Columns - The Sunday Times Economic Analysis

Current imperatives in understanding the multi dimensional issues of poverty

By Nimal Sanderatne

Poverty is the most intractable problem. Despite economic growth poverty persists at an unacceptable level in many countries and has many manifestations. Overall national statistics do not capture the full range and variety of poverty conditions that are prevalent as poverty is a multifaceted and multidimensional issue. Even though income poverty is important, there are many other facets of poverty that are not captured by the levels of income alone. Economic growth alone will not reduce poverty: good governance, the nature of economic strategies, public expenditure patterns and structural reforms are needed to make a serious dent in poverty.

These are some of the serious concerns in poverty that have been explored by CEPA in its ten years of research that have generated fresh perspectives on poverty.

These issues and the impact of an ageing population on poverty and the contribution that sports could make to ameliorate the poor are among the subjects that were discussed at a Colloquium organised by the Centre for Poverty Analysis (CEPA) on June30-July 1 in Colombo. The CEPA Colloquium on Current Imperatives in Understanding Poverty had a wide participation of other research institutes in the country and in the region. The discussions ranged from macroeconomic issues to regional, urban and village studies and the experiences of other South Asian countries.

Macroeconomic dilemma

The paradox of high rates of economic growth co-existing with high rates of poverty has been a contradiction in the economic development of many countries. Drawing on the experience of a large number of countries Simon Kutznets developed the theory that the initial thrusts in economic growth led to a poor distribution of incomes with the rich getting richer and the poor getting poorer in relative terms. Eventually, the gains in economic development, it was argued, would trickle down to the poor and a more egalitarian society would evolve. This has been the experience of European countries whose poverty is at very low levels.

The East and South East Asian experience was by and large different. These countries were able to reduce poverty in tandem with economic growth. There are many reasons for this. Land tenure reforms and conscious interventionist economic policies that benefitted the poor were implemented at the same time as the economy grew. The fast track economic growth provided increasing urban and industrial employment and the government’s fiscal capacity enabled expenditures that benefitted the poor. The experience of our neighbour India is quite different. The vast strides in economic growth that it has achieved have not led to a more equitable distribution of incomes. In fact the numbers in poverty have grown as the rich grew in an exponential manner. Nearly one half of the population is estimated to be poor, literacy levels though rising are still inadequate and life expectancy relatively low.

Economists have divergent views on economic growth and poverty. One school of thought contends that economic growth alone is inadequate to achieve human development. Since the objective of economic development is to improve social and economic conditions, the process of economic development must ensure improvements in life expectancy, health conditions, literacy and education of a country. Economic growth, however important, is not an end in itself but a means to the achievement of these social goals. Economic growth is a necessary condition but will not by itself improve the living conditions of the poor.
Other economists take a different view. They are of the view that rapid strides in economic development would in the fullness of time reduce India’s poverty. Policies to reduce poverty are not only good economics but good politics. Impliedly governments would therefore endeavour to alleviate poverty and economic growth would give the government the capacity to address the issues in poverty. However India’s experience in the last decade is one of poverty growing in tandem with economic growth. India has put in place many poverty interventionist programmes whose efficacy has been limited.

Sri Lanka’s experience

At the very outset of the Colloquium, the question was raised as to why Sri Lanka that commenced important welfare measures, such as free health, free education and food subsidies even before independence, has not achieved a better level of poverty reduction. The curtailment of expenditures on education and health were among the reasons adduced. These welfare measures have been at the core of the country’s initial impressive gains in human development indicators. Increasing rates of literacy and life expectancy, reduction of maternal and infant mortality rates were impressive for a country at Sri Lanka’s level of per capita incomes.

However in the latter decades the momentum could not be maintained owing to the slow rate of economic growth, different emphasis in economic policies and reduced expenditure on education, health and other social welfare measures due to the fiscal stringency caused by other expenditures, such as the war. Consequently the promise held out by the initial success of achieving much higher levels of human development and much lesser level of poverty have not been achieved. While the country’s human development indicators have continued to improve, those of other countries have improved much more and Sri Lanka’s relative position has declined.

Although the latest statistics on poverty released by the Department of Census and Statistics disclose a fall in the head count in poverty in the Island and a drastic reduction in poverty on the estates, there was scepticism about the comparability of these statistics with those of previous surveys. More important, the Colloquium brought out the multidimensional aspects of poverty in its presentations on horizontal poverty around the country, as well as in other South Asian countries. It was also pointed out that inflation erodes the real incomes of the poor seriously and natural disasters of floods, tsunami and drought affect the poor adversely. The impact of the war was horrendous and the rehabilitation of the displaced poor, not only in housing but in adequate livelihoods would constitute a daunting challenge in the post war era.

Ageing and poverty

An emerging important dimension of poverty that was discussed was the impact of the country’s rapidly ageing population on the poor. The economic and social dimensions of ageing on poverty requires to be addressed immediately as the situation is manageable in the next 7 years that is described as the “demographic bonus”, when the ageing of the population is slow and the dependency ratio modest. No doubt the ageing of the population will bring about difficulties, especially to the poor whose retirement benefits are inadequate or non-existent.

The need for improved definitions of the elderly and services for the elderly will be important in devising policies. The awareness of the government of these issues has been brought out in the National Charter for Senior Citizens and National Policy for Senior Citizens of the Ministry of Social Services and Social Welfare. However funds allocated for the many welfare programmes are inadequate and health services catering to the elderly are lacking. No better example could have been enlightening than the fact that there is no specialization in geriatrics in the country’s medical service.


The question that arises is whether the issue of poverty reduction in all its many dimensions is not fundamentally an issue in good governance. Addressing poverty issues requires the correct priorities in government spending to lessen the burdens that poverty bestows. The use of scarce resources in a socially desirable manner is at the core of the poverty issue. It is not merely economic growth that would lead to a reduction of poverty and the improvements in the livelihoods and human conditions of the people, but the processes and emphasis on economic and social policies and the structural reforms that are at the core of the poverty predicament. It is the lack of entitlements that cause poverty. A better and more egalitarian distribution of production resources are a fundamental requisite to achieve a low level of poverty. Economic growth and structural reforms are required to make a serious dent in poverty reduction.

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