Growth vs. State Intervention

Growth vs. State Intervention: Comparative Perspective in China, India, Brazil

A 2011 World Bank research article, “A Comparative Perspective on Poverty Reduction in Brazil, China, and India,” looked at the three nations’ strategies and their relative challenges and successes. During their reform periods, all three have reduced their poverty rates, but through a different mix of approaches. The report used a common poverty line of $1.25 per person, per day, at purchasing parity power for consumption in 2005. Using that metric and evaluating the period between 1981 and 2005, the poverty rate in China dropped from 84% to 16%; India from 60% to 42%; and Brazil from 17% to 8%. The report sketches an overall scorecard of the countries on the two basic dimensions of pro-poor growth and pro-poor policy intervention: “China clearly scores well on the pro-poor growth side of the card, but neither Brazil nor India do; in Brazil’s case for lack of growth and in India’s case for lack of poverty-reducing growth. Brazil scores well on the social policies side, but China and India do not; in China’s case progress has been slow in implementing new social policies more relevant to the new market economy (despite historical advantages in this area, inherited from the past regime) and in India’s case the bigger problems are the extent of capture of the many existing policies by non-poor groups and the weak capabilities of the state for delivering better basic public services.

Welfare

Aid in its simplest form is a basic income grant, a form of social security periodically providing citizens with money. In pilot projects in Namibia, where such a program pays just $13 a month, people were able to pay tuition fees, raising the proportion of children going to school by 92%, child malnutrition rates fell from 42% to 10% and economic activity grew 10%. Aid could also be rewarded based on doing certain requirements. Conditional Cash Transfers, widely credited as a successful anti-poverty program, is based on actions such as enrolling children in school or receiving vaccinations. In Mexico, for example, the country with the largest such program, dropout rates of 16–19 year olds in rural area dropped by 20% and children gained half an inch in height. Initial fears that the program would encourage families to stay at home rather than work to collect benefits have proven to be unfounded. Instead, there is less excuse for neglectful behavior as, for example, children are prevented from begging on the streets instead of going to school because it could result in suspension from the program.

Welfare states have an effect on poverty reduction. Currently modern, expansive welfare states that ensure economic opportunity, independence and security in a near universal manner are still the exclusive domain of the developed nations. commonly constituting at least 20% of GDP, with the largest Scandinavian welfare states constituting over 40% of GDP. These modern welfare states, which largely arose in the late 19th and early 20th centuries, seeing their greatest expansion in the mid 20th century, and have proven themselves highly effective in reducing relative as well as absolute poverty in all analyzed high-income OECD countries.

Philosopher Thomas Pogge is a supporter of gathering funds for the poor by using a sort of Global Resources Dividend.

Development aid

A major proportion of aid from donor nations is ‘tied’, mandating that a receiving nation buy products originating only from the donor country. This can be harmful economically. For example, Eritrea is forced to spend aid money on foreign goods and services to build a network of railways even though it is cheaper to use local expertise and resources. Money from the United States to fight AIDS requires it be spent on U.S brand name drugs that can cost up to $15,000 a year compared to $350 a year for generics from other countries. Only Norway, Denmark, Netherlands and Britain have stopped tying their aid.

Some think tanks and NGOs have argued that Western monetary aid often only serves to increase poverty and social inequality, either because it is conditioned with the implementation of harmful economic policies in the recipient countries, or because it's tied with the importing of products from the donor country over cheaper alternatives. Sometimes foreign aid is seen to be serving the interests of the donor more than the recipient, and critics also argue that some of the foreign aid is stolen by corrupt governments and officials, and that higher aid levels erode the quality of governance. Policy becomes much more oriented toward what will get more aid money than it does towards meeting the needs of the people. Problems with the aid system and not aid itself are that the aid is excessively directed towards the salaries of consultants from donor countries, the aid is not spread properly, neglecting vital, less publicized area such as agriculture, and the aid is not properly coordinated among donors, leading to a plethora of disconnected projects rather than unified strategies.

Supporters of aid argue that these problems may be solved with better auditing of how the aid is used. Immunization campaigns for children, such as against polio, diphtheria and measles have save millions of lives.Aid from non-governmental organizations may be more effective than governmental aid; this may be because it is better at reaching the poor and better controlled at the grassroots level.As a point of comparison, the annual world military spending is over $1 trillion.