THE POVERTY OF NATIONS

THE POVERTY OF NATIONS

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The Poverty of Nations A. M. Khusro Chairman of the Finance Commission Government of India Emeritus Professor of Economics Delhi University and Chairman Institute of Economic Growth Delhi

First published in Great Britain 1999 by MACMILLAN PRESS LTD Houndmills, Basingstoke, Hampshire RG21 6XS and London Companies and representatives throughout the world A catalogue record for this book is available from the British Library. ISBN 978-1-349-41215-0 ISBN 978-0-230-59577-4 (ebook) DOI 10.1057/9780230595774 First published in the United States of America 1999 by ST. MARTIN S PRESS, INC., Scholarly and Reference Division, 175 Fifth Avenue, New York, N.Y. 10010 ISBN 978-1-349-41215-0 Library of Congress Cataloging-in-Publication Data Khusro, Ali Mohammed. The poverty of nations / A.M. Khusro. p. cm. Includes bibliographical references and index. ISBN 978-1-349-41215-0 (cloth) 1. Poor. 2. Poverty. 3. Poverty Government policy. HC79.P6K48 1999 362.5 dc21 99 17494 CIP A. M. Khusro 1999 Softcover reprint of the hardcover 1st edition 1999 978-0-230-75061-2 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1P 0LP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted his right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988. This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. 10 9 8 7 6 5 4 3 2 1 08 07 06 05 04 03 02 01 00 99

Contents List of Tables and Figures Preface vi viii Executive Summary 1 Part I The Nature of Poverty 1 Introduction 31 2 Persistence of Poverty and Early Attempts to Eradicate it 35 3 Advent of the Market Economy and its Impact on Poverty 43 Part II Measurements of Poverty 4 Alternative Definitions and Measurements of Poverty 49 5 Some Macro-Indicators of Poverty 59 6 Absolute and Proportionate Poverty 68 7 Sectoral Poverty: Literacy, Education and Health 73 8 Human Deprivation and Distress 83 9 Levels of Human Development 86 10 International Differences in Poverty Levels 97 11 Poverty in the Highly Developed Market Economies 102 12 Poverty in India 112 Part III Some Solutions for Poverty Removal 13 How Recession in the Asian Economies Negatively Impacts the Poverty Situation 137 14 What Obstructs and What Facilitates Poverty Removal 145 15 Strategies for Poverty Reduction in Different Regimes 155 16 Package of Policies for Poverty Elimination 168 Bibliography 182 Index 185 v

List of Tables and Figures TABLES 4.1 Identification of Selected Countries in Different Groups based on Economic Characteristics and Levels of Development 53 5.1 Real GNP Per Capita and Annual Growth Rate 60 5.2 Growth Rate of Real GDP, Gross Domestic Investment and Private Consumption Expenditure 64 5.3 Real GDP Per Capita (PPP$) 66 6.1 Changes in Country-Specific Poverty Line (Based on expenditure per household member) 69 6.2 Absolute and Proportionate Poverty 70 6.3 Availability of Food 71 7.1 Levels of Educational Attainments 74 7.2 Public Expenditure on Education 79 7.3 Some Statistics on Health, Health Care Facilities and Life Expectancy 80 8.1 Unemployment Rate and Indicators of Human Deprivation 84 9.1 Human Development Index and Change Over Time 90 9.2 Real GNP Per Capita (PPP$) 92 9.3 Life Expectancy and Change Over Time 93 9.4 Educational Attainment and Change Over Time 94 9.5 Ranking of the Selected Countries 95 9.6 Correlation Matrix 96 10.1 Relative Poverty: Inter-Country Comparison of GNP Per Capita in Relation to US 98 10.2 Relative Poverty: Distribution of Income or Consumption 100 11.1 Growth Rate of GDP at Constant Prices Selected Industrial Economies 106 11.2 Annual Growth of GDP at Constant Prices (1984 1995) 107 11.3 Annual Five-Yearly Average Investment as Percentage of GDP 108 11.4 Investment as Percentage of GDP 109 11.5 Percentage of Labour Force Unemployed 110 12.1 Number and Percentage of Persons Below Poverty Line in India 119 vi

