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RESEARCH AND TECHNOLOGY

The benefits of research and new technology in reducing poverty are most apparent in agriculture. The introduction of high-yielding varieties of wheat and rice – the Green Revolution – has expanded food supplies and reduced food prices for the poor, and increased wage rates and, in some instances, small farmer incomes. But much more research is needed to improve the productivity of food crops on which many low-income farmers depend and to increase jobs and cheap consumer goods output in industry.

MIGRATION

As development proceeds, more jobs are created in the industrial, urban sector, so people move to the cities. Despite some problems, the living standards of migrants employed in the cities, although low, tend to be above those of the rural poor. Generally, city workers send money home, so that farm land has to support fewer people, both of which benefit the rural poor. Yet policies of urban bias, discussed in the next chapter, spur more migration than what is socially desirable.

TAXES

Chapter 14 discusses tax schemes, such as the progressive income tax, to reduce income inequality.

TRANSFERS AND SUBSIDIES

In developed countries, antipoverty programs include income transfers to the old, the very young, the ill, the handicapped, the unemployed, and those whose earning power is below a living wage. But except for some middle-income countries, such as Brazil and Turkey, most developing countries cannot support such programs. For example, in Nicaragua and Ethiopia, where more than fourth-fifths of the population is poor (World Bank 2003h:58–59), welfare payments to bring the population above the poverty line would undermine work incentives and are prohibitively expensive.

An alternative approach is subsidizing or rationing cheap foodstuffs. Subsidizing foods that higher income groups do not eat benefits the poor. For example, sorghum, introduced into ration shops in Bangladesh in 1978, was bought by nearly 70 percent of low-income households but by only 2 percent of high-income households (World Bank 1980i:42–45, 51, 62). Moreover, in Ethiopia, recovering from more than 20 years of war, per capita income is about equal to the absolute poverty line, implying that average economic welfare is the same as the minimum cost of basic needs. Apparently, Ethiopia cannot cut poverty by reducing inequality (Bigsten 2003:110).

EMPHASIS ON TARGET GROUP

Another strategy for improving the lot of the poor is to target certain programs for the poorest groups. India has an affirmative action program favoring the placement of outcastes and other economically “backward castes and tribes” when openings in educational institutions and government positions occur. A number of countries, including India, use industrial incentives and subsidies to help economically

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backward regions and train business people from underprivileged groups. Some countries have tried to improve female literacy and educational rates. Others have stressed health and nutritional programs for expectant and nursing mothers and children. Improvements in pensions, provident funds, and social security benefit the elderly (although in Brazil politically unassailable social security has become a fiscal nightmare, excluding most of the poor, who, however, provide a large share of the financing) (Lipton and van der Gaag 1993:31). Upgrading housing in urban areas can increase real income among the poor. Finally, some LDCs in a reversal of the policies of the 1950s and 1960s, have stressed development in the rural areas where most poor live.

The success of public intervention to target groups depends on political support. From 1948 to 1977, Sri Lanka spent about 10 percent of its GNP on food subsidies, including a free ration of 0.5–1.0 kilograms (1.1–2.2 pounds) of rice weekly for each person, with the remainder sold at a subsidized price. But in the late 1970s, to reduce the adverse effect of low food prices on agricultural growth, the Junius Jayewardene government replaced this universal food subsidy with a less costly targeted food stamp program that gradually eroded in value with inflation over time. The middle class, who no longer gained from the more cost-effective program, withdrew its crucial political support.17 Similarly, a food subsidy directed to the poor in Colombia was so tightly targeted that it lacked an effective political constituency, and was abolished at a change of government (World Bank 1990i:91–92). In the 1980s and 1990s, Indians have increasingly opposed the job and university-entrance reservation of 22.5–52 percent (the amount varying by state), and many employers have instituted hiring policies to circumvent the job reservation.

Michael Lipton and Jacques van der Gaag, consultants for the World Bank, explain that

Targeting is not simply a Scrooge-like way to limit the fiscal cost of reducing poverty. It can also prevent undue dependency among the poor and wrong incentives. Conversely, incentives can be used to improve targeting. Where the rich avoid the use of public health clinics because of crowding or low-quality care, these clinics can be used as distribution centers for, say, food stamps. This kind of self-targeting has proved effective in Jamaica. Ahmad warns of the risk, however, that such a scheme, although it may avoid leakage to the rich, may exclude or deter many of the poor. (Lipton and van der Gaag 1993:9, citing chapters by Besley and Kanbur, pp. 67–90; Ahmad pp. 359–77)

Another problem is assessing and verifying low incomes, difficult enough in DCs with their literate populations accustomed to filling in tax forms. As an example, Timothy Besley and Ravi Kanbur (1993:71) point to “a coupon program that distributed food every two weeks through government-run supermarkets [using] income to determine who could participate in Recife, Brazil. The program revealed several

17 Undoubtedly, the disruption of production and deterioration of well-being from Sri Lanka’s ethnic conflict and civil war have been major contributors to a substantial increase in malnutrition in the 1980s and 1990.

