Does Redistributing Income Reduce Poverty?

[Tiger80]

http://www.project-syndicate.org/commentary/bhagwati18/English NEW YORK Many on the left are suspicious of the idea that economic growth helps to reduce poverty in developing countries. They argue that growth-oriented policies seek to increase gross national product, not to ameliorate poverty, and that redistribution is the key to poverty reduction. These assertions, however, are not borne out by the evidence. Since the 1950ÃÔ, developmental economists have understood that growth in GNP is not synonymous with increased welfare. But, even prior to independence, IndiaÃÔ leaders saw growth as essential for reducing poverty and increasing social welfare. In economic terms, growth was an instrument, not a target the means by which the true targets, like poverty reduction and the social advancement of the masses, would be achieved. A quarter-century ago, I pointed out the two distinct ways in which economic growth would have this effect. First, growth would pull the poor into gainful employment, thereby helping to lift them out of poverty. Higher incomes would enable them to increase their personal spending on education and health (as seems to have been happening in India during its recent period of accelerated growth). Second, growth increases state revenues, which means that the government can potentially spend more on health and education for the poor. Of course, a country does not necessarily spend more on such items simply because it has increased revenue, and, even if it does, the programs it chooses to fund may not be effective. In almost willful ignorance of the fact that the growth-centered model has proved itself time and again, skeptics advocate an alternative ÅÓedistributive developmental model, which they believe will have a greater impact on reducing poverty. Critics of the growth model argue that it is imperative to redistribute income and wealth as soon as possible. They claim that the Indian state of Kerala and the country of Bangladesh are examples where redistribution, rather than growth, has led to better outcomes for the poor than in the rest of India. Yet, as Columbia University economist Arvind PanagariyaÃÔ recent work shows, KeralaÃÔ social statistics were better than those in the rest of the country even before it instituted its current redistributive model. Moreover, Kerala has profited immensely from remittances sent home by its ñÎigr workers in the Middle East, a factor unrelated to its redistributive policy. As for Bangladesh, the United Nations Human Development Index, admittedly a problematic source, ranks it below India. In impoverished countries where the poor exceed the rich by a huge margin, redistribution would increase the consumption of the poor only minimally by, say, a chapati a day and the increase would not be sustainable in a context of low income and high population growth. In short, for most developing countries, growth is the principal strategy for inclusive development that is, development that consciously includes the marginal and poorest members of a society. But the political sustainability of the growth-first model requires both symbolic and material efforts. While growth does benefit the poor, the rich often benefit disproportionately. So, to keep the poor committed to the system as their economic aspirations are aroused, the wealthy would be well advised to indulge less in conspicuous consumption. At the same time and more importantly the poor need greater access to education in order to increase their economic opportunities and social mobility. Å*ess excess and more access must become the principle that guides development policy. Jagdish Bhagwati is University Professor of Economics and Law at Columbia University and Senior Fellow in International Economics at the Council on Foreign Relations. Co-Chair with President Tarja Halonen of Finland of the UNCTAD Eminent Persons Group on Developing Countries in the World Economy.

[akshayxyz]

I am practically illiterate on these matters and did not read the OP fully. But going by the title, isn't it the basis of Communism? If so, what do we have in Russia and others following communist philosophy? So, if did not work for even one country - Russia, how is supposed to work at world level?

[surajmal]

short answer: no. Long answer: watch PBS's commanding heights documentary.

[Vijay.Sharma]

I haven't read the article but answering the question, "does redistributing income reduce poverty" - it sure damn well does. Income is not always money...what you redistribute is opportunity. I totally totally believe that India has enough wealth to educate all it's citizens to a good level. Here's a very practical and effective way of doing it - All middle class and higher families can sponsor the education of just one other kid from a poor family (if possibly all kids in the family). Example - if each of us here sponsors the education of our maid servant's kids, just imagine how quickly the nation will become rich in education and opportunity. it really doesn't take much...the max you need to spend maybe like 10-20 K per year. For middle class people who earn at least 5 lacs per annum, 20 thousand a year is nothing. Each one teach one. Bring about equal opportunity...reducing poverty is achievable by reducing lop-sidedness of opportunity. In fact it need not even be for education. If the kid is interested in sports...sponsor him. In the other thread we were discussing about sponsoring Rehan - see this is how we can do it. We can take care of our fellow humans by removing obstacles towards equal opportunity. Today we support one individual...tomorrow that individual supports another. We are not giving them "bheek"...we are only being human in empowering them with the opportunities that we were fortunate enough to receive from our parents. At some point in each one of ours ancestry one generation had to work hard and sacrifice. If humanity has to evolve the same way then we will forever have this divide. Fast track evolution by helping others.

