tag:theconversation.com,2011:/us/topics/poverty-reduction-mechanisms-30999/articlespoverty reduction mechanisms – The Conversation2022-02-18T08:33:59Ztag:theconversation.com,2011:article/1694692022-02-18T08:33:59Z2022-02-18T08:33:59ZUganda needs a mind shift to address poor growth and persistent inequality<figure><img src="https://images.theconversation.com/files/445878/original/file-20220211-15-10qr8jm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Uganda is heavily reliant on foreign financial aid.</span> <span class="attribution"><span class="source">Godong/Universal Images Group via Getty Images</span></span></figcaption></figure><p>Uganda <a href="https://www.greengrowthknowledge.org/sites/default/files/downloads/policy-database/UGANDA%29%20Vision%202040.pdf">aspires</a> to become an upper-middle-income country by 2040. This is <a href="https://datahelpdesk.worldbank.org/knowledgebase/articles/906519-world-bank-country-and-lending-groups">classified</a> by the World Bank as a country with Gross National Income per capita income above $4,096. That’s far and above Uganda’s latest figure of <a href="https://tradingeconomics.com/uganda/gdp-per-capita#:%7E:text=GDP%20per%20capita%20in%20Uganda%20is%20expected%20to%20reach%20897.00,according%20to%20our%20econometric%20models.">under $1,000</a>. </p>
<p>The main pillar of Uganda’s push is <a href="https://www.greengrowthknowledge.org/sites/default/files/downloads/policy-database/UGANDA%29%20Vision%202040.pdf">Vision 2040</a>. This is a strategic document drawn up in 2007. Its aim was to formalise Uganda’s aspiration to have a transformed Ugandan society “from a peasant to a modern and prosperous country in 30 years”. </p>
<p>The government also prioritised <a href="https://www.imf.org/external/NP/prsp/2000/Uga/01/#:%7E:text=Uganda's%20Poverty%20Eradication%20Action%20Plan%20(PEAP)%20is%20established%20on%20four,poor%20to%20raise%20their%20incomes">poverty eradication action plans</a> between 1997-2007. And since 2010, the <a href="https://twitter.com/NPA_UG?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor">National Planning Authority</a> has developed five-year plans. </p>
<p>Yet all is still not well with Uganda’s economy. Inequality and multidimensional poverty remain <a href="https://www.unicef.org/esa/media/6146/file/UNICEF-Uganda-Multi-dimensional-child-poverty-2020.pdf">prevalent</a>. The Gini coefficient – the measure of the degree of income inequality – has remained largely <a href="https://data.worldbank.org/indicator/SI.POV.GINI?end=2016&locations=UG&start=1989&view=chart">constant</a> since 1996. The situation has <a href="https://preventepidemics.org/wp-content/uploads/2021/11/uganda_en_20211109_1056.pdf">worsened</a> with the COVID-19 pandemic. </p>
<p>Uganda’s inequality has been aggravated by uneven land distribution and the <a href="https://www.theigc.org/wp-content/uploads/2018/02/Hoza-2018-working-paper.pdf">complex land tenure system</a>. Other factors are household sizes, disparities in access to education, inequalities in employment opportunities, urbanisation and generational poverty. All hinder equitable access and resource distribution. </p>
<p>On top of this, Uganda’s government debt levels have risen so high as to <a href="https://www.monitor.co.ug/uganda/news/national/imf-warns-government-against-excessive-borrowing-1864278">alarm</a> multilateral lending institutions. </p>
<p>This is the backdrop against which I chaired a committee of economic experts convened to <a href="https://www.researchgate.net/publication/346714981_Mindset_Shifts_for_Ownership_of_Our_National_Development_The_Case_of_Domestic_Financing_in_Uganda">examine</a> the current approach to the financing of development. After reviewing the scientific evidence we recommended the way forward.</p>
<p>In short, we underlined the view that at the core of any sustainable development agenda is the nation’s collective mindset. When citizens feel that they own the development agenda and process, they become active participants in development. That’s currently lacking. </p>
<p>Government must encourage citizens to participate in the development. It must start by viewing citizens as agents of economic growth and development, not a burden to the government. Citizen involvement and participation in the development process will translate into country ownership. Greater country ownership will, in turn, advance the country’s national development agenda.</p>
