Poverty, Deprivation, Capability and Economics August 30, 2013

World map showing countries by nominal GDP per capita in 2008, IMF estimates as of April 2009. Sbw01f’s work, but converted to an SVG file instead. (Photo credit: Wikipedia)

‘It has to be known that  the social structures, the power relations, that have generated and continue to generate poverty.’

In the present world, poverty, particularly   as it is experienced in the developing countries, has become the main topic to a great deal of discussion among economists and policy
makers, and there have been various campaigns  going on to overcome it: “to make poverty history.” The United Nations Millennium Development Goals (MDGs) project is for front of these undertakings. In these makings, the issue is absolute deprivation, and the current widely accepted standard defines poverty as living on less than $2 per day and extreme poverty as living on less than $1 per day. The $2 per day and $1 per day figures are in terms of 1990 purchasing power. The World Bank uses these standards to report each year on the number of people living in poverty and in extreme poverty. The definition of poverty in terms of absolute deprivation may make good sense. When people do not have the basic necessities – the food, the shelter, the clothing – that they need to lead a reasonable life, they are living in poverty. Although we might not agree over the exact baseline.  There may look nothing wrong with the term.
However, there are problems with this absolute deprivation term of poverty. Primarily, there is the problem of whether or not an income measure can actually handle what we understand by people living in an ‘unreasonable’  condition of deprivation; not all the things that
make for a reasonable existence can be directly  transformed to purchasable goods and services. Besides, there is the problem of what we mean by ‘deprivation’. Of course, economic well-being – cannot be properly  measured and clearly understood by a single, absolute measure. In particular, the meaning cannot be properly  captured by  individual’s or a people’s absolute level of income. Actually, this issue has been widely recognized by the UN’s Human Development Index (HDI), Sen’s capabilities concept, and to some extent by the Millennium Development Goals (MDGs) campaign. Achieving an income goal alone does not eliminate poverty. A closely related issue  is that poverty (or well-being) cannot be captured properly by any single measure or single combination of measures, such as the HDI. Both the terms of poverty and economic well-being do not take into account issues of inequality in the distribution of income or the distribution of other measures of well-being. This failure to take into account issues of distribution in defining poverty (economic well-being) is conceptually and practically  problematic. If poverty is understood in absolute terms without consideration of distributional issues, the social structures that generate poverty tend to be ignored. It has to be known that  the social structures, the power relations, that have generated and continue to generate poverty. As  Arthur MacEwan  of University of Massachusetts Boston argues: ‘To a large extent, the poor are poor because they lack power, and they lack power because they are poor. When power is brought into consideration, the focus of policy shifts towards such issues as land reform and the effective control of state actions – i.e., of the underlying factors that determine spending on health care, education and other social services. The problem of poverty, then, would be approached as a socio-political problem, not simply as a technical problem. (Technical changes can bring about changes in socio-political relations, and that is one of the reasons, in addition to their direct impacts, that they are often good. But technical solutions are less likely to be effective when they are implemented without consideration of power relations.’  For instance, as studies on the Horn of Africa recognize, the colonizing Abyssinian Ethiopian structure has been  a very serious development problem in Oromia. In recent debates the UN and other international organizations are taking human rights issues to a center stage in the discussions of eliminating poverty as it is to  define the post 2015 actions. Actually, individual human rights and collect (group) rights must be at the center stage  in processes of poverty eliminations and achieving development. A person can be  socially and economically deprived and made incapable to achieve life goals not only as individual but also because he/she is a member of a group.  That is what we have learnt from the experiences and studies on  indigenous people such as the Oromo nation under Ethiopian social and political structures.

The discussion of  poverty may be as old as disciplines of economics and philosophy.  Economists  and philosophers including  Adam Smith, Karl Marx, John Rawls, Amartya Sen, and many more have discussed the subject. The capabilities concept of economic well-being has been established  and extensively discussed by Amartya Sen. He maintains that “…the right focus for assessing standard of living is … something that may be called a person’s capability…., the capability to function …that comes closest to the notion of standard of living.”  The following site is interesting  further discussions: http://scholarworks.umb.edu/cgi/viewcontent.cgi?article=1003&context=econ_faculty_pubs&sei-redir=1&referer=http%3A%2F%2Fwww.bing.com%2Fsearch%3Fq%3Dpoverty%252C%2520capability%2520and%2520deprivation%253Awhat%2520economists%2520say%26pc%3Dconduit%26ptag%3DADE7BA551541340B0B5F%26form%3DCONOMX%26conlogo%3DCT3210127%26ShowAppsUI%3D1#search=%22poverty%2C%20capability%20deprivation%3Awhat%20economists%20say%22

Another Interesting current economic article on the subject of poverty is rebeloged  here with kind acknowledgement to the author:

“How important should the subject of poverty be within the discipline of economics? Some economists appear to think it is a very small issue compared to the magnificent mathematics of general equilibrium theory. Others believe that economics should fundamentally be about the sources of human well-being and misery, and that understanding poverty is absolutely fundamental for economics. How should we try to sort this out? Among the contemporary economists who have given the greatest attention to poverty and deprivation, Amartya Sen and Jean Dreze are particularly outstanding. Their research on well-being, quality of life, and hunger set a standard for the point of viewthat says that life quality and deprivation need to be at the top of the list of economic research goals. Here I’m thinking of books like Inequality Reexamined, Poverty and Famines: An Essay on Entitlement and Deprivation, and Hunger and Public Action. The neoclassical free market purists stand at the other end of the garden.  The economists of the Chicago School put primary emphasis on the beneficent effects of untrammeled market behavior, and they give little attention to the “market imperfections” that poverty and deprivation represent. (The word “poverty” does not occur in the index of John Van Overtveldt’s good intellectual history of the Chicago School, The Chicago School: How the University of Chicago Assembled the Thinkers Who Revolutionized Economics and Business.) Poverty seems to be viewed as a normal and fair result of the workings of market institutions: some people make large contributions and earn high income, and others make small or zero contributions and earn low income.”  Daniel Little, Rebloged from http://understandingsocietyglobaledition.wordpress.com/2013/08/29/poverty-and-economics/ read more from http://understandingsocietyglobaledition.wordpress.com/2013/08/29/poverty-and-economics/

As disccused in the above sources, poverty is not only a matter of lack of income.  And also economic  growth alone does not alleviate poverty.  As it has been analysed in following sources: “The problem with seeing poverty only through the lens of income is that it leaves economic growth as the only option to remove poverty. The underlying assumption is that the poor will be someday and somehow able to earn enough money to take care of all their needs, starting with having sufficient food. The problem is that the poor also lack skills to earn sufficient money, they are denied credit or loan by the banks, they have no access to quality education and healthcare facilities, and face social discrimination and political marginalization. Therefore, it is rather naive to expect that just because the economy is doing well, they will suddenly start having good income and come out of poverty. Thanks to the efforts of eminent economists such as Indian Nobel laureate Amartya Sen and late Dr Mahbub ul Haq of Pakistan, better ways of measuring poverty and human well-being than income have emerged. If the UNDP’s Human Development Index (HDI) launched in 1990 provided the first global tool to probe the standard of living, a bigger thrust was given in 2010 by the Multidimensional Poverty Index (MPI) that uses 10 different indicators to probe various deprivations the poor face. An application of the MPI analysis on the above two countries reveals an entirely different picture. Ethiopia has 90 percent poverty while Uzbekistan reveals just 2 percent multidimensional poor. What we learn from this is that the society in Uzbekistan looks after its people much better than the Ethiopian society. Therefore, poverty is better understood in terms deprivations, not lack of income. Economic Growth Alone is not “Development.” The real purpose of development is to enhance the well being of people and raise their standard of living, for which economic development is an important tool. However, this tool has been converted into an end in itself. Another popular view sees “development” as technological development; other contemporary concepts of development are industrialization and increasing the GDP growth (and keep doing it forever!). The way international business is being steered through global treaties, it appears that the world is being converted into a big bazaar and people into mere tools of production and consumption. The per capita consumption has emerged as modern measure of development and hence, of the well being of people. Hence, people of “developed” nations are the biggest consumers on the planet. Rest of the world is catching fast to beat them in this competition.” http://goodpal.hubpages.com/hub/Looking-at-Poverty-Beyond-Lack-of-income

‘Poverty is powerlessness, lack of representation and freedom. Poverty is a call to action – for the poor and the wealthy alike – a call to change the world so that many more may have enough to eat, adequate shelter, access to education and health, protection from violence, and a voice in what happens in their communities. Poverty is the state of being without, often associated with need, hardship and lack of resources across a wide range of circumstances.’http://www.fightpoverty.mmbrico.com/poverty/what.html

“Since poverty is often so linked with human development, or lack of it, the 1996 report took a special look at poverty and concluded that income poverty is only part of the picture. “Just as human development encompasses aspects of life much broader than income, so poverty should be seen as having many dimensions,” says the report. As a result, the report introduced a new, multidimensional measure of human deprivation called the capability poverty measure, (CPM). The CPM focuses on human capabilities, just as human development index does. Instead of examining the average state of people’s capabilities, it reflects the percentage of people who lack basic, or minimally essential human capabilities, which are ends in themselves and are needed to lift one from income poverty and to sustain strong human development. The CPM considers the lack of three basic capabilities. The first is the lack of being well nourished and healthy, represented in this case by the proportion of children under five years who are underweight. The second is the lack of capability for healthy reproduction, shown by the proportion of births unattended by trained personnel. The third is the lack of capability to be educated and knowledgeable, represented by female illiteracy. The composite index emphasizes deprivation of women because, says the report, “It is now well known that the deprivation of women adversely affects the human development of families and of society.” Comparing the new capability poverty measure with the income poverty index, the report found that while 21 per cent of the people in developing countries are below the income poverty line, 37 per cent face capability poverty.   That is, 900 million people in developing countries are income poor, but 1.6 billion are capability poor.”    http://www.womenaid.org/press/info/poverty/cpm.html

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