October 26, 2020

Economic Growth and Poverty Reduction – Making Growth Work For the Poor

The question of whether economic growth results in poverty reduction is a subject of major contention today. The neo-liberal view to this issue is that development is good for the poor, and that poverty can be alleviated through economic growth. Within this essay, I argue that unless the indegent participate meaningfully in the economy and the restrictions that hinder their participation are removed, growth on its own cannot assist in poverty reduction. The state should also perform a major role in making the poor take advantage of growth by pursuing pro-poor policies. In the subsequent paragraphs, I specify what pro-poor growth is; spell out the constraints to pro-poor development and what can be done to make growth benefit the poor.

2 . Definition of concept: pro-poor growth

According to Ravillion and Datt (1991: 19), pro-poor growth can be explained as ‘growth that involves and benefits the poor᾿ In other words, pro-poor growth demands the maximum participation of marginalized groupings in all sectors. Ravallion and Datt further argue that pro-poor growth will be, inter alia, characterized by what they contact ‘deliberate transfers to the ultra bad who are not able to lift themselves away from poverty. In essence, the argument they are advancing is that the poor need help or even intervention in order for them to benefit from growth. This means that pro-poor growth is a deliberate intervention to make the poor benefit from development rather than leaving the poor to the fate of the ‘invisible᾿ hand of the marketplace. It has to do with setting an enabling environment in which the poor have the opportunity to participate meaningfully in the economy.

According to Kydd et al (2001: 10) pro-growth will occur when the following situations exist:

 Price or efficiency increases in tradable products along with high average share in the poor’s expenditure.

 Price and productivity increase in tradable products with higher labour inputs by the poor.

 Changes in technology or reduced barriers of entry, allowing the poor to engage in production of non-tradables which they could not previously engage in or even

 Gains in the significant amounts of non-poor, which lead to expanded demands for goods or services, created by the poor as a result of upstream or expenditure linkages.

It is important to note that not all growth is pro-poor. Here are some of the characteristics or aspects of growth which are not really pro-poor:

 Disparities in prosperity distribution

 Increases in non-urban poverty

 Growth that ignores agricultural development despite the role it plays in poverty alleviation

 Lack of investment in health and education and learning, which play a critical role in poverty alleviation

 Failure to mitigate inequalities and lack of programmes aimed at addressing the needs of the poor (www.seurities.com).

As Acocella (1998: 162) notes, it is critical to remember that growth does not always lead to human development. Growth may occur without any significant effect on human development, especially with regard to the indegent. Acocella further argues that genuine development or growth occurs when there is improvement in the well being of people.
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Development that does not lead to improvement in the well being of people cannot be said to be developmental in nature. Genuine growth, as Ferro et al (2002: 4) take note, should lead to human development, which entails ‘empowering the poor to lead to and benefit from this growth᾿ It really is clear that pro-poor growth will not occur automatically without the implementation of the right policies that will be instrumental within facilitating its manifestation. There are polices and practices that may hinder pro-poor growth from taking place. I examine a few in the next section.

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