<h2>Collective mindset</h2>
<p>Historically, top-down solutions have dominated debate over sustainable development in Uganda. Multilateral aid, <a href="https://www.imf.org/external/NP/prsp/2000/Uga/01/#:%7E:text=Uganda's%20Poverty%20Eradication%20Action%20Plan%20(PEAP)%20is%20established%20on%20four,poor%20to%20raise%20their%20incomes">poverty reduction plans</a> and <a href="https://www.iser-uganda.org/images/downloads/Ugandas_COVID-19_Economic_Stimulus_Package-Will_it_deliver.pdf">economic stimulus</a> packages are just some examples. </p>
<p>One of the more underappreciated aspects of any sustainable development agenda is the nation’s collective mindset. It’s individuals, communities, and institutions who build the necessary confidence to pursue complex and challenging solutions to their problems. </p>
<p>Another pressing concern that underpins the challenge of implementation is the approach to financing sustainable development. The current approach is to use public and private sector resources to improve development indicators. </p>
<p>But there is little focus on how leaders use these resources to shift the mindset of citizens towards their greater ownership of the development process. The report defines ownership as: </p>
<blockquote>
<p>leadership and participation, at all levels and in every sector of society to achieve a unified goal, in which individuals feel part of a common development agenda.</p>
</blockquote>
<p>Our committee identified Uganda’s four main challenges. These are:</p>
<ul>
<li><p>a focus on improving development indicators to the exclusion of mindset shifts that promote greater ownership of the national development agenda, </p></li>
<li><p>a lack of clarity on how to balance broader inclusion of stakeholders with competence and expertise in financial decision-making, </p></li>
<li><p>stricter oversight of public institutions as a means of building trust not having the desired effect and </p></li>
<li><p>the stifling of financial and overall innovation by current socio-economic-political conditions. </p></li>
</ul>
<p>Our report concluded that inclusive growth approaches should be at the forefront to increase economic growth rate and reduce inequality. Specifically, Uganda’s current monetary and fiscal policies need to be revised to meet the needs of various groups of people. </p>
<p>This calls for investment in the mechanisms that provide opportunities for citizens to achieve their development aspirations. These include expanding financial inclusion – the availability and equality of opportunities to access financial services. In addition, Uganda must invest in citizen level monitoring of development initiatives. The government must also actively address negative perceptions of taxation. </p>
<p>There is evidence of government encouraging citizen <a href="https://theconversation.com/does-bottom-up-monitoring-improve-public-services-what-we-found-in-uganda-154416">level monitoring</a> of government services. And the Uganda Revenue Authority has taxpayer associations. But these efforts have thus far yielded limited results.</p>
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<strong>
Read more:
<a href="https://theconversation.com/when-industrial-policy-meets-african-political-realities-lessons-from-uganda-172528">When industrial policy meets African political realities: lessons from Uganda</a>
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<h2>Towards sustainable development</h2>
<p>Our study argues that certain conditions must be met before investments can become self-sustainable. Competitive advantage and the various ways a country creates, uses, and enhances its advantages, are critical to unleashing a self-sustaining condition of development.</p>
<p>Uganda is far from being self-sustainable in economic development. It continues to be <a href="https://data.worldbank.org/indicator/DT.ODA.ALLD.CD?locations=UG">heavily reliant on foreign aid</a>. The country received $2.1 billion in 2019, representing almost 43% of its government expenditures. This continues to <a href="https://www.bou.or.ug/bou/bouwebsite/bouwebsitecontent/publications/QuartelyStateofEconomy/publications/Quarterly-Economic-Reports/2021/Dec/SOE-report-December-2021.pdf">grow</a>. </p>
