Effective Measures Against Poverty

1. Effective Measures Against Poverty • Dr. Maria Sophia Aguirre • Department of Business and Economics • The Catholic University of America • III World Conference on Families • Mexico City, Mexico • March 28-31, 2004

3. Is the Family Relevant for Poverty Reduction? • Some would argue that the family is key because: • The earth is limited -- the more we are, the poorer we will be. • The family is a hostile place for women and children. Therefore it has to be monitored and regulated by international laws and institutions if poverty among women is to be eradicated. • Population threatens government stability in developing countries • Others argue that the family is key because: • Healthy families are needed for the economy in order to fulfill its purpose: Cover basic needs, generate profits, and contribute towards the wellbeing of people • Numbers in themselves do not equal poverty; rather, poorly structured families and societies as well as economies foster poverty.

4. I Would Like to Argue… • The focus on family and population is not necessarily incorrect, but both the population control policies used and the approach of some international organizations to the family in the past twenty some years are mistaken. • This is so because: • Healthy families are essential for poverty reduction since they have a direct impact on the quality of human, moral, and social capital, and therefore, on the resources and the purpose of economic activity and structures. • Resources are used inefficiently when they are directed towards initiatives that weaken families and divert resources from initiatives that will address effectively weak social and economic structures. This, in turn, hampers real economic growth and perpetuates poverty.

5. On this point, I have good company • Nobel Laureate, 1992 • “No discussion of human capital can omit the influence of families on the knowledge, skills, values, and habits of their childrenand therefore on their present and future productivity.”Becker (1991) • Nobel Laureate, 1998 • “The human development approach must tale full note of the robust role of the human capital, while at the same time retaining clarity about what the ends and means respectively are.What needs to be avoided is to see human beings as merely means of production and material prosperity.” Sen (1994)

6. How Does the Family Fit in the Economy?

7. Several elements of the economy degenerate if they are not ordered towards the family • What is the purpose of economics if not to meet the family members’ need to obtain and to consume? • These needs generate economic activity and affect productivity • What is the motivation to work without a family? • Where but in the family is the need to distribute the goods produced in the economy mainly felt? • What moderation would there be in consumption and spending if there were no family? • What is the economic agent’s motivation to save or invest beyond retirement without the family? • What is the role of the government if not to meet, at least in a subsidiary manner, the needs of the family?

8. Socioeconomic Effects From an economic point of view, the family is very important: • The breakdown of the family is a symptom of a sick and weak society. • Child abuse is 15 times more likely to occur in irregular family settings. • Men who have witnessed their parents' domestic violence are three times more likely to abuse their own wives and children. • Children who witness violence at home display emotional and behavioral disturbances as diverse as withdrawal, low self-esteem, nightmares, self-blame and aggression against peers, family members and property.

9. Children develop in the best way within families that are functional, i.e., with their biological parents in a stable marriage. • There is considerable scientific evidence of the psychological damage done by voluntary breakup of the family • The academic performance and social behavior of a child is very closely related to the structure of the family • Lack of parental support, involvement, and the breakdown of the family have been found to be important factors of poor academic performance • Children from broken families or single parents are worse off • Tend to have more social, psychological, health, and academic problems • Non-maternal care increases children’s aggressive and violent behavior

10. Percentage of Families that are in Poverty by Family Structure and Ethnicity, 2002 Source: Poverty in the U.S.: US Census Bureau, September 2003, Table A-1.

11. Percentage of Women who are in Poverty by Family Structure and Ethnicity, 2000 Source: National Center for Children in Poverty, A Statistical Profile, March 2002.

12. Percentage of Children who are in Poverty by Family Structure and Ethnicity, 2000 Source: March Current Population Survey, US Census Bureau, March 2002.