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problems. . . . It is difficult to target income if income reporting is arbitrary. . . . A coupon program requires extensive bookkeeping and administrative cost.” Building on this experience, the Brazilian government modified the program successfully, reaching very low-income neighborhoods without coupons. Any leakage to the nonpoor was less expensive than administering the cumbersome coupon program.

July L. Baker and Margaret Grosh (1994:983–995; Grosh 1994) found that in Latin America, geographic targeting (especially when the size of unit used in making decisions was small) was as effective as means tests in ensuring that benefits go to the poorest 40 percent of the population. Because of its simplicity and cost-effectiveness, geographic targeting may be a legitimate alternative to self-targeting.

However, today we have few figures on poverty and inequality by region or community within a nation. Identifying and reaching the poor to enable their geographical targeting requires detailed poverty mapping, with data on poverty assessment and “basic needs” indicators at local levels. Few national surveys are adequate for “guid[ing] poverty alleviation efforts aimed at attaching poverty at local levels” (San Martin 2003:173).

WORKFARE

Self-targeting involves designing schemes based on self-regulation that only the poor will pass. One program that provides food security while relying on self-selection by the poor is food or other income in exchange for work. A work requirement, combined with low wages, guarantees that only the poor will apply for jobs where they cannot otherwise be identified, thus allowing a greater coverage of the poor with a given budget. When India’s statutory minimum wage doubled in 1988, Maharashtra state’s Employment Guarantee Scheme doubled the wage rate for food-for-work recipients but because this wage did not effectively ration jobs to the most needy, scheme administrators used informal rationing (Lipton and van der Gaag 1993:34– 35; Besley and Kanbur 1993:78–79). Kirit Parikh and T. N. Srinivasan’s (1993:403– 406) simulation showed that a well-designed, well-executed, and well-targeted works program improves the welfare of the rural poor and increased economic growth, even if the resources are raised through additional taxation. Even if the works program means other investment foregone, the sacrifice in growth is modest and the effect on the welfare of the poor is positive. In some Indian villages, employment-guaranteed workfare served to stabilize income, reducing the “hungry season.” A study of a food- for-work program in Bangladesh found that the foregone earnings of participants in the program were one-third of their earnings (World Bank 1990i:96–100; also Sen 1993:40–47).

INTEGRATED WAR ON POVERTY

A study by Irma Adelman and Sherman Robinson (1978) indicates that, taken singly, most of these policies cannot end rising income inequality occurring with development. Only a total mobilization of government policies toward programs to help the poor directly – a war on poverty – succeeds in reducing income inequality and increasing absolute incomes. And successful countries, such as Taiwan, South Korea,

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Israel, and Singapore, all redistributed before growth. For Adelman and Robinson, the redistributed asset changes with the level of economic development. At first when the economy is primarily agricultural, land is redistributed. With further development, the primary asset is physical capital. At a later stage, the redistribution of human capital through education and training for the poor is emphasized.

It’s easy enough to list ways the state can promote opportunity, empower the poor, and enhance their security (World Bank 2001h: vi). Often, however, political elites and their allies who are threatened by programs that redistribute income and reduce poverty dominate the state. Addressing poverty requires much more than knowing what policies can reduce poverty; most important are citizens with vested interests in reducing poverty and a government that has the political will to attack poverty.

ADJUSTMENT PROGRAMS

Chapters 16, 17, and 19 discuss how the IMF and World Bank compel LDCs experiencing a chronic external deficit and debt problem to undertake economic reform, structural adjustment, and macroeconomic stabilization policies to receive financial support, such as the IMF’s loans of “last resort.” Adjustment and stabilization programs need to provide compensatory transfers or other safety nets for the incomes and livelihoods of weaker segments of the population – the poor, minorities, rural and working people, and women and children – to avoid pushing them below the line of endemic poverty. Funds to reduce the short-term costs of adjustment need to be expanded, including moneys for public works, food-for-work projects, and retrenched public-sector workers, as well as nutrition, potable water, and health care for disadvantaged classes. These programs, if timely and well targeted, can help garner popular support for the necessary adjustment and reduce the society’s vulnerability to hunger and disease.