<p>There are signs that Uganda’s nascent industrial sector may be on the verge of a <a href="https://library.oapen.org/bitstream/id/df800d17-5cfe-48a1-b8f9-4a07c05cbf67/612770.pdf">breakthrough</a> in growth. But the country’s overall business competitiveness and the education system seem to be major restraints in seeing a more profound structural transformation. These stand in the way of Uganda’s ability to get to a self-sustaining condition of development.</p>
<p>To achieve this outcome, Uganda must address three key issues. </p>
<p>First, enhance the impact of domestic resources while making the economic environment more favourable to local industry. </p>
<p>Second, enhance the value of locally collected taxes on the development mindsets of citizens. </p>
<p>Third, expand access to finances at lower interest rates. This would give more citizens the perceived freedom to pursue their development aspirations.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/what-musevenis-priorities-must-be-if-uganda-is-to-become-middle-income-55253">What Museveni's priorities must be if Uganda is to become middle income</a>
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<h2>Conclusion</h2>
<p>Economic growth is essential but improving the wellbeing of the entire population cannot be overstated. This ensures that all citizens gain equally from the benefits of growth and development. This is particularly true for poor and vulnerable groups.</p>
<p>Inclusive growth facilitates equitable access to economic opportunities. It provides equal access to vital services such as education and health. It also empowers the population through financial resources and skills development.</p>
<p>There have been substantial efforts by government to expand the impact of the industrial and manufacturing sectors. But they have seen <a href="https://www.afdb.org/fileadmin/uploads/afdb/Documents/Generic-Documents/Eastern_Africa%E2%80%99s_Manufacturing_Sector_-_Promoting_Technology_-Uganda_country_report_November_2014.pdf">limited growth</a>. In part, this reflects the lack of coherence in trade, technology and industrialisation policies. </p>
<p>The government often quite visibly courts foreign direct investment. <a href="https://theconversation.com/when-industrial-policy-meets-african-political-realities-lessons-from-uganda-172528">At the same time</a> it implements nationalistic policies. One example is <a href="https://www.pwc.com/ug/en/press-room/buy-uganda-build-uganda.html">Buy Uganda Build Uganda (BUBU)</a>. Each policy approach comes with potential benefits and drawbacks. But together, they create an environment of inconsistency and limit either’s potential benefits. </p>
<p>Inequality impedes sustainable socio-economic growth and development. And it hinders the majority of the population from participating in income-generating ventures. Persistent inequality also creates a fertile ground for political instability. This, in turn, is a threat to sustainable development.</p><img src="https://counter.theconversation.com/content/169469/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Ddumba-Ssentamu does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>It’s individuals, communities, and institutions who build the necessary confidence to pursue complex and challenging solutions to their problems.John Ddumba-Ssentamu, Professor of Economics, Makerere UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1633022021-06-27T08:47:53Z2021-06-27T08:47:53ZNigeria’s poverty profile is grim. It’s time to move beyond handouts<figure><img src="https://images.theconversation.com/files/408367/original/file-20210625-19-sa134s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Nigeria's poverty profile is embarrassing </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/two-men-riding-a-bike-get-stuck-in-the-traffic-created-by-news-photo/1127684190?adppopup=true">Luis TATO/AFP via Getty Images</a></span></figcaption></figure><p>Nigerians have been justifiably confused by conflicting poverty data presented by the Muhammadu Buhari administration and the World Bank. According to Buhari, his administration has <a href="https://www.premiumtimesng.com/news/top-news/467326-my-govt-lifted-10-5-million-nigerians-out-of-poverty-in-two-years-buhari.html">lifted</a> 10.5 million Nigerians out of poverty within the past two years. But no sooner had he made the statement than the World Bank <a href="https://dailytrust.com/w-bank-counters-fg-says-7m-nigerians-plunged-into-poverty">asserted</a> that inflation has plunged seven million Nigerians into poverty. </p>
<p>These statements might seem to be contradictory to non-economists.
