Development as ‘economic growth’ or ‘poverty reduction’


Will economic growth lead to poverty reduction?  I believe passionately that the market will never serve the interests of the poorest and most marginalised.  This seems to me to be so clear and obvious that it scarcely needs defending!  However, I am becoming increasingly worried that such opinions are very much in the minority. The dominant, hegemonic view amongst most of those working in the field of development really does seem to be that economic growth will indeed eliminate poverty.

Following my recent keynote at m4Life on 28th October, at which I argued that we need to develop ways in which mobiles can be used to support marginalised groups, such as people with disabilities, I was very strongly challenged by an African colleague, whose views I respect.  In essence, she accused me of being a typical western academic who does not really understand Africa, and that if I did I would know that most Africans wanted economic growth. By focusing on the poorest, she suggested that my views were tantamount to arguing that Africans should remain poor. I felt deeply hurt by these accusations, and am still smarting from their vehemence some two weeks later! I actually don’t know why, they hurt so much, but perhaps it is because I have elsewhere argued strongly that Africa is indeed rich, and that we need to help build on its richness rather than always describing it as being poor!  The irony is that the paper I have written on this has continually been rejected by academic journals – quite possibly because it too does not conform to accepted dogma!

I clearly need to learn to express my arguments more convincingly.  This is a brief attempt to do so in the form of some basic principles:

  • The potential for inequality to increase is inherent within all economic growth.
  • Economic growth, defined in absolute terms, cannot therefore eliminate poverty (see my critique of Jeffrey Sachs, for example, in ‘No end to poverty’)
  • If economic growth proceeds unchecked, it will inevitably lead to increased inequality that will ultimately fuel social and political unrest at a range of scale
  • A fundamental role of states is thus to intervene in the market to ensure that the poorest and most marginalised are not excessively disadvantaged.
  • Given that the market serves the interests of the majority of people, it is incumbent on those who care about reducing inequalities specifically also to address the needs and interests of the poor.
  • Such an argument can be justified both on moral grounds (that it is just), and also on socio-political grounds (to reduce potential violence)
  • With reference to mobile technologies, therefore, all I was doing in my keynote was to argue that companies, entrepreneurs, app developers, and all those claiming to use ‘mobiles for development’ should seek to address the needs of the poor and marginalised, alongside those of global corporations and their shareholders.
  • This is premised upon a belief that ‘development’ is about rather more than just economic growth, and includes notions of equality of opportunity and social justice.

These arguments are developed more fully in:

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13 Comments

Filed under Africa, Development, Ethics, ICT4D, Photographs

13 responses to “Development as ‘economic growth’ or ‘poverty reduction’

  1. Pingback: Tweets that mention Development as economic growth or poverty reduction « Tim Unwin’s Blog -- Topsy.com

  2. I believe that
    a) economic growth is about making the pie bigger;
    b) having a bigger pie does not say;anything about how we share that pie. c) More pie should make it easier that everyone has a bigger piece of it, but it is not a necessary condition;
    d) recent history (i.e. 250 years and, especially, the latter 20) have just proven otherwise: economic growth is being followed by more uneven wealth distribution.

    That said, I mostly agree with you, but in points #3 and #4.

    About point #3, that economic growth does not necessarily lead to equality does not mean that economic growth will never do.

    On the other hand, I agree that economic growth should be checked (monitored, driven) to guarantee (or foster) more equality.

    But I cannot agree on growth necessarily driving towards more inequality.

    On point #4 I plainly disagree. Not on that this is not a solution, but on that this is the solution. I think there are many ways to fight inequality and market intervention is just one of them.

    I personally think that governments should intervene to regain or keep infrastructures and keep the ownership, but leaving the exploitation to the market.

    On the other hand, I’d rather use income (e.g. direct income taxes) and subsidies (e.g. free education for all… or just for the poorer) to level the ground.

    Will read now your re-rejected paper 😉

    i.

    • unwin

      Thanks for these interesting thoughts. Yes, I guess we do disagree on some of the key issues. Overall, in my reading, the historical evidence suggests that capitalism does inevitably lead to increased inequalities; indeed, inequality is capitalism’s life blood! The pie gets bigger because owners of capital exploit the poor and hence cause greater inequalities! If we had a different economic system, that had growth with equality then I could agree with you – but even here, I fear that such growth would not be sustainable. Hence, I think there is much to be gained about thinking about what a no-growth economy might be like!