Can we not expect that donor or lender support (through the IMF, World Bank, or major shareholder government) might provide for social funds to contribute to poverty reduction and the political sustainability of the adjustment process? The IMF (2003b) established a Poverty Reduction and Growth Facility (PRGF) in 1999 to broaden the objectives of its concessional (that is, at least 25 percent grant component) lending to “include a more explicit focus on poverty reduction in the context of a growth oriented strategy.” In addition, the World Bank structural adjustment program has included a Program of Action to Mitigate the Social Costs of Adjustment (PAMSCAD). In 1988, a PAMSCAD for Ghana provided funds for public works and food-for-works projects to reduce the immediate harm to retrenched public sector workers from privatization programs to increase productivity in the long run (Nafziger 1993; Morrisson 2000). Yet as Stewart and van der Geest (1998) show, retrenched and redeployed public-sector workers who were relatively well off benefited substantially, whereas poor households benefited little. Indeed, their survey of 10 LDCs undergoing adjustment during the 1970s and 1980s indicate that only social funds programs designed and funded domestically have been successful in reducing poverty, hunger, and disease. In contrast, external programs have usually failed.

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The evidence suggests that adjustment programs are initially likely to reduce real wages and worsen the condition of the poor. To be sure, the World Bank Social Dimensions of Adjustment Projects (SDA) attempts to find policy instruments to achieve economic development and poverty reduction, with emphasis on short-term compensation where adjustment programs have immediate costs for identifiable groups. However, LDC planners find it politically difficult to compensate the poor for the impact of adjustment programs. To illustrate, in Ghana, the Program of Action to Mitigate the Social Costs of Adjustment (PAMSCAD), beginning in 1988, provided little for projects to offset declining health care and potable water, malnourishment among women and children, and adjustment costs by the poorest classes for the redistributive effect of Ghana’s adjustment programs struck at powerful vested interests, who fought back to regain their ascendancy at the expense of the poor. The Bank and (in other contexts) the Fund have been aware of the internal politics of adjustment that resulted in privileged interest groups but not the poor being effective in receiving compensation for adjustment (Grant 1989:18–20; Streeten 1989:16–17; World Bank 1988a:29–49; Parfitt 1990:128; Nelson 1989:102; Food and Agriculture Organization of the U.N. 1991:114; Abbey 1990:39; Tskikata 1990:161; Nafziger 1993:174–175).

In addition to recipients’ constraints on redistribution, the Bank/Fund shareholders put constraints on projects. The PRGF is a renaming of the IMF’s structural adjustment and enhanced structural adjustment facilities (SAF and ESAF) without changing the conditions set. The IMF, despite the name change for the facility, faces the same institutional limitations as before. DCs, including especially the United States, with congressional budget limitations, have provided few concessional funds for the PRGF or for the World Bank’s concessional window, the International Development Association. Moreover, the United States (with a 17 percent share) and other DCs (total, including the United States, 56 percent) shareholders, committed to the revolving nature of IMF loan funds, want the Fund or Bank to set conditions for stabilization and reform that maximize the chances of the funds’ repayments. Thus, LDCs, some of whom are continually facing conditions for Bank or Fund lending, face major constraints in redistributing income domestically.

Income Equality Versus Growth

Some development economists maintain that inequality, by spurring high investment rates, benefits the poor, as accumulation raises productivity and average material welfare. Gustav F. Papanek (1967), an advisor to Pakistan during the late 1950s and early 1960s, asserted a conflict “between the aims of growth and equality” such that “great inequality of incomes is conducive to increased savings” and that “great inequality of incomes is conducive to increased savings.” Mahbub ul Haq (1966), an eloquent World Bank spokeperson for meeting LDC basic needs in the 1970s and 1990s, contended when he was Pakistani planner in the 1960s: “The underdeveloped countries must consciously accept a philosophy of growth and shelve for the distant future all ideas of equitable distribution and welfare state. It should be recognized

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that these are luxuries which only developed countries can afford.” His conclusion was “additional output should be distributed in favor of the saving sectors.” His was “basically a philosophy of growth as opposed to a philosophy of distribution [and] is indispensable in a period of ‘take-off’.” In the 1980s, as Pakistani planner, he stated views similar to those he held in the 1960s.