But closer analysis suggests that Buhari and the World Bank are right – depending on how poverty is measured.</p>
<p>The first is income or monetary measure of poverty, what economists refer to as the ‘<a href="https://www.ilo.org/wcmsp5/groups/public/---americas/---ro-lima/---sro-port_of_spain/documents/presentation/wcms_304851.pdf">headcount index</a>’. It measures the proportion of the population that is poor based on a minimum personal income - for example $1.90 per day. This minimum amount is deemed adequate to maintain an acceptable living standard, given the cost of living in a given country. </p>
<p>Based on this measure, Buhari is right to claim that – by transferring cash to <a href="https://www.vanguardngr.com/2021/01/social-investment-programme-over-12-million-households-benefitted-from-project-in-last-5yrs-fg/">12 million households</a> during the past five years – a majority of these Nigerians have exceeded the income threshold. Therefore, they have escaped poverty. </p>
<p>The other measure is known as the <a href="https://www.un.org/en/development/desa/policy/wess/wess_dev_issues/dsp_policy_03.pdf">multidimensional poverty measure</a>. It measures poverty by income, and by the access people have to health, education and living standard indicators. These include sanitation, drinking water, electricity, and housing. It is therefore possible for someone to be regarded as non-poor under Buhari’s calculations, but poor when this measure is used. </p>
<p>This is the measure the World Bank appears to be applying. By <a href="https://blogs.worldbank.org/opendata/tackling-poverty-multiple-dimensions-proving-ground-nigeria">this measure </a> 47.3% Nigerians, or 98 million people, live in multidimensional poverty. Most of them are located in northern Nigeria. This poverty rate does not include Borno State, where insurgency has prevented data collection.</p>
<p>Aware of this, the Buhari administration has set the very ambitious goal of lifting <a href="https://www.premiumtimesng.com/news/more-news/444891-buhari-commits-to-lifting-100-million-nigerians-out-of-poverty.html">100 million Nigerians</a> out of poverty by 2030. This is a tall order, considering that another <a href="https://www.theafricareport.com/33300/pandemic-to-poverty-nigeria-in-the-post-covid-future/">five million</a> more Nigerians are expected to become poor as a result of COVID-19 in 2020. </p>
<p>The administration’s <a href="https://statehouse.gov.ng/policy/economy/national-social-investment-programme/">cash transfer programme</a> is commendable. But Buhari should turn his focus more on promoting structural transformation. This would move millions of poor Nigerians from low-productivity agricultural and informal-sector activities to high-productivity sectors such as manufacturing, agro-processing, as well as information and communication technologies.</p>
<h2>What is poverty?</h2>
<p>Poverty is an amorphous and subjective concept, which is influenced by what people consider to be more valuable in life. Those who value more money in their pocket would prefer a monetary measure of poverty. But Nigerians who care more about the healthcare, food, education, electricity, transportation, and security their money can buy would regard the World Bank’s figures as a more useful indicator. </p>
<p>Some economists have proposed the notion of a ’<a href="http://happyplanetindex.org/">Happy Planet Index</a>’ as a better measure of poverty. It measures poverty based on three indicators. These are average subjective life satisfaction, life-expectancy at birth, and ecological footprint. </p>
<p>An illiterate 80-year-old woman who lives on less than $1.90 per day but reports she has been happy all her life; lives in a small hut with no access to electricity; has never visited a hospital or seen a doctor, and consumes mainly organic products grown on her farm, would not be regarded as poor under the Happy Planet Index definition. But she would be poor under the headcount index and multidimension poverty measure. This means poverty is in the eye of the beholder. </p>
<p>Some <a href="https://d3n8a8pro7vhmx.cloudfront.net/acci/pages/145/attachments/original/1462859138/ACCI_Relief_-_Holistic_Understanding_of_Poverty.pdf?1462859138">analysts</a> perceive the stylised conceptualisations of poverty as Eurocentric. They claim that such reflect Western values and marginalise non-Western conceptions of a ‘good life’. </p>
<h2>High food prices</h2>
<p>One reason for the World Bank’s assertion that seven million Nigerians have been driven into poverty is <a href="https://www.nigerianstat.gov.ng/download/1241022">the 22% increase</a> in the price of food. Food prices <a href="https://dailytrust.com/w-bank-counters-fg-says-7m-nigerians-plunged-into-poverty">contributed</a> about 60% to Nigeria’s inflation rate of 18%. Rising food prices exacerbate poverty because it reduces the real purchasing power of households, and shifts expenditures away from essential items such as health, education and housing. </p>
<p>An average Nigerian household <a href="https://www.weforum.org/agenda/2016/12/this-map-shows-how-much-each-country-spends-on-food/">spends</a> about 56% of income on food, the highest in the world. Countries like US, UK, Canada, and Australia spend 6.4%, 8.2%, 9.1%, and 9.8%. Nigeria’s high expenditure on food implies that a slight increase in food prices would push more people into multidimensional poverty.</p>
