Eradicating extreme poverty in Bangladesh

Blog State

Extreme poverty is officially defined in Bangladesh in terms of total living expenses of a family falling short of the cost of minimum food needs. Since a part of spending of such a family will have to be incurred on essential non-food items like fuel or clothing, the minimum calorie needs of the family will not be met at such levels of total spending – hence the distinct categorisation of the extremely poor. According to the estimates based on the official Household Expenditure Survey, the proportion of the extremely poor population declined from 41 percent in 1990 to about 18 percent in 2010. That is a significant achievement; but it is the mopping up of the residual extreme poverty that has proved to be the most difficult challenge for most developing countries.

To a purely academic economist, the first reaction to the idea of complete eradication of extreme poverty in a low-income country like Bangladesh would be one of disbelief; such a goal defies commonly accepted development paradigms and cross-country experience. But Bangladesh has already achieved many seemingly unachievable goals – in reducing child mortality or sending girls to schools or reducing population growth, or delivering microcredit to the poor. So, if any low-income country is a candidate for defying a common economic rule, that country should be Bangladesh.

Why would one consider such a goal to be defying the commonly observed rule of income distribution? Economists are used to drawing the so-called income distribution curve for any country - rich or poor - which shows what percent of the households belongs to what level of income. The curve peaks at about the average level of income and then tapers off on both sides. The high-income or right-hand tail shows the declining number of the rich with higher and higher income, and the left-hand tail shows the number of the poor households with lower and lower income.

No matter how equitable the income distribution is, the tails are there. If not for anything else, some people are extremely poor because they are just unlucky. At our levels of per capita income, eliminating extreme poverty will mean cutting short the omnipresent low-income-end tail of the income distribution curve – or even making it convex instead of its usual concave shape – so as to ensure that nobody is below a minimum threshold level of income. Straightening the tail of an income distribution curve is almost as difficult as doing that to a dog's tail.

But given those odds, consider the positive side. Sir Partha Dasgupta, a famous Cambridge economist, commented in his seminal book An Inquiry into Well-Being and Destitution that no country is so poor that it cannot provide for the basic physical well-being of its entire population. To be able to do that, by implication, there has to be the necessary political will. The political will relates to the whole range of governance-related issues of resource mobilisation for public social spending and the targeting of benefits. Consider this fact: the estimates of so-called poverty gap based on our current income distribution tells us that by redistributing only about 3 percent of our National Income, we can pull everyone out of extreme poverty even this year; but for that, we need to generate that additional resource by taxing the rich and targeting it to the extremely poor. Our tax-GDP ratio of 11 percent compares with Nepal's more than 15 percent, let alone other better-off developing countries. And evasion of income tax is the weakest link of our tax system. Consider also the fact that, according the Household Expenditure Survey 2010 of BBS, about half of the beneficiaries of the social safety net programmes are found to belong to non-poor households.

Luckily, we have some advantages. Barring the case of some small disadvantaged ethnic groups, upward economic mobility of people in the Bangladesh society is not characterised by any barriers of class or caste; and Bangladeshi people, though poor, are development aware and aspire for better life. Research has shown 'aspiration' as an important ingredient of economic growth. Poor people in even remote villages in Bangladesh no more take poverty as their destiny, since they have seen their peers to go up the income ladder by one means or another. That's why even poor people send their daughters to school – one of our unique development achievements.

Bangladesh has a rich variety of social protection programmes – catering to the specific needs of the various disadvantaged groups of the population.  There working members of the extremely poor families need a guarantee of work for a minimum number of days in a year, particularly during the lean agricultural season in rural areas. The demographically weak households with no earning members will need cash transfers. A recent intensive research study led by Professor Robin Burgess of the London School of Economics has shown that free transfer of productive assets, rather than cash, can be a means of providing sustainable livelihoods for the extreme poor. While a comprehensive social protection strategy needs fine-tuning to cater to the needs of various vulnerable groups of the population, policymakers need to be careful about not creating a jungle of programmes too messy to monitor or programmes having too small coverage to justify even the costs of delivery.

As a goal, eliminating extreme poverty has the advantage of involving a simple and easily measurable indicator. But we should be aware of the many kinds of deprivations and vulnerabilities hidden behind this single measure. For example, one puzzle about social development indicators in most of South Asia is that the incidence of child malnutrition remains obstinately high in spite of rapid poverty reduction. Likewise, seasonal poverty and hunger may be hidden behind estimates of poverty or food intake adequacy based on annualised estimates. Considerable progress has been achieved in addressing the problem of seasonal hunger, known as monga, in the greater Rangpur region; but new pockets of poverty and hunger have emerged in other parts of the country due to environmental degradation and climate change.

The initiatives in combating monga in Rangpur have been prompted by widespread public awareness created largely by media reports and civic activism. Amartya Sen has argued that the incentives in democracy are more effective in averting major economic disasters like famines than in addressing the problem of endemic hunger and extreme poverty. The recent public action against monga is a testimony that political incentives in a democracy can be created for combating severe incidence of seasonal hunger as well, once the phenomenon catches public attention. However, lack of similar awareness may have resulted in neglect of other regions in Bangladesh that are vulnerable to seasonal poverty and hunger.

This blog was originally published as an Economics Op-Ed by the Daily Star, on 15 April 2015. Click here to see the original article.