The University of California, Los Angeles, economist Deepak Lal (1990) concluded from comparative studies “that growth does ‘trickle down,’ whilst growth collapses lead to increasing poverty.” Additionally, “direct transfers and social expenditures to alleviate poverty were found not to have made any appreciable dent on poverty.” Indeed expanding entitlements have “the effect of ‘killing the goose that laid the golden egg’.” A part of his finding is the “Director’s law” stating “that most politics (except for the Platonic variety) leads to income transfers from the poor and the rich to the middle class.” For Lal, “it is not surprising that a common finding of many empirical studies of poverty redressed in countries with the most widespread welfare systems is that these programs far from relieving absolute poverty have tended to institutionalize it.” Lal’s conclusions about growth trickling down to the poor and the inefficacy of welfare programs contradict studies by the World Bank and International Labor Office (Chenery, Ahluwalia, Bell, Duloy, and Jolly 1974; Ahluwalia, Carter, and Chenery 1979:299–341; World Bank 1980i; World Bank 1990i; Lipton and van der Gaag 1993; Lecaillon, Paukert, Morrisson, and Germidis 1994).

Adelman and Morris (1973) oppose a strategy of waiting for later stages of development to emphasize income distribution. Initial income and physical and human capital distribution determine the trend inequality. People owning property, holding an influential position, and receiving a good education are in the best position to profit once growth begins. Thus a society with initial income inequality that begins growth is likely to remain unequal or become more so, whereas one with small disparities may be able to avoid large increases in inequality. A society may not be able to grow first and redistribute later, because early socioeconomic position largely fixes the pattern of distribution, at least until higher income levels are approached. Reducing inequality requires immediate priority through land reform, mass education, and other means, rather than leaving redistribution until after growth has taken place.

The Cambridge economist Joan Robinson (1949) argues that even if you assume that inequality spurs capital accumulation and growth, it may not be prudent for the LDC poor to favor inequality, thus risking their children’s health and nutrition to bequeath a fortune to their grandchildren. Promoting saving through inequality is more costly than other alternatives such as government policies to promote both equality and capital formation.

Torsten Persson and Guido Tabellini (1994:600–621) argue that inequality is harmful for growth, since in a society with substantial distributional conflict, political leaders are compelled to produce economic policies that tax investment and growth promotion to redistribute income. In sub-Saharan Africa, in the 1970s through the early 1980s, shrinking economic pie slices and growing distributional conflict added pressures to national leaders, whose response was usually not only antiegalitarian

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but also antigrowth, hurting small farmers’ incentives, taking peasant savings for government industry, building government enterprises beyond management capacity, using these inefficient firms to give benefits to clients, and allocating educational funds to maintain the standing of their children and block the upward mobility of the children of workers and farmers. Regime survival in a politically fragile system required marshalling elite support at the expense of economic growth. Spurring peasant production through market prices and exchange rates interfered with national leaders’ ability to build political support, especially in cities (Nafziger 1988). Yet the link between stagnation and inequality in Africa may be exceptional. Still we cannot be certain that there is generally a tradeoff between growth and equality. Data are not of sufficient quality to enable us to generalize about the relationship between growth and equality in LDCs.

Generally accelerating economic growth through stable macroeconomic policies is perhaps the most satisfactory political approach to reducing poverty and dampening distributional conflict. A number of newly industrializing Asian countries, such as South Korea, Taiwan, Malaysia, and Thailand, have decreased poverty a great deal through rapid economic growth; and historically workers gain more from a larger GNP pie than from a larger share of a pie that remains the same size. When the income pie is not enlarged, any gains the underprivileged classes make are at the expense of the more privileged classes: Such a redistribution from the higher to lower income classes is difficult to achieve politically. However, when the GNP pie grows, the piece of pie can be larger for both privileged and underprivileged groups. The remaining chapters of this book focus on ways of accelerating growth. As the next section indicates, the questions of poverty, inequality, and government policy are intertwined with those of political order.

Poverty, Inequality, and War

War, state violence, and rebel resistance threaten the livelihoods and voices of millions of poor in the developing world. About 20 percent of Africans live in countries seriously disrupted by war or state violence. The cost of conflict includes refugee flows, increased military spending, damage to transport and communication, reduction in trade and investment, and diversion of resources from development. The World Bank (2000a:57–59) estimates that a civil war in an African country lowers GDP per capita by 2.2 percentage points yearly.

