CHAPTER 2 Causes of Poverty and a Framework for Action That report also noted that these efforts had to be com- From World Development Report 1990 . plemented by safety nets for people exposed to shocks ■ Labor-intensive growth and unable to benefit from the strategy. But safety nets ■ Broad provision of social services were clearly seen as playing a supporting role for the . to World Development Report 2000/2001 two main parts of the strategy. ■ Opportunity The 1990 report’s framework for action was derived ■ Empowerment from its concept of poverty, its analysis of the causes ■ Security of poverty, the experience of the 1970s and 1980s, and the state of the world economy at the end of the 1980s. It viewed poverty as low consumption and low achievement in education and health. Economic A decade ago World Development Report 1990 pre- development—brought about essentially by liberaliz- sented a two-part strategy for poverty reduction: ing trade and markets, investing in infrastructure, and providing basic social services to poor people, to in- Countries that have been most successful in attacking crease their human capital—was seen as key to re- poverty have encouraged a pattern of growth that makes ducing poverty. efficient use of labor and have invested in the human The experience that defined the 1990 report, from capital of the poor. Both elements are essential. The first its vantage of 1989, was the contrasting experience in provides the poor with opportunities to use their most the 1970s and 1980s of East Asia, where poverty had abundant asset—labor. The second improves their fallen sharply, and of Africa, Latin America, and South immediate well-being and increases their capacity to take Asia, where poverty had declined less or even risen. Why advantage of the newly created possibilities. Together, did Indonesia outperform Brazil in the 1970s and they can improve the lives of most of the world’s poor. 1980s in reducing income and nonincome (education —World Bank 1990 (p. 51) and health) poverty? The answer was labor-intensive 31 32 world development report 2000 ⁄2001 growth and broad provision of social services—the report’s of growth in developing countries is not necessarily two-part strategy. intensive in unskilled labor. This report uses new evidence and multidisciplinary ■ The emphasis on social services for building human thinking that together broaden the choices for devel- capital was perhaps too optimistic about the institu- opment action to reduce poverty in its multiple di- tional, social, and political realities of public action. mensions. The evidence confirms that economywide Public investment in basic education and health in de- growth improves the incomes of poor people—and in veloping countries has been rising—though in some the longer run reduces nonincome poverty. And ex- countries more slowly than GDP, suggesting a pos- panding the human capabilities of poor people re- sible lack of commitment to expanding social services. mains central in any poverty reduction strategy, both In many countries social spending is regressive. More- for the intrinsic value of such capabilities as health over, such investment has been less effective than ex- and education and for their instrumental contribu- pected, in part because of serious problems in quality tion to other dimensions of well-being, including and in responsiveness to poor people’s needs— income. institutional failures highlighted in the Voices of the But the experiences of the 1990s show that: Poor study and other research. But there have been ■ Growth cannot be switched on or off at will. Mar- successes even in seemingly difficult conditions of low ket reforms can indeed boost growth and help poor resources. Experience and research show that effec- people, but they can also be a source of dislocation. tiveness in service delivery is highly dependent on local The effects of market reforms are complex, deeply institutional capabilities, market structure, and pat- linked to institutions and to political and social terns of political influence. structures. The experience of transition, especially in ■ There is a powerful case for bringing vulnerability the countries of the former Soviet Union, vividly il- and its management to center stage. Participatory lustrates that market reforms in the absence of ef- poverty work underlines the importance of vulnera- fective domestic institutions can fail to deliver growth bility to economic, health, and personal shocks. So do and poverty reduction. Furthermore, there is evi- the financial crises of the 1990s—not least in East Asia, dence that technological change in the past decade the shining example of success in development and has been increasingly biased toward skills. So in con- poverty reduction—and the sequence of devastating trast to what was expected and needed, the pattern natural disasters. BRAZIL Brazil has made impressive improvements still leave school with skills inadequate for ties are tackled effectively, the gains for in social indicators. Net enrollment in pri- a middle-income country integrated with the poor people will be modest. To reduce mary education increased from 88.2 percent global economy. And reducing income structural inequalities, a large land reform in 1992 to 97.1 percent in 1997. Infant mor- poverty has proved difficult. Indeed, in the program is under way, and there have been tality fell from 62 per 1,000 live births in the unstable macroeconomic environment of promising experiments in negotiated land mid-1980s to 38 in the mid-1990s. And the 1980s and early 1990s, poverty rose. reform in the Northeast. In the ongoing much urban infrastructure helps poor peo- Two recent events confirm that the groups education effort the next steps will proba- ple. New programs guarantee minimum most vulnerable to economic insecurity are bly require even broader, deeper, and more per capita spending for basic health care and those with the highest incidence of poverty. participatory reforms—many of these are minimum per student spending in primary Drought in the Northeast hit poor rural now under discussion. The government is schools. Innovative action to get children workers severely, and the ripple effects of also continuing to ease the constraints of into school includes the Bolsa Escola, which the East Asian crisis, though more benign constitutional entitlements, which limit the gives poor families grants if their children than expected, reduced the income of room for maneuver on public spending. Fi- go to school. workers with the least education. nally, successful community - driven devel- Despite the advances, the inequalities Some illustrative priorities for action: opment approaches—in urban upgrading, in health and education remain great, with job growth through productive investment small-farm investments, and community the poorest fifth of the population having and prudent macroeconomic management health agents—show what is possible three years of education, and the top fifth is clearly central to increasing income op- when there is an empowering mobilization more than nine years. The income-poor portunities. But unless structural inequali- of citizens. causes of poverty and a framework for action 33 ■ Inequality is back on the agenda—in the realm of turns on these assets, through a combination of mar- ideas and experience and in the political discourse of ket and nonmarket actions (part II). many developing (and developed) countries. New ■ Facilitating empowerment: making state institutions work shows the importance of gender, ethnic, and more accountable and responsive to poor people, racial inequality as a dimension—and a cause—of strengthening the participation of poor people in po- poverty. Social, economic, and ethnic divisions are litical processes and local decisionmaking, and re- often sources of weak or failed development. In the moving the social barriers that result from distinctions extreme, vicious cycles of social division and failed of gender, ethnicity, race, and social status (part III). development erupt into internal conflict, as in Bosnia ■ Enhancing security: reducing poor people’s vulnerability and Herzegovina and Sierra Leone, with devastating to ill health, economic shocks, policy-induced consequences for people. dislocations, natural disasters, and violence, as well as ■ The global forces of integration, communication, and helping them cope with adverse shocks when they technological advance have proceeded apace, bringing occur (part IV). significant advances to some. But they have passed oth- Opportunity, empowerment, and security have in- ers by. Private capital flows now dominate official trinsic value for poor people. And given the important flows in the world, but they reinforce positive economic complementarities among them, an effective poverty re- developments, either neglecting or punishing coun- duction strategy will require action on all three fronts, by tries with weak economic conditions. the full range of agents in society—government, civil The new evidence and broader thinking do not negate society, the private sector, and poor people themselves. earlier strategies—such as that of World Development Re- Actions cannot be confined to individual countries port 1990. But they do show the need to broaden the in the developing world. Harnessing global forces in favor agenda. Attacking poverty requires actions beyond the eco- of poor countries and poor people will be essential. Ac- nomic domain. And public action has to go beyond in- tions are needed