<p>Food prices have been rising in Nigeria and pushing more people into poverty for a few reasons. First, the depreciation in the value of the Naira has resulted in steep increases in the prices of imported food items, such as rice, sugar, milk, beverages, and frozen food. The Naira has depreciated by <a href="https://www.focus-economics.com/country-indicator/nigeria/exchange-rate">about 13%</a> during the past year. </p>
<p>Second, because of Nigeria’s rapid population growth, food supply in the country may be lagging demand. Nigeria’s population has been growing by about 2.6% <a href="https://data.worldbank.org/indicator/SP.POP.GROW?locations=NG">per annum</a>, while agriculture value added has been growing <a href="https://tradingeconomics.com/nigeria/agriculture-value-added-annual-percent-growth-wb-data.html">at 2%</a>.</p>
<p>This means that agricultural output is barely keeping pace with consumption. Supply shortfalls have been exacerbated by instability, <a href="https://www.acaps.org/country/nigeria/crisis/northwest-banditry">banditry</a>, <a href="https://www.aa.com.tr/en/africa/more-than-dozen-killed-in-northeast-nigeria-boko-haram-terror-attack/2229568">terrorist attacks</a>, poor infrastructure and climate change. Also, the exodus of farmers to urban centres in search of illusive opportunities. </p>
<p>Regardless of who is right, Nigeria’s poverty profile is grim and embarrassing for a country endowed with humongous human and natural resources. The Nigerian National Bureau of Statistics <a href="https://www.reuters.com/article/us-nigeria-economy-poverty/forty-percent-of-nigerians-live-in-poverty-stats-office-idUSKBN22G19A">said</a> in 2020 that 40% or 83 million Nigerians live in poverty. Although Nigeria’s poverty profile for 2021 has not yet been released, it is <a href="https://blogs.worldbank.org/opendata/using-data-combat-ongoing-crisis-and-next-nigeria">estimated</a> that the number of poor people will increase to 90 million, or 45% of the population, in 2022. </p>
<p>If the World Bank’s income poverty threshold of $3.20 per day is used, Nigeria’s poverty rate is <a href="https://data.worldbank.org/indicator/SI.POV.NAHC?locations=NG">71%</a>. Compared to lower rates for some oil-producing developing countries like Brazil (9.1%), Mexico (6.5%), Ecuador (9.7%) and Iran (3.1%), this is grim. </p>
<p>The Nigerian National Bureau of Statistics data suggest that the number of poor Nigerians exceeds the total population of South Africa, Namibia, Botswana, Lesotho, Mauritius and Eswatini combined. </p>
<h2>What Nigeria needs</h2>
<p>Nigeria needs more industrial production, foreign and domestic investment, not just handouts. </p>
<p>There has been too much emphasis on cash transfers, and less on building the capacities of Nigerians to transition into the sectors and jobs of the future. </p>
<p>Cash transfers alone are inadequate and not pervasive enough for extricating a significant number of Nigerians from extreme poverty. Those who received cash payments under the national social investment programme risk falling back into poverty at the end of the programme. But structural transformation is more enduring, as it enables Nigerians to acquire and utilise productive capacities for permanently escaping poverty.</p><img src="https://counter.theconversation.com/content/163302/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Onyeiwu does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Nigeria needs more industrial production, foreign and domestic investment, not just handouts.Stephen Onyeiwu, Andrew Wells Robertson Professor of Economics, Allegheny CollegeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/718752017-04-25T06:24:07Z2017-04-25T06:24:07ZYes, giving money to very poor people will make their lives better — just ask Ecuador<figure><img src="https://images.theconversation.com/files/166170/original/file-20170420-20071-19s7cd0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Cash on hand helps poor families climb out of poverty. </span> <span class="attribution"><a class="source" href="https://flic.kr/p/aFAEHR">401kcalculator.org/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>Is eradicating poverty, a goal the <a href="http://www.un.org/sustainabledevelopment/sustainable-development-goals/">United Nations’ hopes to achieve</a> by 2030, actually feasible? New research out of Ecuador says yes – if governments are willing to pay for it.</p>
<p>According to a <a href="http://www.merit.unu.edu/publications/wppdf/2017/wp2017-002.pdf">United Nations University (UNU) - Merit study of Ecuador’s Human Development Bonus</a> (<em>Bono de Desarrollo Humano</em>, or BDH), direct cash transfers have definitively improved social mobility, or the ability of individuals or households to move between social strata. And it has helped poor families climb out of poverty, especially when complemented by other economic-inclusion programs. </p>
<h2>Cash on hand</h2>
