I recently wrote a piece for Change.Org about something I’ve been thinking about a lot since I got back from South Africa: the disappearance of equity and redistribution from the vocabulary of development work. Up till about twenty years ago or so, it was a common practice in development work to talk about ‘social and economic equalization’ as an aim in its own right. This normally took the form of deciding on a manner in which redistribution of wealth could be made: through taxation and selective expenditure, through active redistribution of resources, such as land, through subsidization and so on. Over time, this approach was removed completely from the discourse. Structural Adjustment was one reason for this, as it tightened purse-strings and regulated taxation structure. It began to seen as counterproductive, discouraging private sector enterprise. There were many reasons for this decline, many of them sound.
However, the concept of redressing imbalances in society didn’t disappear from development discourse. It simply mutated to a new kind of approach, described as ‘pro-poor’ expenditure. The idea behind pro-poor expenditure is essentially that Governments and donors should focus on development activities that aim most directly at the poorest sections of the population. This is less controversial than redistribution though taxation, subsidization or resource transfer, since it simply means that the portfolio of development projects is weighted in a different way.
This approach is based on a very different set of assumptions about the economy than a redistributive policy mix. By focusing expenditures on activities that are most directly related to the poor, the implicit assumption is that economic development and the improvement in the lot of the poor is best served by spending on activities directly relating to them, and allowing the industrial and commercial agriculture sectors to work on their own, unaided or with much less aid. This is new: prior development policy looked more at the prospects for developing a modern economy, one which generates wealth rapidly, in the mould of most currently developed nations, and then seeking to protect the poor from the worst inequities and exploitation that such an economic system can generate.
This is a fundamental change, one that deserves far more thought than has been given to it. Spending more directly on the poor has an obvious intuitive appeal: you’re not relying on any opaque feedback mechanisms to see support translate into gains for the poor, as you would under the historically far more common approach of pushing for overall economic strength and then redistributing through taxation. The idea is that if you spend directly on the poor, if the project is worthwhile, you will see a gain in their standards of living.
Yet, there’s a big unanswered question about this approach: what is the long-term effect of such expenditure? Does it generate a fast-growing economy which creates jobs internally? Or does it create a sort of smaller-scale, class-based aid dependency, something like the morphine drip Matt suggests aid might function as?
I suspect the latter is much more likely than the former. In the last few years, I’ve had the chance to examine the donor portfolios in a number of countries, and have seen first hand how they use their influence to put pro-poor expenditure at the centre of local budgeting processes as well. Yet, the suspicion lingers that these approaches are not sustainable, and not generating further gains: though we’ve spent the last fifteen or twenty years supporting small scale agriculture in Malawi, for example, there is little sign that these small farms are becoming bigger farms, or even moving systematically away from food insecurity in the long-term. What’s more there’s no counter-example we can give: no example of a currently developed country or even a high-flying semi-developed or middle-income country that has followed the pro-poor route.
What this means for the poor is that they are being targeted with the kind of policies that might keep them just out of poverty, but won’t afford them the opportunity to participate in a dynamic economy – the kind which is likely to drive a country from ‘developing’ to ‘developed’.
Yet the answer isn’t simply to focus all our energies on the major agricultural and industrial arms of the economy in the hope of stimulating rapid growth regardless of the impact on the poor; this is how we end up with townships as found in South Africa, favelas in Brazil and so on. The rights and conditions of the poor, the urban and rural labourers and the unemployed must be protected. If focusing our attention on projects aimed directly at enhancing their coping strategies or limited-potential livelihoods and promoting big business in extremis are both flawed, a third way is required: the poor must be supported in gaining fair access to a large-scale economy. This means getting jobs at reasonable wages, keeping jobs, ensuring that access to labour markets is equal, and that infrastructural development in response to industry links the whole country together.
The first two are crucial: almost every country in the world that has escaped from poverty has done so through job creation rather than small-scale personal or family-based economic activities. But in many developing countries, the rights of workers are poorly articulated and badly publicized, while employers use every trick in the book to avoid paying a fair wage or even using a settled labour force, preferring to pick up different workers each day to reduce the chances of their organization. The Government needs to make sure that it has robust labour legislation, but even more that people know about this – this is why supporting responsible union movements can be so valuable in developing countries. Workers are easily exploited because they have so few options. The possibility of their organization would hugely strengthen their ability to share in the spoils of industrial and agricultural development.
My hopes are not high, however. We’re talking about two things that donors really shy away from: worker’s organization and large-scale industry and agriculture, feeling that the former is too politically fraught and the latter don’t need their money or attention the way subsistence farmers do. It all again comes down to the need to have a coherent idea of what kind of development path to follow – and as I’ve said before, it seems that very few donors or countries have any such vision.
6 Comments
I'm not well-versed on the Brazilian experience, but it seems as though that country's government has pursued policies that would fall in your "third way" categorization, as described here: http://www.economist.com/node/16486525?story_id=16486525&CFID=138627586&CFTOKEN=84069344.
