Rising inequality: Choosing between focus on growth or focus on poverty
Nobel laureate believes the two development issues are intertwined.
NEW YORK:
Poverty seems to be a ‘dirty’ word for our country’s economic managers, but for Nobel Laureate Joseph E Stiglitz the issue remains relevant, as he believes it is wrong to discard the poor on both moral and economic grounds.
“Poverty is absolutely relevant, and remains a very important concern,” Joseph Stiglitz recently said, while responding to a question that asked him whether the topic of poverty has become irrelevant in the 21st century. He was sharing his thoughts with journalists on wide-ranging global issues at the Columbia University.
Since 2009, Pakistan’s economic managers have been shy of recognising the issue of poverty and inequality, terming it an ‘irrelevant agenda’ pursued by international donors. In a concentrated effort to discourage the debate on poverty, the finance ministry, for the first time ever, went ahead and simply deleted the poverty chapter from the Economic Survey of Pakistan for fiscal 2011-12.
As many as 22 million Pakistanis, may, therefore, find their voice in Stiglitz, who speaks not only in favour of Pakistan’s poor, but also the poor in developing countries elsewhere.
His voice is powerful enough that policymakers may find it difficult to ignore. Joseph E Stiglitz, a Nobel Prize winner in 2001, was also the World Bank’s Chief Economist – the institution where Finance Minister Dr Abdul Hafeez Shaikh has once served. In 2011, the Time magazine named Stiglitz among the 100 most influential people in the world.
Stiglitz says it is wrong to say, from “both a moral point of view and from an economic point of view,” that poverty has lost relevance. He believes that inequality weakens the economy, and that such inequality also creates a more divisive society.
Stiglitz says that nations waste their human resources if they allow inequality to rise, because those at the bottom are no longer able to live up to their potential. Furthermore, the social cohesion needed to attract and circulate investment for economic growth is also lost if society is divided along economic lines.
Furthermore, Stiglitz says that although poverty cannot be eradicated without growth in general, but poverty has, in some instances, actually risen with growth due to the structural faults inherent in different economies.
Contrary to Stiglitz’s thinking, Planning Commission Deputy Chairman Dr Nadeem ul Haque has consistently argued that growth will (somehow) automatically take care of poverty. During the past two years, he has criticised those who debate the issue of poverty. The Planning Commission has also desisted from releasing official poverty figures. In informal talks, he argues that it would be appropriate to talk about growth instead of poverty. By doing so, he may be overlooking critical faults in how the Pakistani economy itself is structured.
Stiglitz explains that even a country’s GDP is not a good measure of success: “If one person is getting wealthier and wealthier, with the GDP going up, but most people are worse off, that is a failed economy,” says Stiglitz.
Instead, he believes that a successful economy is one in which the most people are doing better. Stiglitz is quick to point out that a country’s GDP does not capture the distribution of its wealth. One growth measure, he says, could be the country’s median income – the income of people in the middle.
He says that median incomes have been on a decline since 1996, and now stand at the same level now as where they were around 15 years ago. He also says that changes in the level of poverty could be another measure of the growth and development of a country’s economy, and if more and more people are slipping into poverty, policymakers should be concerned.
According to the unofficial results of a survey carried out by the Pakistan Bureau of Statistics in 2011, the incidence of poverty in Pakistan is 12.4% – down by 4.8% since 2008, if the report is to be believed. Not only this, inequality has also apparently declined in the country, according to the survey.
However, independent experts wonder how seven million people came out of poverty – given those statistics – with an average growth rate of only 3% during the last five years, and persistent double-digit inflation for the last six consecutive years.
As pressure mounts on the government to change its policy on poverty, it has constituted a committee comprising officials from the public and private sector to probe into the poverty statistics controversy. The government has released the poverty data but is not yet ready to officially release the 12.4% poverty figure.
Published in The Express Tribune, November 5th, 2012.
Poverty seems to be a ‘dirty’ word for our country’s economic managers, but for Nobel Laureate Joseph E Stiglitz the issue remains relevant, as he believes it is wrong to discard the poor on both moral and economic grounds.
“Poverty is absolutely relevant, and remains a very important concern,” Joseph Stiglitz recently said, while responding to a question that asked him whether the topic of poverty has become irrelevant in the 21st century. He was sharing his thoughts with journalists on wide-ranging global issues at the Columbia University.
Since 2009, Pakistan’s economic managers have been shy of recognising the issue of poverty and inequality, terming it an ‘irrelevant agenda’ pursued by international donors. In a concentrated effort to discourage the debate on poverty, the finance ministry, for the first time ever, went ahead and simply deleted the poverty chapter from the Economic Survey of Pakistan for fiscal 2011-12.
As many as 22 million Pakistanis, may, therefore, find their voice in Stiglitz, who speaks not only in favour of Pakistan’s poor, but also the poor in developing countries elsewhere.
His voice is powerful enough that policymakers may find it difficult to ignore. Joseph E Stiglitz, a Nobel Prize winner in 2001, was also the World Bank’s Chief Economist – the institution where Finance Minister Dr Abdul Hafeez Shaikh has once served. In 2011, the Time magazine named Stiglitz among the 100 most influential people in the world.
Stiglitz says it is wrong to say, from “both a moral point of view and from an economic point of view,” that poverty has lost relevance. He believes that inequality weakens the economy, and that such inequality also creates a more divisive society.
Stiglitz says that nations waste their human resources if they allow inequality to rise, because those at the bottom are no longer able to live up to their potential. Furthermore, the social cohesion needed to attract and circulate investment for economic growth is also lost if society is divided along economic lines.
Furthermore, Stiglitz says that although poverty cannot be eradicated without growth in general, but poverty has, in some instances, actually risen with growth due to the structural faults inherent in different economies.
Contrary to Stiglitz’s thinking, Planning Commission Deputy Chairman Dr Nadeem ul Haque has consistently argued that growth will (somehow) automatically take care of poverty. During the past two years, he has criticised those who debate the issue of poverty. The Planning Commission has also desisted from releasing official poverty figures. In informal talks, he argues that it would be appropriate to talk about growth instead of poverty. By doing so, he may be overlooking critical faults in how the Pakistani economy itself is structured.
Stiglitz explains that even a country’s GDP is not a good measure of success: “If one person is getting wealthier and wealthier, with the GDP going up, but most people are worse off, that is a failed economy,” says Stiglitz.
Instead, he believes that a successful economy is one in which the most people are doing better. Stiglitz is quick to point out that a country’s GDP does not capture the distribution of its wealth. One growth measure, he says, could be the country’s median income – the income of people in the middle.
He says that median incomes have been on a decline since 1996, and now stand at the same level now as where they were around 15 years ago. He also says that changes in the level of poverty could be another measure of the growth and development of a country’s economy, and if more and more people are slipping into poverty, policymakers should be concerned.
According to the unofficial results of a survey carried out by the Pakistan Bureau of Statistics in 2011, the incidence of poverty in Pakistan is 12.4% – down by 4.8% since 2008, if the report is to be believed. Not only this, inequality has also apparently declined in the country, according to the survey.
However, independent experts wonder how seven million people came out of poverty – given those statistics – with an average growth rate of only 3% during the last five years, and persistent double-digit inflation for the last six consecutive years.
As pressure mounts on the government to change its policy on poverty, it has constituted a committee comprising officials from the public and private sector to probe into the poverty statistics controversy. The government has released the poverty data but is not yet ready to officially release the 12.4% poverty figure.
Published in The Express Tribune, November 5th, 2012.