<p>Ecuador’s BDH is a cash transfer given to extremely poor families each month, as long as their children are regularly attending school and health clinics. Since 2003, each beneficiary household has received US$15 every month, irrespective of household size (Ecuador uses the US dollar). The amount was increased to US$30 in 2007, US$35 in 2009, and US$50 in 2013.</p>
<p>Unlike similar programs in other Latin American countries, including <a href="http://www.worldbank.org/en/news/feature/2014/11/19/un-modelo-de-mexico-para-el-mundo">Mexico’s Prospera</a> and <a href="http://www.worldbank.org/en/news/opinion/2013/11/04/bolsa-familia-Brazil-quiet-revolution">Brazil’s Bolsa Familia</a>, where monitoring of student attendance and nutritional compliance is quite strict, in Ecuador conditionality is somewhat soft.</p>
<p>It’s well known that cash transfers positively impact access to quality health and education services, as <a href="https://www.odi.org/publications/10505-cash-transfers-what-does-evidence-say-rigorous-review-impacts-and-role-design-and-implementation">evidence from 30 developing countries</a> shows. They are also proven to improve labour supply and familial asset accumulation, strengthen social networks and stimulate local markets. </p>
<p>But the literature is scarce when it comes to the long-term effects of such transfers. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/166171/original/file-20170420-20071-m1jbjp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/166171/original/file-20170420-20071-m1jbjp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=463&fit=crop&dpr=1 600w, https://images.theconversation.com/files/166171/original/file-20170420-20071-m1jbjp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=463&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/166171/original/file-20170420-20071-m1jbjp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=463&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/166171/original/file-20170420-20071-m1jbjp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=582&fit=crop&dpr=1 754w, https://images.theconversation.com/files/166171/original/file-20170420-20071-m1jbjp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=582&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/166171/original/file-20170420-20071-m1jbjp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=582&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">For women and indigenous people in Ecuador, poverty isn’t the only barrier to mobility.</span>
<span class="attribution"><a class="source" href="https://flic.kr/p/cKsF6S">Dottie Day/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Using administrative panel data collected over ten years, the UNU-Merit <a href="http://www.merit.unu.edu/publications/wppdf/2017/wp2017-002.pdf">study</a> analysed the determinants of social mobility in Ecuador on a multivariate welfare index, reflecting the importance of different dimensions of structural poverty conditions. </p>
<p>It sought to answer such critical macro-level questions, such as does more cash, with or without conditionality, actually increase the social mobility of the poor? And does an assured basic income establish the baseline security necessary for people to feel free to pursue their goals? </p>
<p>Preliminary results were released in a January 2017 working paper co-authored by Franziska Gassmann and myself. We showed that the BDH does have a positive long-term effect on individuals and families. </p>
<p>Between 2009 and 2014, households receiving the BDH increased their welfare index – meaning that their wealth grew, as did their ability to rise through the ranks of society, in both absolute and relative terms – by between 12% and 13.6%, compared to people who did not receive the cash transfer. </p>
<p>Our finding demonstrates that the BDH improves recipients’ well-being not just temporarily, but in the longer term, thereby fostering social mobility among Ecuador’s poorest sectors.</p>
<h2>More money, less problems</h2>
<p>Our study also showed that welfare increases in keeping with higher cash transfers. A 10% higher BDH transfer amount, or an extra US$3 per month, correlates with a rise in welfare of 0.79% to 0.86%. </p>
<p>The improvement is more marked among households that received the Human Development Loan (<em>Crédito de Desarrollo Humano</em>, CDH), a variation of the BDH that pays a yearly amount of US$600 aimed at promoting productive investments. Households that received this wealth accumulation-oriented transfer have a 4% to 4.2% higher welfare index than those that receive only the BDH.</p>
<p>For economists and policymakers, our research results should confirm that cash transfers must not be seen as merely a way to ensure the minimum level of food consumption, education and access to health for society’s poorest. Rather, they are a tool for fostering longer-term social mobility. </p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/166168/original/file-20170420-20057-mcu6v0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/166168/original/file-20170420-20057-mcu6v0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/166168/original/file-20170420-20057-mcu6v0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/166168/original/file-20170420-20057-mcu6v0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/166168/original/file-20170420-20057-mcu6v0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/166168/original/file-20170420-20057-mcu6v0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/166168/original/file-20170420-20057-mcu6v0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">More money, more mobility.</span>
