Category: Poverty

Why global value chains should be called global poverty chains

benjaminselwyn3 Comments

Global value chains (GVCs) 鈥渂oost incomes, create better jobs and reduce poverty,鈥澨齮he World Bank. Since the collapse of the Eastern Bloc in 1991 and the reintegration of China into the global economy, world trade has become increasingly organized through GVCs. For example, the components and inputs for Apple鈥檚 iPhone, an icon of contemporary capitalist globalization, are made by听听in over fifty countries.

Transnational corporations (TNCs) 鈥� labeled 鈥渓ead firms鈥� in the academic literature 鈥� established GVCs as part of their competitive strategies, outsourcing existing work or starting up new activities in countries where labor costs were cheap. State managers across the Global South increasingly gave up on establishing integrated domestic industries and sought instead to enter GVCs as component suppliers. Today, over four hundred fifty million workers are employed in .

Many prominent figures suggest that these systems of production and distribution represent radically new development opportunities. As the former secretary general of the Organisation for Economic Co-operation and Development (OECD), 脕ngel Gurr铆a, :

Everyone can benefit from global value chains . . . encouraging the development of and participation in global value chains is the road to more jobs and sustainable growth for our economies.

The academic Gary Gereffi, the intellectual father of GVC analysis,  that development across the Global South requires supplier firms 鈥渓inking up with the most significant lead firm in the industry.鈥�

In reality, GVCs are a great boon for some of the world鈥檚 biggest companies, but not for their workers. It would be more accurate to describe many GVCs as听.

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Institutions, Economic Development, and China鈥檚 Development Policy for Escaping Poverty

tingxulaw8 Comments

I recently have had opportunities to reread the works of Professors Erik Reinert and Peer Vries and to reflect on my previous work on the relationship between institutions, economic development, and China鈥檚 development policy for escaping poverty. Professors Reinert and Vries have studied, along with a few other distinguished economists and economic historians, 鈥榩overty traps鈥� at national and transnational levels for decades (eg, Serra 1613; Landes 1998; Reinert 2007; Reinert 2009; Vries 2013). Both argued that innovation and structural change are the keys to escaping poverty.

Professors Reinert鈥檚 and Vries鈥檚 work on economic development has brought the work of Joseph Schumpeter (1883-1950) to light. In this blog post, I will review how the work of Schumpeter, Reinert, and Vries helps us explore three key questions: First, what kind of development does a country need to escape poverty? Second, what kind of institutions can promote development? Third, how to develop? These three questions are crucial to understand China鈥檚 escape from poverty.

Professors Reinert鈥檚 and Vries鈥檚 arguments can be well supported by China鈥檚 national development policy. Below are a few highlights of rich empirical evidence. In 1984 the Chinese government proposed a development-oriented poverty reduction policy to replace the previous aid reliance policy (Central Committee of the Communist Party of China and the State Council 1984; for critiques of relying on massive foreign aid to escape poverty, see e.g. Moyo 2009; Hubbard and Duggan 2009; Banerjee and Duflo 2011). On 18 January 1992, Deng Xiaoping (1904-1997, leader of the PRC from 1978 to 1989) made a famous speech in his Southern Tour, emphasising that 鈥榙evelopment is the absolute principle鈥� (fazhan cai shi ying daoli). Since then, China鈥檚 economic development has entered a new stage. In 1994 the Chinese government fully adopted the development-oriented poverty reduction policy as a national policy.

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Ephemeral universalism in the social protection response to the COVID-19 lockdown in the Philippines

Andrew M. Fischer1 Comment

By Emma Lynn Dadap-Cantal, Andrew M. Fischer and Charmaine G. Ramos

Since March 2020, the Philippines has implemented one of the world鈥檚 strictest and longest lockdowns in response to the COVID-19 pandemic, which has caused severe disruptions in peoples鈥� livelihoods. The government鈥檚 emergency social protection response, the 鈥楽ocial Amelioration Program鈥� (SAP), has also been notably massive, introducing one-off near-universal income protection. It is an insightful case given that the country鈥檚 existing social assistance system has been celebrated as a model for developing countries, even though it has been mostly bypassed in the emergency response. Moreover, the country鈥檚 highly stratified and fragmented social policy system has resulted in implementation delays and irregularities that have fostered social hostilities and undermined the potential for such momentary universalism to have lasting transformative effects.

The Philippine government first imposed its 鈥榗ommunity quarantine鈥� on 15 March, which has since been extended until 30 June. Thus far, the pandemic has not been severe relative to evolving global indicators, with 302 confirmed infections per million people and 11 confirmed deaths per million people as of 25 June (although at only 5,760 tests per million people, these confirmed rates are likely to be significantly underestimated). However, as elsewhere in the Global South, the lockdown has thrown the country into an employment crisis given that more than 60 percent of its workforce is informal, most in precarious situations even when earning above the official poverty line.

In response, the government rolled out the 鈥楽ocial Amelioration Program鈥� (SAP), comprising at least 13 different schemes and with an estimated total budget equivalent to as much as 3.1 percent of the country鈥檚 GDP [1]. The largest scheme is the Emergency Subsidy Program (ESP), which has been allocated 200 billion Philippines pesos (PhP; about 3.5 billion euros), more than three times the combined budget of all the other schemes.Read More »

Misunderstanding the average impact of microcredit?

milfordbateman2 Comments

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Photo: . Microfinance center leaders tally the week’s loan payments in India.

By听补苍诲

A recent article on the 鈥�鈥� by Dr. Rachel Meager (LSE) has received much praise over the past few weeks. Meager deploys Bayesian hierarchical modelling to provide a new take on the argument in favour of a reformed system of microcredit. Her work builds on the data provided by six randomized control trials (RCTs) conducted by Abhijit Banerjee and colleagues (see ). Meager makes an attempt to exculpate the microcredit model from the awkward fact that its impact on the poor has been very much less than originally envisaged. She also claims to show that the critics have overstated the negative impact of microcredit. Microcredit should therefore continue to be a policy intervention, she goes on to say, but there need to be changes in the operating methodology for a more meaningful development impact to be possible in the future.