[Tiger80]

All middle class and higher families can sponsor the education of just one other kid from a poor family (if possibly all kids in the family). Example - if each of us here sponsors the education of our maid servant's kids, just imagine how quickly the nation will become rich in education and opportunity. it really doesn't take much...the max you need to spend maybe like 10-20 K per year. For middle class people who earn at least 5 lacs per annum, 20 thousand a year is nothing.

My question is what is the aim of education? At present every person think that aim is to study and get a white collar job,is it possible? How many Farmers send their children to school so they can become better farmers ? Most of them send them so they can secure govt job or join some organised private sector job.

[Vijay.Sharma]

My question is what is the aim of education? At present every person think that aim is to study and get a white collar job,is it possible? How many Farmers send their children to school so they can become better farmers ? Most of them send them so they can secure govt job or join some organised private sector job.

As I mentioned in the post, it need not be just education. If the kid wants to become a sportsperson, sponsor his sports requirements, if he wants to become a guitar player, buy him a guitar, send him to music school. The idea is redistributing opportunity. Just do it...don't think too much about it...most of us here earn enough to sponsor a kid. And I am not talking about CRY kinda 1000 rupee sponsor - those don't exactly uplift those children by much. In CRY like things you will generally get low quality teachers. But if you become a serious sponsor to say the child of the construction worker next to your house, you can keep tab of that child's growth. You can provide direction to that kid's future just like the way you will provide to your own kid or your father did to you. If each family sponsors one other family, we don't need these CRYs...we can do a thousand times better than CRY can ever hope to

[Shehezaada]

I haven't read the article but answering the question, "does redistributing income reduce poverty" - it sure damn well does. Income is not always money...what you redistribute is opportunity. I totally totally believe that India has enough wealth to educate all it's citizens to a good level. Here's a very practical and effective way of doing it - All middle class and higher families can sponsor the education of just one other kid from a poor family (if possibly all kids in the family). Example - if each of us here sponsors the education of our maid servant's kids, just imagine how quickly the nation will become rich in education and opportunity. it really doesn't take much...the max you need to spend maybe like 10-20 K per year. For middle class people who earn at least 5 lacs per annum, 20 thousand a year is nothing. Each one teach one. Bring about equal opportunity...reducing poverty is achievable by reducing lop-sidedness of opportunity. In fact it need not even be for education. If the kid is interested in sports...sponsor him. In the other thread we were discussing about sponsoring Rehan - see this is how we can do it. We can take care of our fellow humans by removing obstacles towards equal opportunity. Today we support one individual...tomorrow that individual supports another. We are not giving them "bheek"...we are only being human in empowering them with the opportunities that we were fortunate enough to receive from our parents. At some point in each one of ours ancestry one generation had to work hard and sacrifice. If humanity has to evolve the same way then we will forever have this divide. Fast track evolution by helping others.

AWESOME post! do you mind if i post it as a status message on facebook? a condensed version that is

[vipin]

Redistributing income artificially won't reduce poverty. Making the poor worth contributing significantly to the society and earning their due in the process will. Some redistribution of income is required to afford benefits like education and health-care to the poor people so that they can be made valuable / employable.

[Vijay.Sharma]

AWESOME post! do you mind if i post it as a status message on facebook? a condensed version that is

Please feel free to and thanks for the kind words

[Vijay.Sharma]

Redistributing income artificially won't reduce poverty. Making the poor worth contributing significantly to the society and earning their due in the process will. Some redistribution of income is required to afford benefits like education and health-care to the poor people so that they can be made valuable / employable.

