Policies Aimed at Raising the Income of the Poor

Policies Aimed at Raising the Income of the Poor Text extracted from: The World Food Problem Leathers & Foster, 2004 http://www.lastfirst.net/images/product/R004548.jpg

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? Elite Poor

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 http://news.bbc.co.uk/2/hi/south_asia/3535018.stm 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 http://jetcityjimbo.com/awful_wonderful/photos/emmasmarket.html 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 http://www.tribalbazaar.com/merchadise/Pictures/w.8.jpg 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 http://www.meridianholidays.com/Can_bali_sing_super_holiday.html

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 http://www.globaleye.org.uk/secondary_summer/oncamera/india-factory.html 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 http://news.bbc.co.uk/2/hi/south_asia/2322387.stm 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 http://www.thebigquestion.co.za/Default.aspx?tabid=743 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 http://www.globaleye.org.uk/secondary_summer/oncamera/taiwan-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 http://www.thenoelfoundation.org/pinternational.html

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 http://news.bbc.co.uk/2/hi/programmes/from_our_own_correspondent/1874755.stm 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 http://bara.arizona.edu/research/pro-ranching-mexico.htm

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 http://www.provost.uncc.edu/LatinoInitiative/Photos.htm 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 http://www.uwm.edu/Dept/CIE/Resources/globalization/images/globefull169.gif

http://www.foreignpolicy.com/wwwboard/g-index.php

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 http://www.zazona.com/ShameH1B/JobDestructionHumor.htm

http://www.foreignpolicy.com/wwwboard/g-index.php

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 http://www.cigionline.ca/about/ibg.php?member=41

Policies Aimed at Raising the Income of the Poor