<span class="attribution"><a class="source" href="https://flic.kr/p/aYWfHD">401kcalculator.org/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>The finding that size matters is also noteworthy. The more money families receive, the better their outcomes. </p>
<p>Finally, social transfers such as the CDH that have the explicit objective of starting a business have an even stronger effect on absolute mobility. Thus, to enable social mobility, anti-poverty policies should be geared towards improving access to physical capital and income-generating activities (vocational training, for instance, and financial services). </p>
<p>These findings are consistent with the idea <a href="http://siteresources.worldbank.org/SOCIALPROTECTION/Resources/SP-Discussion-papers/430578-1331508552354/1203.pdf">that social safety nets</a> play a productive role in society. It also confirms our intuition about promoting productive capacities. </p>
<p>In this sense, the role of social transfers can and should be to overcome so-called “<a href="http://economictimes.indiatimes.com/definition/poverty-trap">poverty traps</a>” such as credit constraints, opportunity and transaction costs, and the non-optimal decision-making that can come from extreme scarcity. </p>
<p>To mitigate poverty traps, policy instruments should consider household composition (gender, for instance, and age) and economic vulnerabilities (such as disability and level of formal education, among other things). A cash transfer does not mean the same thing to everyone; it must be designed considering each household’s specific needs.</p>
<p>The study also confirms that governments must enact complementary policies if they hope to reduce social exclusion for society’s most vulnerable, those who struggle with more than just poverty. Laws promoting reproductive health, fostering gender equity and reducing opportunity gaps between ethnic groups or between urban and rural areas will give cash transfers like the BDH more bang for their buck.</p>
<p>The economic growth of developing nations is a necessary condition for poverty reduction, but it has never been sufficient. If correctly designed and complemented, cash transfers can have a transformative effect on society’s poorest members. They can effectively and efficiently smooth consumption, foster social mobility – and, possibly, eradicate global poverty.</p><img src="https://counter.theconversation.com/content/71875/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrés Mideros Mora does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A new study shows that conditional cash transfers have helped Ecuador’s poorest households climb out of poverty. When that money was paired with capital to invest, people fared even better.Andrés Mideros Mora, Research Fellow, United Nations UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/646522016-09-07T19:20:22Z2016-09-07T19:20:22ZWhat Brazil can teach the world about tackling child malnutrition<figure><img src="https://images.theconversation.com/files/136865/original/image-20160907-25266-1eai8hi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Child stunting in Brazil was decreased by insisting that mothers visit healthcare centres.</span> <span class="attribution"><span class="source">Reuters/Ueslei Marcelino</span></span></figcaption></figure><p>Just under a <a href="http://data.unicef.org/nutrition/malnutrition.html">quarter of the world’s five-year-olds</a> suffer from child stunting. A little more than half of all these stunted children live in Asia and more than one third in Africa. </p>
<p>Children are <a href="http://data.unicef.org/nutrition/malnutrition.html">considered stunted</a> if they are too short for their age by the time they turn five. It’s the result of poor nutrition in the first 1,000 days of a child’s life. It is irreversible and associated with impaired cognitive ability and reduced school and work performance later in life.</p>
<p>Stunting has declined in the last 24 years – from nearly 40% of all children to nearly 24%. But sub-Saharan Africa lags behind. In some regions, such as West and Central Africa, there’s an alarming increase in stunted children.</p>
<p>There are several lessons that the world can learn from Brazil about how to reduce child stunting. In the 1970s, 55% of children in the <a href="http://www.who.int/bulletin/volumes/88/4/09-069195/en/">north east of Brazil</a> were stunted. By 2006, the figure was reduced to 6%. There are two remarkable feats that Brazil has achieved. Firstly, the high rate of child stunting was <a href="http://www.scielo.br/pdf/rsp/v43n1/en_498.pdf">reduced rapidly over 10 years</a>. Secondly, the speed with which the number of stunted children has declined has been accelerating. </p>
<p>As a first step what Brazil did was to look at the underlying causes of child stunting. The main factors were inadequate access to food, inadequate care for children and women, insufficient health services and an unhealthy environment. These were the areas it set about focusing on.</p>