      I’m not sure we necessarily disagree on the fourth point – what I was trying to say is that state’s have a responsibility for the most marginalised people in their polities, and that they do therefore need some kind of intervention to achieve this. I would include taxes and subsidies as a form of market intervention.

      Hope you enjoy “On the richness of Africa”!

  3. Sam

    Tim, Thanks.

    “On the Richness of Africa” is enormously worthwhile, if only in that it compels us to question the fundamental assumptions underpinning our relentless need to wage “war” against poverty and all things unpleasant. Unfortunately though, the resulting dissonance of this mental exercise proves too much to bear for most of us. While it may seem helpful, as you say, to “understand the interests underlying the use of words such as ‘rich’ and ‘poor,’” this is far from practical, rather self-destructive actually, for anyone with a personal interest in maintaining the foreign aid industry in some shape or form. This applies equally to the fly-by-night international consultant and the illiterate African farmer, both of whom more or less aid dependent.

    These terms are the super structure upon which we craft our world. And this is clearly not the world of peace and harmony, but the world of intellectual notions of right and wrong, progress, morality, and religion; the world of semantics, abstractions, and theory; the world of magic, illusions! In other words, poverty is the poverty trap, not Africa.

    Perhaps you should consider shortening and reformatting the piece for a non-academic audience, or one that isn’t quite so tied up in supporting these notions for their own sake.

    Thanks again for this and your other contributions to the field. I just read your ICT4D which is actually how I stumbled upon the blog.

    Sam

  4. Thao

    Thank you Tim for this thoughtful & thought provoking post! I find it extremely relevant & a reminder to me as I work on my research project.

  5. What about cooperatives? They work in a capitalist environment and, notwithstanding, they generate no inequalities in their core. But maybe I’m speaking of market economies and not capitalism, which is not exactly the same thing…

    Regarding the 4th point, we agree then:)

    (reading pending, but not at the bottom of the pile 😉

    • unwin

      …hence why the ICT4D Collective is explicitly designed to try to be a ‘collective’!

      That having been said (i) there are numerous tensions between the viable functioning of co-operatives within a capitalist system, and (ii) my experience is that most co-operatives do actually have inequalities at their core. This was certainly my conclusion from examining co-operative and former co-operatives in post-Soviet eastern Europe during the 1990s.

  6. Yours is definitely a most demolishing working paper.

    I guess it may not be accepted either because it is not quantitative or because it goes against mainstream thinking.

    Have you tried South-East Asia journals? (I’m meaning it)

  7. Economic growth can lead to poverty reduction…Economic growth should be intiated in the poorest communities as you pointed in out in your 7th point.

    Social businesses that respond to the poor needs and create employment in the poorest regions will bring economic boost to entire countries since a large part of the population in Africa is rural.

    As an African involved with the business world in Africa, I agree with you…things aren’t black and white when it comes to economic growth and poverty reduction, they shouldn’t exclude each other because it is very nuanced.
    But your point is right, economic growth should be conducted while being inclusive of the poor for it to really have an impact on African people.

    Thanks

  8. Tim,
    reading your post many months later. Your recent twit (commented by David Souter) about preventing ICTs to increase poverty is maybe another starting point to renew this discussion.

    If we restrict ourselves to Africa, the enormous variety of poverty must be recognized first. Poverty is not hard to recognize when you meet it, but it cannot be captured in just a few categories. I can easily enumerate ten different categories of poverty, but this is not the place. Each specific poverty condition needs its own specific remedy. The remedies are as numerous as the conditions. There is no one-size-fits-all policy that through a miracle will make poverty go away. This is of course also true for a discussion of poverty and ICT.

    Instead, I would like to draw attention to what is happening to the access networks in Africa. The mobile operators now own the entire (almost) infrastructure for ICT in Africa, and network upgrades to 3G and LTE are in full swing in all but a few of the 40 Subsaharan countries. Coverage is almost universal. Cheap bandwidth via underwater cables is fed into Africa in scores of places. All this is paid for by – first – hundreds of millions of GSM users. Many pay as little as one dollar per month, but through the miracle of prepaid accounts they are profitable customers just the same. The next expansion to fully IP based networks is underway, and most of it will be paid by the Great Unwashed Facebook Masses.