13. Developed Countries Welfare Expenditures vs Developing Countries Debt in 2001 Source: CIA World Handbook, 2003

14. In the developing world, the family faces serious problems because of poverty • Lack of income and assets to attain basic needs: • Human Assets: basic labor, education, health, skills • Natural assets: inputs of production • Physical access: infrastructure • Financial assets: access to savings and credit • Social assets: instructions that are functional and not corrupted. • Vulnerability to adverse shocks, linked to an inability to cope with it

15. The family faces serious health problems, in the developing world • The main health risks and causes of death for man and woman are: • Isachaemic Heart and Cerbrovascular diseases (16.7 million) • Malignant neoplasms (cancer) (kills 7.1 million per year) • Injuries (kills 5.2 million) • Respiratory diseases (kills 3.7 million) • Perinatal conditions (kills 2.5 million) • Respiratory infections (kills 3.9 million) • HIV/AIDS (kills 5 million new cases and 2.8 million) • Diarrhoeal Diseases (kills 1.8 million) • Tuberculosis (8 million new cases and kills 1.8 million people) • Malaria ( 300-500 million new cases and kills 1.2 million) • Maternal condition (540,000 per year) • These diseases are rare and treatment is accessible in developed countries at a remarkably low cost. WHO, World Health Report, 2003 , Annex Table 3.

16. Solutions Proposed • Managing the AID crisis by spreading the use of condoms, believed to lead to “safe sex”, and of antiretroviral drugs. • Although condoms give the “best” protection against HIV, the risk of infection is reduced to 87-95% for men, the risk reduction for women is not as high because of physical differences. (Davis and Weller,1999) • In a 1996 study conducted in four countries, the Conjunct Program of the United Nations on HIV/AIDS found that the use of condoms increased the risk of contracting AIDS because most contraceptives use a chemical substance, nonoxinol-9, which tends to have an irritating effect that causes lesions increasing the risk of contracting HIV. (UNAIDS 1996 and NACHHD 1999)

17. Access to family planning increases underage sexual activity (Kaiser (2000) and Paton (2002)) • The number of children reporting the use of condoms has raised from 46% to 63% between 1992 and 2003 • In 1999, 72% of children defined “safe sex” as using condoms and contraceptives or other means. 28% defined it as “abstinence.” • There is evidence that sexual activity at this age has detrimental psychological, health, behavioral and academic effects on them. • 66% of public schools report the main message of Sex Education programs to be contraceptives vs. only 34% reporting to be abstinence.

18. Low Cost Effective Interventions (annual cost per capita) Sources: CDS, WHO

19. Allocation of Funds • Cost of malaria to African countries is 1-5% of GDP. Direct and indirect costs of malaria in sub-Saharan Africa exceed $2 billion. • World Bank lending for malaria amounted to $300 million and for tuberculosis amounted to $560 million. • The WHO funds totaled $369 million in 2002-2003 • For HIV/AIDS, World Bank allocated $1.5 billion in grants, loans, and credits to fight HIV/AIDS over the past five years. • Cost of Antiretroviral regimen had decreased significantly ($12,000 to $500 for a year treatment) • Annual population assistance levels reached $2 billion a year.

20. Environmental Health, Welfare and Living Conditions in Low Income Countries

21. Expenditures by Sector on Grant-Financed Development Activities of the United Nations System (Percentage of Total)

22. Expenditures on Grant-Financed Development Activities of the United Nations System by Sector Source: Compiled from Comprehensive Statistical Data on Operational Activities for Development, years 1990-2003.

23. How Government Policies Can Help: Some Examples • Legislation that supports families vis a vis other types of living styles • Programs that support and promote healthy marriages and stable families • Changes in family subsidies for children • Parental leaves • Promotion and protection of the family as a means to eradicate poverty, especially the feminization of poverty • Programs that are directed towards fostering functional societies and markets in which corruption is not a fundamental part of governmental operations

24. Microcredit • Microcredit has shown to be a successful and dollar-efficient lending tool that has positive results for both individuals and families. It opens doors to low-income populations in developing countries while generating significant financial returns. • It increases income and improves consumption patterns while bettering the well-being of families. Reduces dependency • Targeting women and married men has proven to be especially advantageous for successful programs and for family well-being. • A group lending model without non-business social objectives programs attached to it has proven to be most successful. • It fosters development, as well as habits that are fundamental for economic growth: responsibility, accountability, trust, market operations, education, and creativity.

31. International Commitment

32. Ratio of Social to Financial Staff by Institutional Characteristics Source:Paxton, Julia. A Worldwide Inventory of Microfinance Institutions. Washington, DC: Sustainable Banking with the Poor, The World Bank, 1996.

