Introduction
The article by Tim Besley and Robin Burges analyzes the emerging trend of poverty throughout the world and how poverty has changed over time. They try to understand the contribution of growth in the developmental process and in poverty alleviation. Their paper thus can be broadly divided into two large sections, first dealing with understanding growth and its relation to development and poverty, and second, the policy implications for countries. As the incidence of poverty has been observed to follow a geographic concentration, the paper tries to understand what structural policies unique to the region that could have resulted from it.
Growth and Development
Tim Besley and Robin Burges note in their paper “Halving Global Poverty” that, depending on the average real per capita income of a country, high inequality of income is positively correlated to the high degree of poverty when the poverty line is pegged at $1 a day (11). In other words, when the mean income is held constant and most of the income goes to a few rich men in the country, the poor masses will have very little income at their disposal.
The authors used data from the household surveys that collected information about income and consumption. However, household surveys do not collect data for aggregate GDP. In addition, the global picture of poverty and inequality presented in the study is partial as the study itself indicates, at $1 poverty line across the world, poverty has reduced around 6 percent but the absolute number of poverty has decreased by a meager 0.1 billion.
This indicates that poverty measurement and incidence are not homogeneous in nature. For example, in East Asia poverty has reduced considerably as China has developed rapidly whereas Sub-Saharan Africa has remained stagnant in terms of growth and development. This clearly indicates that the rise in income will not create a similar effect on different countries. This will result is more poor people in the country affecting growth as well as the development of the country.
The main argument presented by Besley and Burgess is that growth alone does not provide sufficient conditions for the reduction of poverty. They believe the growth rate that is necessary to halve poverty is enormously more than the historic rates. Hence, they suggest policy should be made in such a way that to directly address poverty alleviation.
Though their initial regression suggested that higher growth would allow trickling down to alleviate poverty, the growth required to halve the amount of poverty in the world was much higher than the historical growth averages. Thus, they suggested that it is essential to find ways that can reduce poverty, as increasing growth is a necessary but not a sufficient condition for poverty alleviation. Further, redistribution of income also is hindered by the fact that the poor countries usually have high-income inequality. Thus, it is essential to establish a well thought out redistribution mechanism.
The authors point out that the recent developmental studies have tried to revisit the traditional theories with a fresh gloss on it (19). They point out that other economic theories recommend opening up of the economy and advocate a free market economy for removing poverty/ However, this study believes that the policies formulated by the government can reduce poverty. Further, they also suggest that poverty alleviation programs that target lofty targets on a macro level will not be able to remove poverty.
On the contrary, the institutions that govern the political and economic environment should take the center stage in taking policy decisions to remove poverty. In other words, the policies should have a focus on the micro-level rather than macro targets.
Policy Implications
The article presents a holistic idea of how poverty can be halved in the less developed countries of the world. The findings and suggestions can be intuitively understood and do not necessarily require the aid of a mathematical regression analysis. For instance, if there is high inequality of income, a simple rise in the growth rate of increase in per capita income will not remove poverty to that extent as the benefit of the growth will trickle down, not to the poor but will go to the handful of rich people in the country. Here what becomes more important is the headcount of the people under the poverty line (or the $1 mark). Therefore, policies should be formulated to address the negative effect of income inequality on poverty even when there is an overall growth in the economy.
Policy implications should aim to reduce the adverse effect of high-income inequality on the development process. For instance, per capita income does change poverty but do not correlate with the changes in income inequality. Inequality within a country does not change significantly over time as the structural features of the economy determine the distribution of income in a country (Besley and Burgess 10).
Thus, the aim of policymakers should be to find a means to redistribute income in order to reduce the inequality gap. Further, policymakers should look at the effect of redistribution of income. Even if there is a high rate of growth, high inequality will result in the benefit of the growth going to the few rich people and not be distributed to the poor masses. Therefore, inclusive growth should be the aim of the less developed countries that aim to boost growth in order to remove poverty.
Work Cited
Besley, Timothy and Robin Burgess. “Halving Global Poverty.” The Journal ofEconomic Perspectives 17.3 (2003): 3-22. Print.