Scaling Up Poverty Reduction Conceptual Framework

Transcription

1 Conceptual Framework

2 Table of Contents 1. BACKGROUND 3 2. OBJECTIVES 4 3. STRATEGIC PILLARS Investment climate Social inclusion 7 4. IMPLEMENTATION FACTORS QUESTIONS FOR STUDY: 12 Conceptual Framework page 2

3 1. Background In a series of UN conferences during the 1990s the international community established a set of Millennium Development Goals. These are 25-year targets to be achieved between 1990 and The first goal is to halve the proportion of the world s population living in extreme poverty (on less than $1 per day measured at international prices or PPP). Other goals include reducing child mortality, achieving universal primary education and literacy, and making development environmentally sustainable. What makes us think that these ambitious goals can be met? Well, some hope and some lessons come from the experiences of Asian developing countries with half the world s population that basically met the MDG for poverty reduction in the 25 years ending in That is, the developing countries of Asia collectively reduced extreme poverty by more than 50% over the period from 1978 to Some of these countries have had the kinds of gains in health and education outcomes envisaged by the MDGs as well. Much of the collective gain depends on China, which is the most populous country in the region. The year 2003 is the 25 th anniversary of the launching of widespread economic reform in China. While household poverty data from 1978 are not as good as today s data, still it is clear that more than half of China s population was living on less than $1/day in 1978; today the share is about 15%, reflecting the most rapid large-scale poverty reduction in human history. China s extraordinary success should not obscure the fact that India has had very impressive poverty reduction as well. From independence to about 1978, there was virtually no change in India s poverty rate (slightly more than half the population lived below a national poverty line that is equivalent to about 85 cents per day). In the past 25 years India has cut its poverty rate in half. Some of the other Asian developing countries have had impressive poverty reduction as well Vietnam, especially in the past 15 years, and Indonesia, despite some set-backs since Bangladesh has had some success with poverty reduction, though not as much as India. Myanmar and Pakistan, on the other hand, have not done well. There is also a lot of diversity in experiences within countries. What is important about the Asian experience is that up to 1978 the developing countries in the region in general were not doing well. So, clearly there was some shift in institutions and policies that has enabled many though not all -- locations to scale up poverty reduction to rates that were historically unprecedented. Conceptual Framework page 3

4 2. Objectives The main objective of the Shanghai poverty conference, then, is to learn from both the successes and failures of development in all its dimensions -- in Asia and elsewhere. Asia provides most of the successful cases, but there are pockets of progress elsewhere Chile in South America, Uganda in the 1990s in Africa. In particular, the conference will aim at uncovering the factors that were critical for countries to achieve development results at scale. Development results as measured by levels of poverty reduction depend very heavily on GDP growth rates. Other MDGs have some relationship to growth as well, but are also strongly related to specific interventions in health and education, especially programs that actually reach the poor. There are important historical examples of countries and communities making very sizable improvements in health and education outcomes, even in a weak growth environment. It is interesting that both China and Vietnam reduced infant mortality by more than two-thirds in the period, when neither country was growing especially rapidly and when poverty was on the rise. This was the result of rural health interventions. Bangladesh has made rapid progress with literacy in general and female literacy in particular over the past 25 years, a period of modest growth and poverty reduction. Again, specific programs were the key to this success. It is important to understand how these large-scale gains in health and education outcomes were achieved and to what extent the lessons translate to other environments. Learning from both the successes and failures of development is important for several reasons. Despite the progress, Asian developing countries are still home to about half of the extreme poor in the world. India has the largest single concentration of extreme poor. So, while it is heartening that India has cut its poverty rate in half, there is still a huge poverty problem there. Bangladesh, Myanmar, Pakistan, and Vietnam all have high proportions of extreme poor as well. And while China s poverty rate on the $1/day line is down to about 15% that still represents about 200 million people. In many of these countries progress on the health and education aspects of the MDGs is lagging as well. So, there is still an important agenda of poverty reduction in Asia, and the conference should help countries and communities within countries learn about what has worked, and what has not worked, in other locations. A second reason why learning from the diverse experiences is important is that the other main regions with large concentrations of extreme poor Sub-Saharan Africa and Central Asia have had no progress with poverty reduction over the past one to two decades. Meeting the MDGs will depend critically on accelerated progress in these regions. There are isolated projects here and there that help improve people s lives. But how do countries and communities scale up these interventions to levels that really make a dent in poverty numbers? This concept of scaling up is a central theme of the conference. It has three dimensions. First, it means achieving outcomes commensurate to the scale of the objectives and challenges at hand, using the instruments and resources that are available. Conceptual Framework page 4