<h2>How Brazil did it</h2>
<p>One of the biggest policy initiatives was to focus on poverty reduction. A group of well-designed pro-poor public policies were introduced between 1995 and 2006. This involved ensuring better income distribution and increased access to services.</p>
<p>Income distribution was a key element of the policies. <a href="http://www.worldbank.org/en/news/opinion/2013/11/04/bolsa-familia-Brazil-quiet-revolution">Brazil’s income transfer programme</a> is now recognised as one of the most advanced in the world. Families with income below the poverty line receive a monthly stipend which puts them above the poverty line. Women and children in these families are required to attend primary health centres and older children must attend schools regularly. </p>
<p>The policy was designed on the premise that poverty reduction can only be achieved with a better income distribution rather than increased economic growth. At the time of the rapid decline in child stunting, Brazil’s <a href="http://www.investopedia.com/terms/g/gini-index.asp">gini coefficient</a> which measures inequality sat at <a href="http://www.mjaneross.com/inequality-in-brazil-since-1984/#prettyPhoto%5Bgallery209%5D/0/">0.60</a> (zero is perfect equality and one is perfect inequality). In the 10 years until 2006, it declined to <a href="http://www.mjaneross.com/inequality-in-brazil-since-1984/#prettyPhoto%5Bgallery209%5D/0/">0.50</a>. But economic growth at that time sat at just 1.4% per capita. It’s clear from this that the reduction in poverty was not driven by economic growth but by income distribution.</p>
<p>The main benefit of improving income distribution is that the social disparity in child stunting can be reduced rapidly. By 2006, child stunting prevalence was 6% in both the northeastern and the southeastern regions. The regional inequalities had disappeared in 10 years. The reduction in economic inequalities in child stunting was also strongly reduced. We estimated that poverty reduction contributed with <a href="http://www.scielo.br/scielo.php?pid=S0034-89102009000100005&script=sci_arttext&tlng=esja.org">22,5% of the national reduction</a>) in the prevalence of child stunting.</p>
<p>The pro-poor policies also focused on increased access to essential public services. For example, the family health programme made it possible for people to access a doctor, many of whom had never been able to. And access to antenatal care was dramatically improved. In 1996 only 37% of the poorest quintile of mothers had access to antenatal care. This was increased to 80%, substantially reducing the socioeconomic disparities in antenatal care. This was achieved with investments in primary health clinics and family health teams, particularly in poor settings. </p>
<p>Our research estimates that the health interventions accounted to a 10.4% decline in child stunting.</p>
<p>There was also a massive education drive. Big investments were made in school programmes. This included allocating federal funds to support primary education. In every city the education budget was apportioned based on the number of children who needed to go to school.</p>
<p>In addition, there was also a massive drive to ensure that mothers were able to complete their education. We estimate that this accounted for one quarter of the decline in stunting.</p>
<p>Lastly, investment was made in infrastructure to improve the environment. Water supply and sewage systems were improved. This accounted for just over <a href="http://www.scielo.br/scielo.php?pid=S0034-89102009000100005&script=sci_arttext&tlng=esja.org">5% of the decline</a> in stunting. </p>
<h2>Side-effects</h2>
<p>What we found was that pro-poor policies did not avoid a huge <a href="http://ajph.aphapublications.org/doi/abs/10.2105/AJPH.2006.099630">increase in the prevalence of obesity</a> and other nutrition related non-communicable diseases. From 2006 to 2015 there was an annual 1 percentage point increase of adults that were obese. This amounted to more than 1 million new cases of obesity per year. </p>
<p>We realised that better income distribution and increased access to essential public services are not enough to prevent the epidemics of obesity, diabetes and other nutrition related non-communicable diseases.</p>
<p>So why is there a growing burden of obesity and diabetes in Brazil? The challenge lies in the food system. Part of this has been due to changes from a food system that provides real foods to a food system that provide ultra-processed products.</p>
<p>The challenge now is to ensure that the benefits from the pro-poor policies are not eroded, but that the unintended consequences are managed.</p><img src="https://counter.theconversation.com/content/64652/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Carlos Monteiro receives research funding from FAPESP (Sao Paulo state Research Foundation) and CNPq (Federal Brazilian Agency for Research Development). </span></em></p>There are several lessons that the world can learn from Brazil about how to rapidly reduce child stunting in 10 years.Carlos Monteiro, Professor at the Department of Nutrition of the School of Public Health, Universidade de São Paulo (USP)Licensed as Creative Commons – attribution, no derivatives.