33. Ratio of Social to Financial Staff by Region Source:Paxton, Julia. A Worldwide Inventory of Microfinance Institutions. Washington, DC: Sustainable Banking with the Poor, The World Bank, 1996.

34. Heavily Indebted Poor Countries • For so many years, concessional lending to the developing world has been a central point in the issue of debt, but despite all this, most poor countries could not meet their debt obligations • In the 1980s and early 1990s, strategies to ease up repayment terms for poor countries were pursued, including further concessional relief • However, it became clear that countries’ repayment problem was not temporary and that a more comprehensive solution was needed • In 1996, a new debt relief program was initiated called the Heavily –Indebted Poor Countries (HIPC) Initiative, under the leadership of the IMF and the World Bank

35. First comprehensive approach to reduce the external debt of most heavily indebted countries • It includes both Macro-economics and Social Programs • Potential to place debt relief within an overall framework of poverty reduction • It is a mix of debt forgiveness and debt relief funds from creditors which is activated at the completion point: when reforms are implemented correctly and a period of adequate performance has been completed • It intends to help heavily indebted countries shift from endless debt restructuring to enduring debt relief. • External debt servicing will be cut by approximately $50 billion. • The World Bank will reduce its debt claims by nearly $11 billion.

36. Criteria for Eligibility • In order to qualify for the forgiveness of debt, a country must: • Be eligible for concessional assistance from the IMF and the World Bank. • Face an unsustainable debt burden, beyond available debt-relief mechanisms. • Establish a track record of reform and sound policies through a well defined Strategy for Poverty Reduction Program (PRSP), which includes domestic macroeconomic adjustments as well as structural social policy reforms.

37. The Heavily Indebted Poor Countries

38. Implementation • Of the 40 countries eligible, 10 have acted upon it. • 5 reached their completion point by 2001: Burkina Faso, Uganda, Bolivia, Tanzania, Mozambique • 5 countries still in the process of implementation: Senegal, Nicaragua, Guyana, Mali, Benin • Strategies for Poverty Reduction Programs vary by country. Some have been more successful than others in both the macro-economic and the social policy efforts

39. Components

40. Positive Effects • Increase of social expenditures in African and Latin American Countries ($4,407 in 1999 to $6,897 in 2001 and social expenditure to government revenue increased by 6%) • Most of the countries show improvements in social indicators: on average per capita real spending on education and health increased by 3.4% and 3.3% respectively. • Increasing attention to human capital: On average 40% of the countries annual interim relief will be spent on education and 25% on health care

41. Positive results were found in • Programs that directed resources towards education and health (children and tropical diseases) were especially successful: Uganda, Tanzania, and Bolivia • Programs that succeeded in implementing anticorruption measures: Uganda and Burkina Faso • Programs that addressed infrastructure issues and labor training: Uganda, Bolivia • Overall, however, much is still left to be done

42. Negative Results were found • Programs that directed funds towards armaments • Programs that failed to define clear processes for accountability (Mauritania, Mali) • Programs that focused mainly on reproductive health and AIDS at the cost of more fundamental needs (Zambia, Mozambique, Senegal, Ghana, Nicaragua, Mali) • This was especially serious given that limited budget savings leads to transferring more funds to creditors than they are able to invest in basic services

43. Successful Private, Micro-level Initiatives • Systems of flexible working hours for men and women (women tend to use it more): Equality of opportunity while keeping the role of equity in mind • Working from home or at a distance • On-site day-care or other childcare support provided by employers • Tenure clock stopped due to maternity • Consulting groups: flexibility but no benefits. It creates an interesting dynamic • Still, there is a need to address the working structure in terms of the family - the natural family - and to keep in mind that, many times, this generates long-term profits rather than short-term

44. Conclusion • The family is a necessary good for economic development: it should be promoted and protected if poverty reduction wants to be achieved. • Children develop in the best way within a family that is functional, i.e., with his biological parents in a stable marriage. • The breakdown of the family: damagesthe economy and the society since human and social capital is reduced and social costs increased.

45. Some of the resent reevaluations of family policies in developed countries seem to point in the right direction. • Similarly, initiatives such as microcredit and some of the social programs implemented as part of the HIPC have been effective in improving the condition of families in developing countries. • Health, Education, Training, Infrastructure • The private sector needs to respond to these needs as well. Some good initiatives have been implemented.