Poverty: Comparative Analysis of China and India

University of National and world economy

economic sociology paper

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Poverty:

Comparative Analysis of China and India

WRITTEN BY mANOL MANOLOV
ECONOMICS IN ENGLISH 131
FACULTY No: 29114055

TABLE OF CONTENTS:

1. Introduction to ‘poverty’ in the world

• Causes of poverty • Effects of poverty • Global analysis of world poverty • Analysis of East-Asian region

2. Analysis of poverty in India

• Overview • Historical trend • Urban poverty • Rural poverty • Indian economic development

3. Analysis of poverty in China

• Overview • Historical background • Analysis of characteristics of China’s poverty • Recent economic growth in China • Connection between the Economic growth and Poverty reduction

4. International cooperation for reducing poverty

1. Introduction to ‘poverty’ in the world

According to the World Bank (2000), “poverty is pronounced deprivation in well-being”. This of course begs the question of what is meant by well-being.

One approach is to think of one’s well-being as the command over commodities in general, so people are better off if they have a greater command over resources. In this view, the main focus is on whether households or individuals have enough resources to meet their needs. Typically poverty is then measured by comparing an individual’s income or consumption with some defined threshold below which they are considered to be poor. This is the most conventional view - poverty is seen largely in monetary terms. This also is the starting point for most analyses of poverty.

A second approach to well-being (and hence poverty) is to ask whether people are able to obtain a specific type of consumption good: do they have enough food? Or shelter? Or health care? Or education? In this view the analyst would need to go beyond the more traditional monetary measures of poverty and analyze an individual’s deprivation of education, nutrition, clothing, shelter etc.

Perhaps the broadest approach to well-being (and poverty) is the one articulated by Amartya Sen (1987), who argues that well-being comes from a “capability’’ to function in society. Thus poverty arises when people lack key capabilities, and so have inadequate income or education, or poor health, or insecurity, or low self confidence, or a sense of powerlessness, or the absence of rights such as freedom of speech. Viewed in this way, poverty is a multi-dimensional phenomenon, and less amenable to simple solutions.

Around the world, in rich or poor nations, poverty has always been present. In most nations today, inequality—the gap between the rich and the poor—is quite high and often widening. The causes are numerous, including a lack of individual responsibility, bad government policy, exploitation by people and businesses with power and influence, or some combination of these and other factors. Many feel that high levels of inequality will affect social cohesion and lead to problems such as increasing crime and violence.

• Causes of poverty

Poverty is caused by two basic things: scarcity of basic needs and barriers to opportunities.

In the past poverty had been mostly accepted as inevitable as economies produced little while populations grew almost as fast making wealth scarce. Food shortages were common before the appearance of modern agricultural technology. However, nowadays there are well enough places that still lack such technology, leading to poverty rates being retained or even raised. On the other hand, intensive farming often leads to a vicious cycle of exhaustion of soil fertility and decline of agricultural yields. Approximately 40% of the world's agricultural land is seriously degraded.

Health care can be widely unavailable too. The loss of health care workers emigrating from impoverished countries has a damaging effect. For example, an estimated 100,000 Philippine nurses emigrated between 1994 and 2006. There are more Ethiopian doctors in Chicago than there are in Ethiopia.

There are also a lot of factors of living, closely connected with poverty. Colonial history, centralization of power, corruption, warfare, environmental degradation and social inequality are factors on which the development of a nation or state is fully dependent. Moreover, warfare, unproductive agricultural cycles, drought and flooding and all kinds of natural disasters are factors which directly lead to poverty of any kind. Such factors are known as acute causes of poverty.

• Effects of poverty

Poor health and education severely affects productivity. Inadequate nutrition in childhood undermines the ability of individuals to develop their full capabilities.

The lack of economic freedom inhibits entrepreneurship among the poor. New enterprises and foreign investment can be driven away by the results of inefficient institutions, notably corruption, weak rule of law and excessive bureaucratic burdens.

In reality, behind the increasing interconnectedness promised by globalization are global decisions, policies, and practices. These are typically influenced, driven, or formulated by the rich and powerful. These can be leaders of rich countries or other global actors such as multinational corporations, institutions, and influential people. In the face of such enormous external influence, the governments of poor nations and their people are often powerless. As a result, in the global context, a few get wealthy while the majority struggle.

• global analysis on world poverty

The world has the wealth and means to end poverty. Almost half the world — over three billion people — live on less than $2.50 a day And over 11 million children will die from poverty-related illness this year alone. This is the reality – the difference between the “developing” and “developed” countries is huge.

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In 2005, the wealthiest 20% of the world accounted for 76.6% of total private consumption. The poorest fifth just 1.5%:

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Relatively to the graph above, the poorest 40 percent of the world’s population accounts for 5 percent of global income. The richest 20 percent account for three-quarters of world income.

Nearly a billion people entered the 21st century unable to read a book or sign their names. Less than one per cent of what the world spent every year on weapons was needed to put every child into school by the year 2000 and yet it didn’t happen. Of 2.2 billion children in the world 1 billion are in poverty (every second child). For the 2 billion children in the developing world there are 640 million without adequate shelter (1 in 3), 400 million with no access to safe water (1 in 5) and 270 million with no access to health service (1 in 7). A lot more facts can be displayed in order to portray the tremendous ratio of poverty and well-being in the world today.

• Analysis of East-Asian region

The role of social policy and particularly social security in addressing the ongoing challenge of poverty in East Asia is huge despite the region’s spectacular experience of economic growth in decent decades. The East Asian miracle resulted over the last four decades in a transformation of the region’s traditional agrarian economies and significant increases in standards of living for many ordinary people. Even though it was given little attention, poverty has remained an ongoing problem. The problem became particularly evident however with the Asian financial crisis of 1997 when many low income and middle class workers became unemployed. As a result of this crisis, the need for effective social policies and social security programs were recognized. The idea that economic growth would solve the problem of poverty was increasingly challenged. Even in China today, where rapid growth has created new employment opportunities and the promise of prosperity for many, the government has recognized that the problem of poverty cannot be addressed only through economic growth but that comprehensive social policies must be formulated, and this includes the development of an effective security system.

It is claimed that the East Asian nations had not only solved the problem of poverty but were likely to maintain high standards of living for their citizens for many years to come. There were many references to what was called the “Asian Century” at the 2008 World Economic Forum at Davos which implied that the East Asian nations had not only achieved economic success but were likely to dominate global trade and finance in the future. This notion perpetuates the idea that economic growth is the solution to the poverty problem.

However, the seriousness of the problem of poverty is seldom missed by journalists and the main stress is put on the vast economic development. While the incidence of absolute poverty associated with subsistence agriculture and urban, informal economic activities has declined dramatically, this does not mean that poverty and relative deprivation have been eradicated. Indeed, it became painfully clear in the late 1990s that the East Asian economies were vulnerable to global economic shocks and ill prepared to address the challenge of rising unemployment, homelessness and other social ills.

Analysis of the World Bank show, that in recent years poverty in the region has decreased from 2% in Korea up to more than 10% in Malaysia. Poverty declines in China and India have been particularly sizable.

The table below shows the proportion of population below the poverty line of 1$ per day:

|Country |1990 |Latest Year |
|People’s Republic of China |33% |10.8% (2004) |
|Mongolia |27.3% |11% (2002) |
|Indonesia |20.6% |4% (2005) |
|Malaysia |