Thursday, 12 March 2009

Give the poor choices: report

Business Mirror

Written by Cai U. Ordinario / Reporter
Thursday, 12 March 2009

IN order to achieve mass-poverty reduction globally, a new study released by the World Bank underscored the need not only for initiative and good work ethics on the part of the poor, but also ample economic opportunities for the poor created by governments.

The World Bank study, titled “Moving out of Poverty: Success from the Bottom Up,” was conducted in 15 countries—the Philippines and its neighbors Indonesia, Cambodia and Thailand, as well as Malawi, Morocco, Senegal, Tanzania, Uganda, Afghanistan, Bangladesh, India, Sri Lanka, Colombia and Mexico.

Among the key findings of the study: the poor and the rich have the
same or at least similar aspirations in life, particularly on family and work ethic, and the myths surrounding the poor have resulted in counterproductive government policies through the years.

The study also cited a need to shift the focus of governments and other institutions to the local level to better understand how to expand opportunity sets for poor people and help facilitate their own initiatives to improve their lives.

“Myths about poor people and about the causes of poverty have led to policy choices that have not helped those in poverty. Our research reveals the wretched opportunities that confront poor people in contrast to the gilded choices that the rich enjoy. To break out of poverty, poor people need the same opportunity sets as the rich. This requires fresh thinking and new mindsets about poor people and the scale of poverty,” the study stated.

“Poverty is not an affliction of the few but a condition of the many. In almost half the countries in our study, 50 percent of the population is poor. These hundreds of millions of people cannot all be drunken, lazy, criminal or unable to imagine and plan a future for themselves and their children,” the study added.

The World Bank conducted 21 studies that focused on specific communities, resulting in studies that are not nationally representative. In the Philippines, for instance, two study regions were identified, such as in Bukidnon and conflict areas in Mindanao.

The Bukidnon study built on a panel data set to examine the role that physical assets, human capital and governance play in mobility. In Mindanao, however, the focus was on local-level conflicts to investigate how conflict in different growth contexts affected people’s ability to move out of poverty.

Among the findings of the study are that large fractions of the nonpoor are falling into poverty in other parts of Africa and in the conflict regions studied. In study regions that sampled households affected by conflict, nearly a third of nonpoor households fell into poverty due to conflict.

“It is interesting that in the conflict-affected region of the Philippines, 38 percent of the nonpoor fell into poverty, but only 5 percent did in the nonconflict Bukidnon region of that country,” the study stated.

The study also said another reason that poor people remain poor is the poor’s lack of “clout in the marketplace,” mainly due to the small size of their transactions. This forces the poor to buy at high costs and sell their products at low costs.

In the Philippines, some farmers in Mindanao who were interviewed for the study even said there are times when they ask their buyers what the prevailing price of their product is in the market, which places them at a huge disadvantage when trading.

“The problem is us, not [the] poor people. We have to change. If only we can make the world look like what poor people think it really is—a place where hard work pays off, where there is equality of opportunity—we will see mass-poverty reduction in our time. Imagine a world in which we listen to poor women, men and young people, and fix what they think isn’t right,” the study stated.

In order to improve the poor’s plight, the World Bank study said there is a need to improve economic opportunities in rural areas by providing quasi-public goods like permanent roads, physical market spaces, irrigation waterways, telephone networks, electricity and cheap, reliable transport.

It is also important, the World Bank said, that opening up procurement chains and markets, increasing local grain-storage capacity, and improving access to information on prices are some measures that can usher in better returns to poor people in rural communities.

The study said economic organization of poor people could play a critical role in helping them move out of poverty. It stressed that the initiative to bring about change can come from any institution—government, civil society, or the private sector.

There is also a need to provide poor people larger loans, new and innovative financing arrangements for small enterprises and support in making the best use of credit. The bank said this is important since the poor cannot access formal credit facilities or do not have the collateral to obtain loans.

The World Bank also said there is a need for strong local democracies that ensure property rights; and that a positive business environment is critical for ensuring that the benefits of opening up markets are more equally shared.

However, the study said land titling, business licensing and other economic policies adopted by local democracies often help only the socially dominant, wealthier class.

“People in poverty want economic opportunity. When opportunity sets expand in a dynamic local economy, people can take initiative and move up or out of poverty. All too often, however, people find channels of upward movement blocked and their initiatives thwarted,” the study stated.

The publication is the latest and most comprehensive study on attitudes about poverty since its predecessor, Voices of the Poor, was released in 2000. The study included interviews with more than 60,000 people.

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