We can tackle the oncoming problem of poverty not by squeezing money out of what we already have but rather by increasing sustainably the size of the national cake
The two major political blocs have yet to publish their detailed programs. Both have indicated however that one of their priorities will be to fight poverty. What nobler objective can there be than to lift up destitute people from deprivation and misery? The idea carries a lot of appeal.
This is not the first time the idea of putting poverty behind has been advocated by political parties. In the past, numerous specially designed programs were launched to tackle the problem. The fact that people do not live in the state of utter destitution that prevailed in days gone by is testimony to the fact that those programs have served their purpose.
Even as things have improved drastically compared to those days, newer programs keep coming up, aiming to make a dent on poverty. This means that poverty must be having a hard back, making it difficult to tackle it over such a long period.
Had the welfare state been scrapped, as has been tried on several occasions in our recent economic history, poverty would have been more solidly entrenched. In other words, had it not been public policy to offer free primary and secondary education, free health care, non-contributory basic retirement pension to all above age 60, etc., the incidence of poverty would have been higher in the population.
The government’s report of 2013 on our compliance with the Millennium Development Goals (MDG) states that we don’t have extreme poverty in Mauritius, i.e., a state in which distinct persons live on less than a dollar a day over one decade. However, the report goes on to state that there is relative poverty (people not having the means to maintain the average standard of living of the country). It must be this kind of poverty that the two political blocs would be targeting to address as one of their objectives in their political programs.
The MDG report goes on to state that between 2001-02 and 2012, households in relative poverty in Mauritius increased from 7.7% of the population to 9.4%, i.e., these people were unable to catch up with others. Inequality increased as well. The share of total income of the 20% of the population at the lower end of incomes declined over the same period from 6.4% of total income to 5.4%, in all, these 20% got one fifth of the country’s total income. By contrast, the top 20% increased their share of total income to 47.4% from 45.6%, almost half the total.
This situation is mirrored in the country’s Gini Coefficient which deteriorated from 0.388 in 2006-07 to 0.413 in 2012. A Gini Coefficient of 0 implies all incomes in the country are equally shared (perfect equality) among income earners whereas when it is at 1, one person alone gets all the incomes (perfect inequality). An upward movement in the Coefficient from a lower number (0.388) to a higher (0.413) implies an accentuation of inequality in society. If, on top of that, those at the lower end receive a paltry sum as income, their plight could be severe.
In practical terms, a situation such as this could translate itself in several ways. Those at the bottom end may not be able to afford decent shelter, clothing and food, let alone sanitation and safe and reliable water supply. They may not even have the means to climb out of their poverty over more than one generation, with an attendant risk that they may get even more impoverished. Pressure of demand from those who have enriched themselves enormously in the process causes prices of land, housing and even day-to-day goods and services to soar beyond the reach of those with a worsening economic fate. It is a real life situation that has manifested itself in many countries, principally in Asia and Africa. Uprisings in the Middle East and other places sprang up due to such discrepancies.
Action is necessary to redress such a situation and this no doubt explains why the two major political blocs over here are focusing on the issue. It could entail a redistribution of incomes through a program of taxes and subsidies across different segments of the population.
Policy makers within a country are however at the beck and call of important economic lobbies and what they end up doing in this pursuit is to get the redistribution money from out of the pockets of those who have only recently managed to get out of poverty, leaving intact those at the top. It looks like a reversal of past policies that had managed to raise a small cluster of people from poor to middle class, aspiring perhaps to become part of the elite someday. This is how the economic boom which preceded the global economic crisis of 2008 was characterized by huge and growing disparities between the incomes of the well-off (becoming better-off) and the worse-off (becoming even more worse-off).
But there is a better remedy for the situation. This is done through economic development, i.e., by increasing the scope of production and size of international trade of a country. Countries which have followed this route target key centres of industrialization as a strategy for development. They identify areas in which to encourage industrial investment. We have ourselves done this in the 1970s and 1980s when nobody had time for sectionalisation of the population, given the momentum of the economic uptake.
Countries which have a more significant track record in this respect include Japan, China, South Korea, Hong Kong, Taiwan, Singapore, Penang Island in Malaysia, Turkey, some post-communist Eastern European countries, Mexico, United Arab Emirates, South Africa nearer home and perhaps also Brazil in Latin America. They employed low cost local labour, available international technology and created the conducive environment to attract a torrent of international investments in their countries’ real production sectors, using domestic savings by the same token to change drastically their critical production mass. They did resort to redistribution to prevent people slipping into poverty, but out of a much higher average national income.
We started going on this road of economic development at one time but could not sustain the effort to the extent required. We neglected certain promising areas such as IT development based on our own manpower resources. We did not challenge our industrial effort to the extent necessary to be able to join the emerging new performing economies of the world. We may still catch up and give ourselves the hope that we can tackle the oncoming problem of poverty not by squeezing money out of what we already have but rather by increasing sustainably the size of the national cake.
* Published in print edition on 10 October 2014