For example, Sierra Leone, in West Africa, is virtually the poorest country in the world (World Bank 2001h:38; World Bank 2003h:14–16). Sierra Leone’s “tragic conflict . . . has taken a terrible toll through lost lives, rape, mutilation, and the psychological harm to boys abducted into the army and militias. The effects of conflict – destruction of fragile institutions of governance, flight of skills, personal losses, and social wounds that could take generations to heal – create a vicious cycle of continued poverty and strife” (World Bank 2001h:38).

What effect do poverty and inequality have on war? Wars and massive state violence occur predominantly in low-income countries, especially those experiencing

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negative or stagnant economic growth. A large proportion of these states are also weak or failing, providing few, if any, public goods or services and experiencing breakdown in the rule of law.

Economic stagnation and decline worsen the feeling of relative deprivation, people’s perception of social injustice based on a discrepancy between goods and conditions they expect and those they can get and keep. The deprivation often results from income or communal (ethnic) inequality (Stewart 2000:16), where people’s income or conditions are related to those of others within society. Relative deprivation spurs social discontent, which provides motivation for collective violence (Gurr 1970). Tangible and salient factors such as a marked deterioration of living conditions, especially during a period of high expectations, are more likely to produce sociopolitical discontent that may be mobilized into political violence.

The political scientist Kalevi Holsti (2000) finds that the policies of governing elites, not rebel action, are at the root of most conflicts. Slow or negative per-capita growth puts pressure on ruling coalitions. Ruling elites can expand rent-seeking opportunities for existing political elites, contributing to further economic stagnation that can threaten the legitimacy of the regime and future stability. Or they can reduce the number of allies and clients they support, undermining the legitimacy of the regime, risking opposition by those no longer sharing in the benefits of rule, and increasing the probability of regime turnover, such as coups. To forestall threats to the regime, elites may use repression to suppress discontent or capture a greater share of the majority’s shrinking surplus above subsistence, reducing future investment and growth. Amid economic crisis, either strategy, expanding rent seeking for elites or reducing the size of the coalition, exacerbates the potential for repression, insurgency, and civil war. Overall economic stagnation interacts with political predation in a downward spiral, a spiral seen in African countries such as Angola, Ethiopia, Sudan, Somalia, Liberia, Sierra Leone, and the People’s Republic of Congo (Kinshasa) (Nafziger and Auvinen 2003; Nafziger and Auvinen 2002:154–155).18

This stagnation and decline is often associated with, and exacerbated by, a predatory state, driven by ethnic and regional competition for the bounties of the state. Elites extract immediate rents and transfers rather than providing incentives for economic growth. In some predatory states, the ruling elite and their clients “use their positions and access to resources to plunder the national economy through graft, corruption, and extortion, and to participate in private business activities” (Holsti 2000:251). People use funds at the disposal of the state for systematic corruption, from petty survival venality at the lower echelons of government to kleptocracy (thievery) at the top.

Wars are more likely to occur in societies in which the state is weak and venal, and thus subject to extensive rent seeking, acquiring private benefit from public resources

18Other economic factors, such as large military expenditures and a lack of adjustment to chronic external debt, together with political factors such as ethnic antagonism, contribute to war. See Nafziger and Auvinen (2003); Nafziger, Stewart, and Vayrynen¨ (2000); Collier and Hoeffler (1998:563–573); and Berdal and Malone (2002).

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(Vayrynen¨ 2000:440). Cause and effect between state failure and rent seeking are not always clear. State failure need not necessarily result from the incapacity of public institutions. Instead, although “state failure can harm a great number of people, it can also benefit others,” (ibid., p. 442) especially ruling elites and their allies. These elites may not benefit from avoiding political decay through nurturing free entry and the rule of law and reducing corruption and exploitation. Instead, political leaders may gain more from extensive unproductive, profit-seeking activities in a political system they control than from long-term efforts to build a well-functioning state in which economic progress and democratic institutions flourish. These activities tend to be pervasive in countries that have abundant mineral exports (for example, diamonds and petroleum), such as Sierra Leone, Angola, Congo–Kinshasa, and Liberia, while predatory economic behavior has a lower payoff in mineral-export-poor economies such as Tanzania’s.19

Conclusion

Poverty is multidimensional, referring not only to low income but also to hunger, illiteracy, poor health, inadequate infrastructure, and lack of power and voice. In the last half century, inequality in the Human Development Index (HDI) has fallen sharply, especially spurred by reductions in global health and educational inequality.