While seemingly a well-meaning attempt to explore the impact of microcredit, we were struck by the way that her overall argument appears to seriously misunderstand, and it definitely misrepresents, the existing research on microcredit as a development instrument. Read More »

The Curious Case of M-Pesa鈥檚 Miraculous Poverty Reduction Powers

Nicholas Loubere8 Comments

32893313893_6621b6cf98_o.jpg
M-PESA kiosk outside Kibera centre in Nairobi. Picture credit:

By ,听 and听Nicholas Loubere

Over the past decade the expansion of digital-financial inclusion through innovations in financial technology (fin-tech) has been identified by the World Bank, the G20, USAID, the Bill & Melinda Gates Foundation, and other major international institutions, as a key way to promote development and alleviate poverty in the Global South (; ; ). Perhaps the most influential and widely reported publication pushing forward this narrative is an article examining M-Pesa written by US-based economists Tavneet Suri and William Jack鈥�and published in the prestigious journal Science鈥�entitled ‘The Long-run Poverty and Gender Impacts of Mobile Money’. M-Pesa is a mobile phone, agent-assisted platform for transferring money from one person to another. It was originally developed with funding from DFID and has quickly become a darling of the digital-financial inclusion movement. In this particular article, the authors make the far-reaching claim that 鈥榓ccess to the Kenyan mobile money system M-PESA increased per capita consumption levels and lifted 194,000 households, or 2% of Kenyan households, out of poverty鈥� ().

Suri and Jack鈥檚 article in Science has sent ripples through the global development community and has served鈥�as perhaps was intended鈥�to solidify support for upping the promotion of digital-financial inclusion initiatives across the Global South. Importantly, the article鈥檚 claims of unprecedented poverty reduction have been uncritically picked up by all of the international development agencies and microcredit advocacy organisations, as well as by many mainstream economists, so-called 鈥榮ocial entrepreneurs鈥�, tech investors, and media outlets. Much like microcredit in the 1980s, fin-tech and digital-financial inclusion is now very widely seen as a 办别测鈥�if not the key鈥�to reducing global poverty and promoting local development.

In this post we summarise our recent article entitled 鈥業s Fin-tech the New Panacea for Poverty Alleviation and Local Development?鈥� (), which challenges Suri and Jack鈥檚 findings, and urges the global development community to take a second, more critical look at their study. We argue that the article contains a worrying number of omissions, errors, inconsistencies, and that it also employs flawed methodologies. Unfortunately, their inevitably flawed conclusions have served to legitimise and strengthen a false narrative of the role that fin-tech can play in poverty alleviation and development, with potentially devastating consequences for the global poor.Read More »

If India gave minimum support incomes to the rich before, it can do the same for the poor. Rahul Gandhi can do it.

Rishabh KumarLeave a comment

rahulghandi.jpgIndia鈥檚 opposition leader has recently floated听minimum income support. The 1.5% GDP equivalent it requires can be financed through a 3% tax on the richest 3000. It is not just an idealized safety net for the poor 鈥� it has been done before, for the super elites. If it works, it can be a model for adoption in other emerging democracies. Read More »

Why positive thinking won鈥檛 get you out of poverty

Farwa Sial11 Comments

attitude-be-positive-draw-262532.jpgBy Farwa Sial and Carolina Alves

In a recent听, the development economist Seema Jayachandran discusses three studies that used听Randomised Controlled Trials (or RCTs) to understand听the benefits of enhancing the self-worth of poor people. Despite wide differences in context, all the cases explore the viability of 鈥榤odest interventions鈥� to 鈥榠nstill hope鈥� in marginalised communities, concluding that 鈥榬emarkable improvements鈥� in the quest for poverty reduction are possible.

听from Uganda, for example, argues that 鈥渁 role model can have significant effects on students鈥� educational attainment,鈥� so the suggestion for policy-makers might be 鈥渢o place more emphasis on motivation and inspiration through example.鈥�听Another听听argues that 鈥減sychological barriers impede such disadvantaged groups from breaking the vicious circle and achieving better outcomes in life,鈥� so small but effective changes that address these psychological constraints can alleviate the effects of poverty and social exclusion.

The underlying theme of these studies is that individuals can surmount the structural challenges of poverty through their own efforts using tools like 鈥榚ffective role models,鈥� the generation of 鈥榤ore hope,鈥� and the 鈥榠mprovement of their mental health.鈥� Positive psychology of this kind and an emphasis on behavior change to meet the goals of individuals have been around at least since the 1950s, first in the popular literature of self-help books and now in academia, where they form part of an increasingly fashionable trend to 鈥榙o poverty reduction differently.鈥�Read More »

Think Positive, Climb out of Poverty? It鈥檚 Just Not So Easy!

Svenja Flechtner4 Comments

quehoraselavolta_open license.jpg
Social mobility in Brazil: Positive thinking and ambitious aspirations can create lots of frictions鈥�

A few weeks ago, from Northwestern University published an in which she discussed the role of positive thinking and of believing in oneself for overcoming poverty. Jayachandran argues that there is “growing evidence that it can used as an anti-poverty strategy”, while also warning about placing too much emphasis on positive thinking alone. This post will dwell on the latter point, arguing that we should pay much more attention to limitations and broader contexts of positive thinking in development. I do not want to deny the role of self-worth and forward-looking aspirations for poverty reduction and quality of life more generally, but I will emphasize the importance of considering their role only as part of a broader policy mix.

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