How can lessons from Brazil's experience be applied elsewhere? Are these lessons generalizable, considering Brazil's natural resource abundance?
Related to your points about labor organization, I saw this article in the NY Times that describes an interesting model for factory work in the developing world: http://www.nytimes.com/2010/07/18/business/global/18shirt.html?_r=2&pagewanted=1&hp.
My worry is that this model is dependent on a specific sub-set of consumers (i.e. college students) who are potentially more willing (and able?) to make their purchasing decisions based on factory working conditions, workers' wages, etc. I'm skeptical that consumer behavior can foster such changes in working conditions on a larger scale. Following from this, an important question (on which there must be mountains of literature) is, how much room do governments have in implementing such labor legislation without scaring away investment?
I'm not well-versed on the Brazilian experience, but it seems as though that country's government has pursued policies that would fall in your "third way" categorization, as described here: http://www.economist.com/node/16486525?story_id=16486525&CFID=138627586&CFTOKEN=84069344.
How can lessons from Brazil's experience be applied elsewhere? Are these lessons generalizable, considering Brazil's natural resource abundance?
Related to your points about labor organization, I saw this article in the NY Times that describes an interesting model for factory work in the developing world: http://www.nytimes.com/2010/07/18/business/global/18shirt.html?_r=2&pagewanted=1&hp.
My worry is that this model is dependent on a specific sub-set of consumers (i.e. college students) who are potentially more willing (and able?) to make their purchasing decisions based on factory working conditions, workers' wages, etc. I'm skeptical that consumer behavior can foster such changes in working conditions on a larger scale. Following from this, an important question (on which there must be mountains of literature) is, how much room do governments have in implementing labor legislation while not scaring away investment?
Thanks for the comment Kartik - I'm also not much of an expert on Brazil, so appreciate the link.
There is *reams* of research about how Governments can support labour laws without scaring off investment, or rather, suggesting that labour rights don't scare off investors. In large part, we are not talking about minimum wages, but about better, more stable conditions. Wages are one aspect of this. Sri Lanka is a good example - the Ceylon Worker's Congress plantation union formed political party and their role in Parliament helped them generate a political voice. Coupled with some strategic strikes, they managed to massively improve conditions for workers - health care was provided, education improved, housing improved, while wages also increased, though not at breakneck pace. The tea industry didn't suffer any noticible decline in investment over this period - the story is of slightly less profit for the plantation against a proportionately much larger gain for the workers. (The union isn't what it used to be anymore, but that's a different story).
I also don't think this is necessarily a case of a 'fairtrade'-like arrangements, where consumers pay a premium for a better conscience. In many cases, the industries and producers who would be hit by the use of better labour laws and conditions are not the ones which are only marginally profitable but often the ones in the strongest position: the biggest plantations and farms, the largest industries. Experience from successful union movements suggests that potential gains from price changes (in agricultural goods) are split a little more evenly between capital and labour, rather than prices being changed, since these businesses are often price-takers in a global market. Profits do fall a bit, but we're not talking about decimating the industries here - a small change, a little protection makes a proportionately very large difference to labour standards of living.
Thanks for this discussion, Ranil. I wasn't aware that equity and equality used to be part of mainstream development thinking (us youngsters have a short memory). But I have paid lots of attention to the literature suggesting that inequality not only slows poverty reduction, but has a significant detrimental impact on social cohesion, harmony, the self-esteem of the people on the bottom end etc. - things that are difficult to measure by the standards donors use. Even if inequality is not a trendy issue anymore, it is still making the people on the receiving end quite unhappy, though I am not sure whether intra-country inequality is on the whole increasing or decreasing - I would assume the former. And a problem with pro-poor policies in a very unequal country is that even when most people are out of poverty, they are still relatively worse off.
As far as your third way goes - I think organised labour is vital, but a part of a bigger picture. Cases come to mind like Thailand, where I'd argue that inequality is deeply entwined with socio-political structures. There, politics probably prevents strong organised labour - but, then, if we have a political environment where organised labour can thrive, it's probably also going to be a political environment where the poorer can assert themselves in other ways. People generally don't like being significantly poorer than others, and not being able to do anything about it. That sense of self-esteem that Lula has given the Brazilian poor is not only about labour rights; it's about ownership of the political system.
I agree with you on the more general idea that politics are a/the serious barrier to addressing inequality. Inequality, by definition, benefits someone, and people don't like giving up privilege. As long as we try and stick to the "all must win prizes", pro-poor approach to development (is there any other way for donor countries to do it?), it's going to be really difficult to address this from outside, if it's even possible. Maybe this is where the aid-as-life-support idea really has to kick in.
Among national anti-poverty movement in the UK, and to an extent elsewhere in Europe, a focus on inequality is very much apparent. See especially the work of Richard Wilkinson at the following link: http://www.equalitytrust.org.uk/
So long as your union movement doesn’t run into insider-outsider problems…. know of any rigorous historical analysis of union movements and their relationship with the unemployed? How do you get a union movement to represent the unemployed?