Policies Aimed at Raising the Income of the Poor Text extracted from: The World Food Problem Leathers & Foster, Toward-Undernutrition/dp/

Poverty and Inequity Are poverty and inequity inevitable? Must there be an elite? –In U.S. we are an elite Traditional values: –Dominate or be dominated –Work hard to be among the elite Alternative is terrible Is inequity a moral good? –Or morally unacceptable? How can inequity be diminished? –To achieve a better life for everyone? Poor Elite

The Hungry are Poor Policies to alleviate poverty: –Redistribute income or wealth from the rich to the poor Progressive taxation Land Reform –Promote general economic growth Bangladesh Garment Factory

Taxation Progressive Taxation –Wealthy pay greater percentage of income than poor –Income tax –Sales tax in developing world Poor often barter for goods Sales taxes come from wealthy To redistribute wealth –Governments have to spend tax money on the poor Bartering in Zaire outside of the taxable economy

Inflation due to income elasticity of Demand If one rupee taken from top 5% in India –Reduces food demand by.003 rupees If government gives the rupee to the poor in bottom 20% –Increases food demand by.58 rupees –Therefore inflationary Market economy removes some of the benefit India market stall

Tax land use value Tax on some large land owners small No incentive to farm efficiently If tax land use, inefficient farmers will be forced to sell –Land redistributed without displacing good farmers

Minimum wage laws May help the poor –Can be enforced in urban areas Results in mass migration to cities in developing countries May not help the poor –Wait for a good job can take a long time –Family undernourished while waiting for employment –Employers motivated to substitute captial for labor Invest in machines Reduce number of jobs Clothing Factory, India

Hope for Land Reform Credited with helping reconstruction of Japan, Taiwan Inequity in land can be extreme –Columbia: 10% of owners controlled 80% of land (1988) Tenant farmers pay 50% to landlord If small farmers own land, motivated to –Work long hours –Invest in fences, irrigation –Increase productivity Tenant farmers, India

Problems with land reform Socialist elimination of property ownership causes problems –China –Russia “Land to the tiller” reforms did not benefit poorest people –Puru May reduce investment in agriculture by wealthy –Afraid of losing land Policy may be “anti-agricultural” form of urban bias Land Reform in South Africa

Economic Growth Private sector must grow to provide jobs –Government projects don’t create jobs efficiently Per capita income in Taiwan: –1960: $1,200 –1998: $12,000 Per capita income in Democratic Republic of Congo: –1960: $489 –1998: $197 aiwan-factory.html

How to promote growth Recommendations of World Bank and IMF: –High savings leading to increased capital stock Good macroeconomic policy –High labor productivity Education Health Anti-poverty –Adoption of new technology Market orientation

Good Macroeconomic Policy Objectives: –Low inflation Encourages savings Keep central Bank out of political process –More confidence in savings –Low budget deficits Prevents printing more money and inflation Reduces borrowing by governments –Stable exchange rates Attract foreign investors McDonald’s in China

Market Orientation Promote open and free trade –reduce government distortion of supply and demand Assign and enforce property rights –To increase ownership –Motivates productivity Eliminate corruption

Agricultural Development Promote growth of the agricultural sector –Increased productivity Stimulates economic growth Low food prices –allow low wages to be paid in factories –but workers live well Can buy more non-food items –Stimulates employment Market stall, Mexico

Globalization Definition: increasing integration of countries in the world economy –Opening borders –Adopting macroeconomic policies in order to get IMF loans –Adopting market-oriented agricultural and industrial policies In order to get IMF loans –Reducing restriction on foreign investment –Adopting labor and environmental policies that will attract foreign investment ges/globefull169.gif

Globalization

Criticisms of Globalization Policies encourage –Low wages –Poor working conditions –Poor environmental quality Fiscal policies imposed by IMF –Reduce health programs –Reduce education –Reduce poverty alleviation programs IMF policies are antidemocratic –IMF can countermand decisions by democratic governments Multinational corporations benefit –At expense of ordinary people

Joseph Stiglitz Nobel Prize in economics 2002 Policies imposed by IMF –don’t take into account special circumstances of each country Private sector solutions –require infrastructure that may not be there Globalization policies – need to be reformed to help poor countries grow