    So without interventions from governments or donors or international institutions, a fantastic network is now available for the delivery of all sorts of ICT services, throughout almost all of Africa. Commercial content will fill up much of the space, much of it (naturally) with dubious value. But all the “good” stuff can also be delivered, and especially the governments will get – for free! – channels to deliver e-government, e-health, e-eduction and all the other e-services that have so long been in the dreams of speakers and gurus at e4D events.

    Will these new networks and services hurt the poorest? Or are your concerns based in the (inevitable) asymmetry of income distribution? Is it that, when only one group enjoys the benefits of e.g. mPesa, the non users are relatively worse off?

    It makes me almost go overboard with enthusiasm when I see the ICT development in Africa. It is not a controlled or orderly process, quite the opposite. It is driven by purely commercial interests from the supply side, and by rather frivolous interests for entertainment on the demand side. But the networks are real, and they are open to use for any purpose. It is like when humanity first tamed the horse. Use it to draw carts to the market or for cavalry warfare. It is our own choice.

    • unwin

      Thanks very much for this long and thoughtful reply. Yes, usually, I too am very positive about the transformations taking place with/through ICTs in Africa. However, on more and more occasions I am reminded that much of the rhetoric about ICTs really improving the lives of the poorest and most marginalised fails to live up to what is written on the label! The reality does not match therhetoric. If you look at the relative balance of ‘interest’ between shareholders of major global ICT corporations, and the poor streetchild on the streets of Africa, then I feel frustrated. Listening to so many people in the industry talking, they are primarily interested in profit, rather than in serving the needs and interests of the poor. All the data shows that the poorest remain left behind – do look at the ITU report on the least developed countries published last year. So, yes, you are right, my arguments are about relative poverty, and not absolute poverty! It is difficult to measure these things, but the profits being made by those in the mobile industry are at the ‘expense’ of what you term the GUFM! Aren’t you glad that the share price of Facebook virtually halved following its launch?!

      • Hello again,
        It is hard to think clearly about cause and effect of poverty. Historically, early economic growth episodes were mostly associated with improved labour productivity in agriculture and industry, which released workers for manufacturing. This is clearly the case in China in the last thirty years, where hundreds of millions of people have left low output jobs in farming. That process has not started yet in Africa, but with ten percent growth in GDP, many countries will soon be entering this phase.

        Poverty is static in low growth rural economies. It is a moving target in high growth, where large numbers of people see their positions change dramatically in a generation or less. Inequality gets a new face, and that seems to be more worrying than the old-fashioned rural poverty. When the political situation allows a bit of enlightenment, the worst effects of both new and old poverty can be mitigated, but that’s exceptional. Zero-sum politics and robber capitalism are far too common. The growth process is probably accelerated by ICTs in one way or another, but I think it is hard to argue that ICTs by themselves are driving inequality either way.

        For poor people in Africa, there is only one type of ICT, and that’s mobile telephony. All densely populated areas in Africa have coverage, and the potential of voice telephony is a reality for over 90% of the population in e.g. Uganda and Rwanda. Even very poor rural households are actually using ICTs. All 140 GSM operators report large numbers of users with monthly expenditures of just one or two dollars. These customers are all welcomed by the operators, for two reasons: The prepaid accounts imply zero cost to carry the customers, and they generate revenues when they receive calls.

        Thinking about the effects, I think the utility of telephony is relatively larger for a poor family than for a rich. A phone call that saves a five hour walk is worth a great deal to a poor family, but gives only marginal utility to the well off. Other kinds of ICT simply do not enter the lives of poor rural people, yet.

        GSM networks are by far the most complex and investment intensive ICT applications in all African countries. They are open to all at a very small fee, and hundreds of millions of users demonstrate how utility far exceeds costs. For a few dollars, anyone can participate as an equal in these advanced ICT networks. I think their net effect is strongly equalizing.

        The future is quickly getting into these networks, with smart phones and 3G services. The networks are getting ready to deliver the full range of ICT services, and there are all reasons to believe that the utility of the full e-world will welcomed by all. Since the financing of the networks is paid by the rich kids with Facebook accounts, the real effects would be equalizing!

        So if the networks, rather than individual computers or applications, are in focus in our discourse about ICT4D, I think we would get a better handle on things. I would be glad to come to a CTO event and speak about it.

        Best regards,

        Olof Hesselmark
        Stockholm

  9. Pingback: A new global partnership: the report of the high-level panel on the post-2015 development agenda | Tim Unwin's Blog

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