5 Second, outcomes should be understood in terms of development results at the country, regional, and global level, including on the key dimensions of the MDGs. Third, we recognize that development results derive from working in partnerships and thus we have to think of scaling up as a whole. These three elements provide a working definition of scaling up. We go into this conference with an interest in promoting learning and with an open mind as to what may translate from one environment to another. While it is good to have an open mind, it is also good to have some initial ideas or hypotheses about what has led to success and failure in efforts to reduce poverty. The development experiences in Asia and elsewhere have been extensively researched and it makes sense to draw on that work in setting out the following analytical framework which will be explored in more detail through the conference and the preparatory work that leads up to it. Under the overarching objective of growth and poverty reduction, there are two strategic pillars concerning what to do, that is, what governments and communities need to do to create a good environment for sustainable growth and poverty reduction, and for ensuring that the development process is inclusive. On these, there is a fair amount of consensus as to what is needed, which is reflected in the discussion in the next section. These strategic pillars are: SInvestment climate SSocial inclusion On the other hand, there are four implementation factors concerning how to do, that is, why some governments and communities move on this agenda and others do not, and how we can encourage and assist more governments to do so. Successful cases of poverty reduction suggest that these four implementation factors are potential drivers of any scaling up process: SCommitment and Political Economy for Change SInstitution Innovation SLearning and Experimentation SExternal Catalysts Using the above concepts, we propose for the conference a comprehensive matrix within which to study cases of successful programs, policies and projects. On one side of the matrix we have the categories under strategic pillars in which effective institutions and policies are needed to achieve outcomes -- that is, the different aspects of the investment climate and the different aspects of social inclusion and service delivery. On the other side of the matrix we have implementation factors which show characteristics of successful policies, programs and projects. We are interested in learning across both dimensions of the matrix, but in many ways learning how to do is more novel and more challenging to draw inferences about than is learning what to do. Conceptual Framework page 5

6 3. Strategic Pillars 3.1 Investment climate Recent work in economic history and development emphasizes that long-term growth depends to a large extent strength of property rights and the ability of the government to regulate in a fair way with a minimum of corruption and interest-group capture, and to create the conditions for markets to succeed. The key issue is whether people investing for the future be it starting a small firm or sending their children to school have confidence that they will reap the benefits of what they sow. Measuring this security of property rights is inherently difficult, but there is little doubt that countries such as Kenya, Myanmar, Nigeria, and Pakistan have poor security and high uncertainty, and such countries are universally poor. It is suggestive that China, India, and Vietnam were all rated to have poor property rights 20 years ago, but these countries have shown the largest improvement in property rights and rule of law measures in ratings produced by private investor rating agencies. That differences in property rights and rule of law explain much of the variation in countries diverse experiences is very intuitive. In a poor property rights environment, households and firms must focus on day-to-day subsistence. In this type of setting, any surplus accumulated by individuals is more likely to fund capital flight or out-migration than to be reinvested in the local economy. While the historical studies are suggestive they do not provide much specific guidance about how weak institutions affect development, nor about how improvements in institutions have come about. Recently the Bank has been helping clients get a better fix on the importance of institutions and property rights by sponsoring investment climate surveys. These surveys reach a large, random sample of private firms mostly SMEs and collect information both on the local governance environment and on firm performance. Among locations in Bangladesh, China, India, and Pakistan there is a clear relationship between investment climate and firm performance including growth of employment and the level of wages, both of which are critical for poverty reduction. In locations where the government makes it difficult for firms to operate because of poor infrastructure or excessive regulation/corruption, there is little job creation, growth, and ultimately poverty reduction. These micro studies provide more guidance about what specifically communities need to do to encourage growth and development. Improving the investment climate alone is not sufficient to make locations prosper; other factors are important as well. One of the key ones is access to markets. If you look at the world economy from space you find that production is amazingly concentrated geographically. There are advantages to firms and households clustering together in urban agglomerations. These advantages include obvious ones such as economies of scale in infrastructure provision, as well as less tangible ones such as spillovers from one firm to another. Furthermore, most of these urban agglomerations are along coasts or Conceptual Framework page 6

