recent development. As Figure 11.1 shows, average spending between 1990 and 2004 was high by Latin American standards. Notwithstanding all of this, the system has historically been biased not towards the poorest social groups but rather to the middle classes. Although it has become increasingly redistributive over time, its net impact on the distribution of income is still regressive.
Marcus André Melo

12. Ireland’s Boom-Bust Cycles: The Elusive Search for a Balanced Development

In the mid- to late 1990s Ireland for the first time began to attract international attention for what seemed a remarkable developmental breakthrough. Embracing the opportunities opened by globalization, it managed, through some options made by policy makers and with not a little luck, to create conditions that led to a 15-year economic boom, from 1993 to 2007, which saw employment expand dramatically, and average living standards rise to some of the highest levels in the European Union. Yet, this ‘Celtic Tiger’, as it came to be known both at home and abroad, collapsed suddenly in 2008 as the country entered into a crisis that, in the words of the International Monetary Fund (IMF) ‘matches episodes of the most severe economic distress in post-World War II history’ (IMF, 2009: 28). In late March 2011, the governor of the Central Bank of Ireland, Prof. Patrick Honohan, who is an academic expert on finance, described it as ‘one of the costliest banking crises in history’ (quoted in Carswell, 2011). As the full scale of sorting out its bankrupt banking system became obvious, the country’s deficit as a percentage of its GDP rose to 32 percent in 2010, a full ten times the deficit permitted by the European Union and a record for any country outside wartime. Meanwhile, the country experienced its deepest recession since independence in 1922: GDP declined by 3.5 percent in 2008, a further 7.6 percent in 2009, and 1 percent in 2010 while GNP, regarded as a more accurate measure of Irish growth since it excludes the extensive profits of multinational companies taken out of the economy, contracted by 3.5 percent in 2008, a further 10.7 percent in 2009 and 2.1 percent in 2010. Unemployment, which as recently as 2007 had been 4.4 percent of the labour force, had risen to almost 15 percent by mid-2011.
Peadar Kirby


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