The dynamics of poverty

The chronically poor are the ones hit hard by the recent hike in fuel and food prices, as they have limited means of their livelihoods, entitlements and capabilities. Hence, they are highly vulnerable.

BY Lok Nath Bhusal

The usual way to poverty measurement or identification of the poor has been the first step towards formulating anti-poverty policies and programs. A number of national level household surveys have been conducted in Nepal during the last three decades to estimate the extent of human deprivation. All these poverty measurements following the 1977 have been money-metric – computed using information on per capita consumption or income or expenditure - and cross-sectional, except the Nepal Living Standard Survey (NLSS-II) 2003/4. The NLSS-II provides longitudinal data that is the basis for the analysis of poverty dynamics in the country. There are significant methodological variations across different surveys, but based on whatever data we have, it is reasonable to conclude that Nepal could not make significant strides towards even reducing monetary poverty until the beginning of the 21st century. Also, it must be admitted here that, given the political sensitivity of poverty data, there has always been a tendency to downsizing and distorting it. Hence, the actual numbers might be much higher than the reported in the table below. Also, since such a monetary approach to poverty measurement is inherently one dimensional, it can not give us the true reflection of the extent and degree of the multiple faces of human deprivation, such as capabilities, social exclusion, powerlessness and vulnerabilities.

Table: Poverty in Nepal over Time

Survey Year Poverty Surveys by % of people below poverty line % of Chronically Poor % of Chronically Poor out of the total poor 1977 Planning Commission   36.2     1984 Nepal Rastra Bank 42.5       1995/6 NLSS - I   42     1998 CBS (based on NLSS -I data)   45     2003/4 NLSS - II   31 20 43

Source: Sadeque (2003), CBS (2004) and (Bhatta and Sharma, 2006).

Poverty is not a static condition, and thus recently researchers have shifted their attention to study the dynamics of poverty, employing both quantitative and qualitative methods. It has been perceived that poverty status of people generally changes over time - they move into and out of poverty - owing to various socio-economic shocks and alteration in their livelihoods. Such shocks range form individual level to global level, and constrain or facilitate various forms of livelihood capitals. However, many people remain in poverty for a long period, and this extended duration of the poverty status is the distinguishing feature of chronic or persistence poverty. Chronically poor may live in poverty for ever, and their poverty may be inherited by their children. They have little access to productive assets and have low capabilities in terms of health, education and other forms of socio-cultural capital.

The Chronic Poverty Report 2004/5 states that “living in poverty for long period is both a symptom of past deprivation and the cause of future destitution.” Indeed, chronically poor people are vulnerable, excluded, exploited, and powerless and have high dependency rates – the problem of poverty is essentially multidimensional. Therefore, if poverty as a whole is considered to be a socio-economic evil, chronic poverty is both the parents and offspring of this evil. The chronically poor are the ones hit hard by the recent hike in fuel and food prices, as they have limited means of their livelihoods, entitlements and capabilities. Hence, they are highly vulnerable.

Contrary to the orthodoxy that the chronically poor account for much fewer than the transitory poor has been challenged by the estimates presented in the Chronic Poverty Report. By combining US$1/day poverty figures with the available panel data, the report has estimated that out of the 1.2 billion people that are in extreme poverty in US$1/day terms, the global number of the chronically poor is between 300 to 420 million. This means, worldwide, there are approximately 25 to 33 percent of the people living on less than US$1/day are chronically poor. While there are chronic poor people in all parts of the world, the report has also estimated that the largest number of such poor people are in South Asia - about one-third of the poor population or 135 to 190 million.

It has been argued that the global family has come to recognise that the coexistence of pervasive poverty, with the affluence of a much smaller segment of the population, is ethically unacceptable, economically inefficient and politically unsustainable. No doubt, chronic poverty is a challenge to any society that claims to be civilised, prosperous and egalitarian. People in chronic poverty are those who have benefited the least from economic growth and development, partly because of ineffective social protection policies and partly due to deliberate state denial of their problems. As a result, chronic poor and their children will make up the majority of the 900 million people who will still be in poverty globally in 2015, even if the Millennium Development Goals are met. They are the politically invisible poor, and occupy a blind spot when it comes to the design of development policy and the delivery of public services. Hence, such poverty is not easy to tackle unless specific policy actions are undertaken.

Two academics, namely Saurav Dev Bhatta and Suman Kumari Sharma, at the University of Illionis at Chicago and Tribhuvan University, respectively, have for the first time conducted a research on chronic poverty in Nepal. Although their study is based on the NLSS- II survey data, estimates show that there are at least 20 percent people who are chronically poor – about five million out of about 27 million people. Again, this number becomes quite significant as it turns out to be 43 percent out of the total poor people in the country. The remaining 57 percent were transient poor. Having one fifth of the population in persistent poverty is clearly a challenge to both the government and the donors. Most importantly, hence, there is an acute need for searching the highways and byways of Nepalese chronically poor for realising the MDGs, particularly halving the number of absolute poor by half by 2015. In the meantime, it is crucial to informing the public policy makers and the donors with this knowledge and information at a time the country is making a major socio-political and economic transition in its history with a vow to make a “New Nepal”. Are they likely to gain from the notion of new Nepal and much hyped economic revolution?

Changes in policy have the chance to do this. It has been found that the lack of human capital and household wealth are the significant determinants of chronic poverty in Nepal. Hence, there is urgent need to universalise all levels of education, basic health care, nutrition and other skills-oriented trainings as well as comprehensive incomes and assets redistribution policies and social welfare to reduce chronic poverty and thus achieve the MDGs. Since targeting is administratively costly, socially stigmatising and psychologically harassing; we should proceed with a universal approach of socio-economic security. Although the latter approach might be economically costly, it is likely to ensure broader political alliance among all classes in our society, and thus enhance social cohesion. Instead of buying guns in the name of conflict, we must afford butter for peace. The question is of political will, not of wealth. Universal socio-economic security is the right way towards breaking the chronic poverty trap.

(Bhusal is an economist and can be contacted at loknathbhusal@yahoo.com)

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