7 major rivers, because access to larger markets stimulates innovation and investment. Access to markets has both a policy dimension and an infrastructure dimension. On the policy side, the developing economies that have prospered in the past 25 years are all ones that have become more open to international trade and direct foreign investment, enabling their firms to connect with a large market. Countries such as China, India, and Vietnam had extremely closed trade policies 25 years ago, and since then have gradually liberalized trade and encouraged inflows of direct investment. China is on track to become the second largest trading nation in the world, after the United States. But policy within countries is just as important. In populous countries with potentially large markets, providing one s own firms with good access to this domestic market is important. Taking advantage of one s own scale also means that it is important that people be able to move relatively easily from the countryside to towns and cities. Despite initial restrictions on such mobility, China has had huge migration from countryside (often in the interior) to cities (often along the coast). Understanding the role of migration in growth and poverty reduction is an important area for further study. Aside from policy, the quality of infrastructure plays a critical role in access to markets. The investment climate surveys conducted so far reveal that China s flagship production locations have quite good infrastructure compared to other countries at similar levels of development ten years ago. Power, telecom, and ports all work relatively well. It takes an average of 8 days to clear customs in China, 12 days in Bangladesh, and 17 days in Pakistan: this provides a critical market access advantage to Chinese firms and helps explain their rapid growth in recent years. The development of the highway system has helped create a better-connected internal market. While infrastructure is important, the issue is generally not one of funding. Poor property rights countries actually spend 50% more on infrastructure, relative to GDP, then well-governed countries, but fail to provide good services because the money is poorly used. The investment climate studies have also revealed the importance of local governance. Developing the highway system or telecom are national issues; but many of the key factors that affect firms on a day-to-day basis involve local government. How bureaucratic and corrupt is the local government? Moreover, when local government is corrupt, it is very unlikely that local water, power, and other infrastructure will work well. While China or India in general may be doing well, the variation across locations within each country is huge. There are relatively well-governed locations and relatively poorly governed ones. Investment, growth, and job creation are concentrated in the good investment climate locations. One critical issue then is how the poor locations can learn from the good ones, and what kinds of interest group politics are preventing poor locations from reforming. 3.2 Social inclusion Locations that have created reasonably secure property rights and access to markets have prospered over the past 25 years, while locations with poor rule of law and/or cut off Conceptual Framework page 7

8 from markets have languished. As seen in the cases of China, India, and others, many poor people have benefited from this greater prosperity. But the ability of the poor to benefit from and contribute to growth depends critically on whether or not they have access to assets, access to basic services, and access to markets. From world-wide experience, it is clear that money alone, or merely increasing public expenditures, does not necessarily lead to improved service outcomes and social inclusion for the poor. If the funds meant for poor people do not reach them, they cannot benefit. If teachers do not show up in schools, doctors and nurses do now show up in health clinics, or charge them for free drugs or treat them so rudely that they do not return, poor people will not gain. Making effective use of existing or new resources requires policies and institutional relationships of mutual accountability between policy makers/politicians, service providers and citizens, particularly poor people. To enable poor men and women to play their roles effectively requires an empowering approach to development. An empowerment approach to development sees poor people as key resources and partners; it taps into their knowledge, skills, vigilance and deep motivation to move out of poverty. Nobody has more at stake in poverty reduction than poor people themselves. The challenge is to remove obstacles from their way, invest in their assets and capability and increase their access to opportunity. There is no single institutional model to support empowerment of poor people. However, there are four elements that seem to be common across successful experiences in very different economic, political and social contexts. They are increasing access to information, inclusion and participation, downward accountability, and local organizational capacity. When poor people have greater influence, power and control over public resources and decisions, providers are more likely to be responsive and accountable. For empowerment strategies to work on a large scale requires policy shifts and institutional arrangements that provide the right incentive environment and linkages focused on performance among the key actors, poor people and other citizens; providers; policy makers and politicians. A case in point is the dramatic decrease in poverty in China following the introduction of the household responsibility system and greater freedom for peasants to participate in economic decision-making. China s shift in policies led to the break up of communes and equitable distribution of land to millions of poor peasants. In addition, households were allowed greater freedom to decide what to sow and to whom to sell in emerging competitive markets and to keep their profits. Land reform is one important asset issue for the poor. Another one is access to credit; micro-finance institutions such as the Grameen Bank in Bangladesh have succeeded in getting finance to the poor. Beyond access to assets, there is also the issue of access to basic public services. Most of the countries in which the poor are concentrated -- Bangladesh, China, India, and Vietnam are all examples -- have high population density on their arable land, and some significant shift of the labor force out of agriculture into services and manufacturing has to be part of a successful poverty reduction program in these locations. Hence the Conceptual Framework page 8