True! That is exactly what I mean when I say we can sponsor a poor kid...you know we can be the "educated" parent that the poor kid otherwise doesn't have. Guidance is the most important thing for children. Of course we financial support is a given but on top of that they need guidance. Otherwise they will end up like CRY...basic minimum survival things will be given to the children but how many of these children really grow up to make something better than 'survival existence' of their lives? Every kid needs personal guidance and programs like CRY are not designed to do that Hence I keep saying that the have's can just give a little to one have-not. Each one enable one. I am totally sold on that idea

[Mariyam]

I haven't read the article but answering the question, "does redistributing income reduce poverty" - it sure damn well does. Income is not always money...what you redistribute is opportunity. I totally totally believe that India has enough wealth to educate all it's citizens to a good level. Here's a very practical and effective way of doing it - All middle class and higher families can sponsor the education of just one other kid from a poor family (if possibly all kids in the family). Example - if each of us here sponsors the education of our maid servant's kids, just imagine how quickly the nation will become rich in education and opportunity. it really doesn't take much...the max you need to spend maybe like 10-20 K per year. For middle class people who earn at least 5 lacs per annum, 20 thousand a year is nothing. Each one teach one. Bring about equal opportunity...reducing poverty is achievable by reducing lop-sidedness of opportunity. In fact it need not even be for education. If the kid is interested in sports...sponsor him. In the other thread we were discussing about sponsoring Rehan - see this is how we can do it. We can take care of our fellow humans by removing obstacles towards equal opportunity. Today we support one individual...tomorrow that individual supports another. We are not giving them "bheek"...we are only being human in empowering them with the opportunities that we were fortunate enough to receive from our parents. At some point in each one of ours ancestry one generation had to work hard and sacrifice. If humanity has to evolve the same way then we will forever have this divide. Fast track evolution by helping others.

Great post. :hatsoff:

[Sidhoni]

I haven't read the article but answering the question, "does redistributing income reduce poverty" - it sure damn well does. Income is not always money...what you redistribute is opportunity. I totally totally believe that India has enough wealth to educate all it's citizens to a good level. Here's a very practical and effective way of doing it - All middle class and higher families can sponsor the education of just one other kid from a poor family (if possibly all kids in the family). Example - if each of us here sponsors the education of our maid servant's kids, just imagine how quickly the nation will become rich in education and opportunity. it really doesn't take much...the max you need to spend maybe like 10-20 K per year. For middle class people who earn at least 5 lacs per annum, 20 thousand a year is nothing. Each one teach one. Bring about equal opportunity...reducing poverty is achievable by reducing lop-sidedness of opportunity. In fact it need not even be for education. If the kid is interested in sports...sponsor him. In the other thread we were discussing about sponsoring Rehan - see this is how we can do it. We can take care of our fellow humans by removing obstacles towards equal opportunity. Today we support one individual...tomorrow that individual supports another. We are not giving them "bheek"...we are only being human in empowering them with the opportunities that we were fortunate enough to receive from our parents. At some point in each one of ours ancestry one generation had to work hard and sacrifice. If humanity has to evolve the same way then we will forever have this divide. Fast track evolution by helping others.

:two_thumbs_up::two_thumbs_up::two_thumbs_up:

[maniac]

This is my simple understanding of the concept,Correct me if I'm wrong Re-destributing Income concept which is one of the foundations of communism is a proven failure. Where as an open market concept does have a huge impact in the ratio of the lifstyle led by the rich and the 'not so rich',we tend to overlook that it still does better the life style of the middle class and generates oppurtunities. For eg;When India became an open market Tata,Reliance,Wipro etc became richer but at the same time they had a direct effect on the lifstyles of the middleclass too. As long as poor are concerned,distributing income is only a short term solution.rehabilitating and providing them with oppurtunities is what the Govt needs to do.Which is where the Indian Govt has failed so far.The projection of shining India is a direct affect of the open market policies but distributing income to reduce poverty will open a new can of worms IMHO

[Vijay.Sharma]

I truly hope we can bring in our own interpretations to "re-distributing wealth" in order to move the concept forward and change it to better suit us. The fact of the matter is that no ideology is a panacea. Capitalism has its own ills as does communism. Democracy has its own ills as does Republicanism, Dictatorship, Theosophism, Monarchy, etc. While capitalism increases opportunity in general, socialism helps to level the playing field. Both are necessary. Let us define our own version of "redistributing wealth". If the discussion is limited to arguing about the pros and cons of an archaic and proven failure of a concept like communism then all we are doing is engaging in intellectual masturbation. Rather it would help us more if we could change the ideology to a practical one to suit our own t,s,p,c. That will, I guarantee you, take us forward and help us contribute and do something to change the situation.