List of Tables and Figures vii 12.2 Incidence of Poverty 120 12.3 Numbers and Proportions of Literates and Illiterates 120 12.4 Enrolment in High/Higher Secondary Schools 123 12.5 Enrolment in First Degree and Higher Courses 123 12.6 Stock of Educated Persons 124 12.7 Birth and Death Rates and Expectation of Life at Birth 125 12.8 Population Served by Hospital Beds 127 12.9 Rural Population Served/Not Served by Primary Health Centres (PHCs) 129 12.10 Rural Population Served/Not Served by Health Sub-Centres (HSCs) 129 12.11 Proportion of Population Below Different Poverty Lines 132 12.12 Expenditure on Social Services by the Centre and State Governments 133 FIGURES 12.1 Proportions of Literates and Illiterates in India 1951 91 121 12.2 Expectation of Life at Birth in India 1951 91 125 12.3 Population Served by Hospital Beds in India 1951 91 126 12.4 Rural Population Served/Not Served by Primary Health Centres 130

Preface The Economic and Scientific Research Foundation (ESRF) gave me a singular opportunity to address an area of research which has been close to my heart for a long time, when it enabled me to undertake a study of poverty across the international frontiers. For many years I have held strongly the hypothesis that while affluence is growing nearly everywhere in the world, no area of the globe is free of poverty, including some of the most affluent countries and regions. I also hypothesized that in many areas new poverty may be emerging even as old poverty is being conquered. The reason for such beliefs was the continuation of the phenomenon of underdevelopment and the lack of will on the part of governments and peoples of several regions of Africa, Asia and Latin America the third world to fight poverty; the failure of the former Soviet Union and allied states in the second world finally to annihilate unemployment, poverty and human distress, especially in the transition from one economic system to another; and the emergence of repeated recessions in North America, Western Europe, Japan and Australia the first world which are causing a recurrence of unemployment and human distress in varied forms, from drugs to drunkenness and from new diseases to terrorism. With encouragement from the patrons of the ESRF and with effective assistance from colleagues, I was able to analyse the phenomenon of poverty in 24 countries of the world, divided into five categories, through five different ways of measurement and at two different points of time. The availability of a vast volume of data in the Human Development Reports of the UNDP, the World Development Reports of the World Bank and several other sources, as well as the evolution of new techniques of measuring poverty like the Human Development Index (HDI), opened up new possibilities of analysis and I was the beneficiary of all these sources. Suggestions from Dr Charat Ram encouraged me greatly and it was his advice that led me to prepare a special chapter on India. Mr K.K. Podar, Mr R.V. Kanoria, Dr Amit Mitra and Mr M.L. Nandrajog, were always supportive of this project. Collegial discussions with Mr D.N. Patodia and constant advice from him gave a boost to my morale and a fillip to my work. I cannot thank the above-named friends sufficiently for their advice and support. The facilities given by the Federation of Indian Chambers of Commerce and Industry (FICCI) as well as the ESRF efficiently lubricated the research set-up and provided a wholesome atmosphere for work. viii

Preface ix But this work would not be what it is without the constant and disciplined encouragement of my economist colleague, Dr M.M. Ansari, and the computer assistance and multi-faceted help of Mr Suresh Mathur, both of whom worked with great sincerity and technical efficiency to complete this research project on the Poverty of Nations. I must give my grateful regards to both of them as well as to Mr S. Hajra of the ESRF who kept me free from the details of administration and accounts in this venture so that I could concentrate on the research project without distraction. Mrs Jyoti Ramesh assisted me in the early stages of this project and collected useful information for initiating the research work. A.M. Khusro