9 importance of primary education, which is crucial if people are to move easily into these modern sectors. Aside from being a means to poverty reduction, universal education is an important end in its own right one of the key MDGs. One of the major objectives of the conference is to understand what programs have successfully promoted mass education, even in lowgrowth environments. In China s case, there was massive improvement in literacy in the 20 years before economic reform began. Bangladesh and parts of India have had impressive success in recent decades, especially with female literacy. And Bangladesh has made major progress reducing child mortality rates and fertility rates through targeted interventions. In India, the national primary education campaign is working well in some locations, and not at all in others. How do we understand these differences and can the lagging locations learn from the successful ones? The general issue here is how to provide effective services to the poor, when typically the local government in poor locations is more part of the problem than part of the solution. The WDR 2004 is pulling together the research and experience with improving service delivery in difficult environments. It will provide useful examples of different successes from around the world, including efforts to treat AIDS and contain its spread in countries such as Uganda and Thailand; workable maternal health programs that have dramatically reduced maternal and child mortality; and various kinds of successful education programs. A common theme in many of these successful cases is the importance of participation of the poor in design and implementation of programs. An important lesson from China is that the relatively equitable initial distribution of land and human capital meant that the vast majority of the rural poor benefited quickly from reforms that developed the institutions of a market economy and provided access to large markets. That so much of the population benefited quickly helped make the reform process politically sustainable. In Vietnam as well the initial equitable distribution of land and relatively high level of educational attainment in rural areas meant that market reforms and opening to the world economy could quickly produce mass poverty reduction. This interaction of different dimensions of development or the need for a multi-sectoral approach is an additional issue to explore in the conference. While China has had many successes in poverty reduction and social improvements, it also has lagging regions that are a growing concern. Much of the remaining poor in China are geographically concentrated in interior locations. In some cases educational and health indicators have been going backwards in these locations. So, a key challenge for China is providing public services in the lagging regions. Even with decent public services, there are important issues of access to markets and helping integrate the lagging communities into the country s dynamic development. This problem of lagging regions is prevalent in all of the large developing countries. Some of India s interior locations, such as the state of Uttar Pradesh, have large landless and illiterate rural populations. It is harder to get economic reform going in this kind of location, and the benefits of any reform to the poor are marginal. If Uttar Pradesh were a Conceptual Framework page 9

10 country, it would be among the largest and most socially deprived on earth. Reforms to benefit the poor such as universal education and maternal health programs tend to be derailed or captured by the better off. As a result, illiteracy remains among the highest in the world. 4. Implementation Factors So, there is broad consensus about the kinds of institutions and policies that lead to mass poverty reduction and to improvements in health and education outcomes. However, there is also a growing recognition that institutions are very persistent this has been another focus of recent work in economic history. For example, we have a good understanding now of how differences in the natural endowments of South and North American colonies centuries ago led to the development of different institutions in the two environments. Furthermore, many of these institutional differences have persisted to this day. Because institutions are critical for growth and because they have longlingering effects, long-term growth rates have also been quite persistent. During the two hundred years ending in 1980, Europe and North America have consistently grown faster than the rest of the world; Latin America has grown at an intermediate rate; and Asia and Africa have grown slowly. As a result, global inequality rose sharply up to The good news in the past 25 years is that growth accelerated sharply in the populous Asian countries, putting an end at least temporarily to the trend of rising global inequality. This is a very important historical development. While geography and history are obviously important, they are not deterministic in some simple, mechanical way. But it is true that large improvements in institutions and policies are relatively rare, so it is critical to understand what has led to these changes in the major cases of success. Can we document the characteristics of successful programs and projects that have resulted in genuine institutional change? From this, what lessons can we take away about how to manage the implementation of programs and projects? We see the conference as organized around four potential success factors: Commitment and political economy for change Institutional innovation Learning and experimentation External catalysts (including donors) The first characteristic that we will explore is the importance of stakeholders commitment to poverty reduction, and political economy for change. In the clearest case of national level reform China there was a visible change in the strategy for poverty reduction around , and the emergence of a group of leaders firmly committed to reform and to ensuring that the mass of people benefited from reform. In several other cases of country-level reform, this issue of leadership and commitment also appears to be important (Indonesia in 1966, Vietnam in 1986). For more micro reforms improving schools or successful health campaigns leadership is often important as well. The Conceptual Framework page 10