[maniac]

I truly hope we can bring in our own interpretations to "re-distributing wealth" in order to move the concept forward and change it to better suit us. The fact of the matter is that no ideology is a panacea. Capitalism has its own ills as does communism. Democracy has its own ills as does Republicanism, Dictatorship, Theosophism, Monarchy, etc. While capitalism increases opportunity in general, socialism helps to level the playing field. Both are necessary. Let us define our own version of "redistributing wealth". If the discussion is limited to arguing about the pros and cons of an archaic and proven failure of a concept like communism then all we are doing is engaging in intellectual masturbation. Rather it would help us more if we could change the ideology to a practical one to suit our own t,s,p,c. That will, I guarantee you, take us forward and help us contribute and do something to change the situation.

Mixed Economy is a failed Concept as well...See Pre-1990 India....A well-handled capitalistic society is definetely the most succesful concept so far.

[Vijay.Sharma]

^^ O well!!!!! If you insist on theoretical discussion. Let's first start with defining the two ideologies. And then let us make sure we both are on the same page as to what the "spirit" and interpretation misgivings of both the ideologies are. Next, we dive in and compare India of pre 90 and post 90 and see whether it is a "failed" concept truly. What do you think we would have achieved out of it? Alright let me make my reasons for coming into this thread clear just in case there is any misunderstandings. I am here to take practical ideas from people here that I as an individual can implement. And also to provide my own ideas.

[maniac]

^^ O well!!!!! If you insist on theoretical discussion. Let's first start with defining the two ideologies. And then let us make sure we both are on the same page as to what the "spirit" and interpretation misgivings of both the ideologies are. Next, we dive in and compare India of pre 90 and post 90 and see whether it is a "failed" concept truly. What do you think we would have achieved out of it? Alright let me make my reasons for coming into this thread clear just in case there is any misunderstandings. I am here to take practical ideas from people here that I as an individual can implement. And also to provide my own ideas.

I am not trying to get into a debate with you bro....I am just giving my personal opinion. I like to keep my understanding of complex economic theroies simple a...and the concept of Re-destribution of income confuses me as there are 2 ways I interpret it All I am saying is in a perfect world, 1st interpretation The concept of capitalism shoud work in the redistribution of income as well...An enterprenur starts a venture,generates employment,generates taxes and the govt would use these taxes for the rehabilitation and uplifment of the unfortunate people. 2nd interpretation Communism:Where Govt.Regulates everything and handles the wealth of the state. I personally like interpretation 1where the failed concept of socialism is removed.

[maniac]

Just to add However rude this may sound,I would not want to give away my wealth(If I had any :)) for which I have worked my *** off. I will try to earn as much as I can legally and be a good citizen by paying my taxes and I think the Govt that I voted for needs to manage my taxes to reduce poverty.

[Vijay.Sharma]

Just to add However rude this may sound,I would not want to give away my wealth(If I had any :)) for which I have worked my *** off. I will try to earn as much as I can legally and be a good citizen by paying my taxes and I think the Govt that I voted for needs to manage my taxes to reduce poverty.

The thing is I don't really think many of us in the modern software and bpo sectors really work our asses off to earn the kinda dough that we do. And that is why I feel I can be a little more understanding of the luxuries I have and share with others. Moreover I am just being selfish in a way. You see, the more you give away something the universe ensures the more of it you have to give away. There is absolutely no denying the truth of this phenomenon although it may seem non-intuitive. I have too many experiences of all types...right from trivial ones to extremely extremely life altering ones to claim it's truth value.

[Silva]

No I think every Indian should know the answer to this question. Their are good welfare programs that help Educate people to survive in society but Indian welfare essentially means poor people getting money, or temporary government jobs in exchange for votes. When they receive government aid they are also given the symbol of the political party that gives them that aid. In India and other 3rd world countries Income redistribution is just a a massive scam.