Absolute poverty is below the income that secures the bare essentials of food, clothing, and shelter. The World Bank and other international agencies have drawn $1/day and $2/day poverty lines, based on 1985 purchasing power parity (PPP). Although the initial $1/day poverty line was based on income essential to prevent undernourishment, after 1985, international poverty has been linked to a PPP exchange rate income rather than access to food.

Sala-i-Martin, who interpolates income distribution by percentiles rather than by the World Bank’s quintiles, estimates that 6.7 percent of the world was suffering $1/day poverty and 18.6 percent $2/day poverty in 1998. The highest rate is probably in Africa, with 40 percent poverty at $1/day and 64 percent at $2/day, with virtually no reduction in poverty rates from 1950 to 2000. The overwhelming majority of the world’s poor live in sub-Saharan Africa, South Asia, and East Asia.

19Death and tragedy in natural disasters, as in war and state violence, strike the poor disproportionately while generally sparing the affluent. Although richer nations do not experience fewer natural disasters than poorer nations, 90 percent of the deaths from these disasters are in LDCs (Kahn 2005:271–284). In late 2003, an earthquake, with a magnitude of 6.3 on the Richter scale and with an epicenter in Bam, Iran, an ancient city of 200,000 people, killed 30,000 people. About 70–90 percent of residences were constructed mainly of sun-dried mud bricks. In comparison, the quake measuring 6.5 on the Richter scale that struck the Northridge area of Los Angeles, California, in 1994 killed 57 people (Murphy 2003: section 4, p. 2). Furthermore, Indian monsoons are much more likely to kill the poor living in hovels in the lowlands than the rich living in well-constructed houses. The rich can engineer their dwellings and afford infrastructure and health and emergency services that reduce their risk of death from storms and earthquakes. See Chapter 17, which discusses how low-income countries are vulnerable to shocks of natural disasters and large fluctuations in export or import prices, and Skoufias (2003:1087–1102), who examines how households cope with natural disasters and economic crises.

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The World Bank’s higher poverty rates are based on consumer data from household surveys, whose consumption spending was substantially underestimated relative to national-income accounts.

Unlike the World Bank, both Sala-i-Martin and Bhalla show that the world’s individual income inequality fell from 1980 to 2000, a result of a shift of large numbers in high-populated Asia, especially in China and India, from the world’s lower to middle class. Still, global income inequality exceeds that for any single country.

Sen’s concept of poverty focuses on capabilities rather than attainments, meaning that a high-income person who squanders his resources so that he lives miserably would not be considered poor. Sen argues that policy makers need the following measures of poverty: headcount or poverty percentage, income-gap or the additional income needed to bring the poor up to the level of the poverty line, and Gini coefficient or concentration of income among the poor.

Early economic development in LDCs often results in reduced income shares for the lowest income groups. Inequality tends to follow an inverted U-shaped pattern, first increasing and then decreasing with growth in per capita income.

People in absolute poverty are undernourished and have low resistance to disease. A high infant mortality rate, a life expectancy of about 45 years, and illiteracy characterize this group. Most of the world’s absolute poor live in rural areas and own few assets. Disproportionate shares of the poor are women and children.

Growth rates of national income are closely correlated with the income growth of the poorest 20 percent. Notwithstanding this and the weakness of poverty data, there is much that LDCs can do to reduce poverty and inequality.

Taiwan’s and South Korea’s stress on land reform, education, and labor-intensive manufacturing, and Indonesia’s emphasis on rural development have succeeded in increasing the income shares of the poorest segments of their populations. By contrast, during the first quarter century of independence in India, many of its programs to aid the poor were circumvented by administrators, landlords, and businesspeople whose economic interests were threatened by such efforts. India’s poverty rates fell rapidly from the mid-1980s through the 1990s, when liberalization reforms spurred growth.

Policies used to reduce poverty and income inequality include credit for the poor, universal primary education, employment programs, rural development schemes, progressive income taxes, food subsidies, health programs, family planning, food research, inducements to migration, income transfers, affirmative action programs, targeting programs for the poorest groups, and workfare schemes for which only the poor will qualify. Designing “safety nets” is essential for protecting poor people during economic adjustment and stabilization programs. Ultimately, however, the success of these policies depends on a government with the political will to attack poverty.

Economists disagree on whether there is a tradeoff or interlink between equality and growth. Most economists agree, however, that accelerating economic growth through stable macroeconomic policies is the most satisfactory political approach to reducing poverty and reducing distributional conflict.

Poverty and inequality increase the risk of war, state violence, and rebel resistance in LDCs.