11 general issue here is how new leaders and political coalitions break through policy logjams that were holding back progress; and how reforms are sequenced to achieve sustainability and maximum impact. While there is broad agreement that certain types of institutions are critical for development, it is also clear that there is no single blueprint for institutional reform. For this reason, the successful reformers have often been quite flexible and have allowed institutions to emerge in a bottom-up fashion. In China, for example, the household responsibility system and the township and village enterprises emerged from grass-roots experimentation. Both institutions were important steps toward better-defined property rights, but neither followed any recognizable institutional model from more developed economies. We need to understand better this willingness to be flexible about institutional arrangements and how institutions develop in a bottom-up fashion. A third characteristic that we observe in some successful programs is explicit experimentation and an active process of learning. China has been a leader here as well. In a number of important issues, reforms have been tried at a province or local level; successful interventions have been scaled up and failed ones, abandoned. Probably the most important issue for the Shanghai conference is understanding how this process of experimentation works and what can be done to promote it. It will be interesting to develop case studies of some concrete examples. The matrix with examples attached illustrates some of the cases that we plan to use to uncover the main lessons. India has also increasingly moved to a model of encouraging local experimentation and even competition. What has happened in India is that a number of states mostly in the south seem to be actively learning from each other and from the outside world, with the result that there is dynamic change. On the other hand, states such as Uttar Pradesh, Bihar, and West Bengal seemed rooted to their poor institutions. Some of the same phenomenon can be observed in China; the faster growth in coastal areas is partly the result of natural geographic advantages, but may also reflect more receptivity to reform in these areas. A key question for big countries such as China and India is whether decentralized reform will eventually bring lagging regions into the dynamic processes, or alternatively will lock in permanent regional inequalities. That is why it is so important to understand what promotes learning and change and to learn how and when decentralization is an effective tool to spur change in lagging regions. Experimentation and learning are really about a willingness to look around and be open to new options. This openness includes cross-country learning. Vietnam, for example, borrowed from China in developing its agricultural reforms. Mexico s PROGRESA system of cash transfers for education has been borrowed and adapted by nearby Central American countries. Cost-sharing health schemes have spread across West Africa. What promotes this cross-country learning? What determines whether programs can successfully translate from one country to another? A final issue that we want to explore is external catalysts, including development agencies. An interesting point about all of the big, successful reform episodes is that Conceptual Framework page 11

12 development agencies and foreign donors played virtually no role in the early stages of reform. The Chinese, Indian, Vietnamese, and Chilean reforms can all be seen as basically home-grown affairs, in which political groups determined to improve their countries performance then turned to various outside agencies for advice and funding. So, another interesting question to explore is this role of development assistance. Aside from the big, national level reform movements, there are numerous examples of local reform in governance, infrastructure, education, health, and other sectors. Donors have been catalytic in a number of cases, such as eradication of river blindness in Africa. But in other cases donor attempts to reform policies and institutions have been heavyhanded; in general, imposing conditions from the outside has not been an effective vehicle for lasting change. These experiences have led to a growing awareness of the importance of ownership on the part of reformers at both the national level and the local level. Among the key questions we would like to pursue is what has helped countries harness their internal capacity to develop a home-grown development change process? Are the approaches transferable across countries? 5. Questions for study On what to do: SWhat specific aspects of the investment climate are most important for encouraging investment and job creation? SHow bureaucratic and corrupt is the local government? SWhat are specific examples of local governments that have improved the investment climate and what results did they achieve? SWhat are effective institutions for regulating infrastructure so that good services are provided? SWhat is the role of internal labor mobility in growth and poverty reduction? SHow can countries and communities effectively distribute assets to the poor? SWhat are the lessons from successful land reform (redistribution and titling)? SHow do we understand differences among regions and can the lagging locations learn from the successful ones? SWhat programs successfully get the poor and excluded into the formal education system? SWhat kinds of safety nets have been effective protecting and empowering the poor? SHow did large-scale gains in health and education outcomes were achieved and to what extent the lessons translate to other environments? SWhat strategies have worked in achieving synergy across key sectors for optimal poverty, health and education outcomes? Conceptual Framework page 12

13 On the how to do it: SHow do countries and communities scale up interventions to levels that really make a dent in poverty numbers? SCan we document the characteristics of successful programs and projects that have resulted in genuine institutional change? SWhat lessons can we take away about how to manage the implementation of programs and projects? SWhat promotes cross-country learning? What determines whether programs can successfully translate from one country to another? SWhat country and local characteristics are conducive to the spread of successful programs? SUnder what conditions are the political incentives of some governments aligned with long-term growth, and of most others, not? SWhat kind of internal partnerships between the government and civil society are conducive to successful reforms? SWhat are the cases where external partners played a catalytic role in local or national reform? SAre there cases where large-scale assistance retarded reforms that might otherwise have occurred? SWho learns from experimentation the decision makers or interest groups that they need to bring along? SHow can formal evaluation play an important role in scaling up? SUnder what policies and institutional arrangements have poor people benefited from access to assets, services and markets? SHow were the right linkages achieved between poor people, providers and policy makers? Conceptual Framework page 13