Development and Poverty - Term Paper Example

DEVELOPMENT AND POVERTY Economic development Economic Development of a country normally refers to the continuous and intensive actions of governments and its policies to endorse and improve the standard of living, economic growth and financial stability of the people of their country. This may include the human capital, infrastructure, economic and financial sustainability, health, literacy etc. In short Economic Development is actually a policy which aims of the well being and financial stability and growth of the people. “Economic development' is a term that economists, politicians, and others have used frequently in the 20th century. The concept, however, has been in existence in the West for centuries. Modernization, Westernization, and especially Industrialization are other terms people have used when discussing economic development. Although no one is sure when the concept originated, most people agree that development is closely bound up with the evolution of capitalism and the demise of feudalism.” (University of Iowa's Center for International Finance and Development) To improve the economic stability, the government of a country must aims at directing its policies in the right directions. It should endeavor to achieve some basic objectives, such as price control, increasing employment and trade opportunities. The government should strive hard to improve the civil and social infrastructure, like highways, affordable housing for its people, so that the overall economy of the country booms and its benefit is transferred to the people at grass root level. The Human Development Index (HDI) is a compound and complex guide to rank the countries of the world by their level of human development. It differentiates the countries into four categories, which are "very high human development", "high human development", "medium human development", and "low human development" countries. The Human Development Index compares the literacy rate, life expectancy, education and the standard of living for all the countries. It helps to decide whether a country is a developed, a developing or an under developed country. It can be judged from The Human Development Index id the economic policies of a country are bearing its fruits or not. Poverty The unavailability of material possession, finances and basic human need such as shelter, food etc refers to the poverty of the people of a particular country. Basic human necessities, such as food, water, shelter, education, health, nutrition etc are the responsibility of the government. But when the government fails to provide its people these facilities then the people are forced to live a life of poverty. The poverty threshold or the poverty line is the minimum level of income which is required to access these basic needs. People who are not even able to access these fundamental needs are said to be living a life below the poverty line. It is estimated that about 1.7 billion people across the globe are living their lives below the poverty line. Poverty is the worst form of violence. (Mohandas Gandhi)  There are many ways of measuring the poverty of the people of a particular region. Among them are the Gini Coefficient and the Headcount Index. The Gini Coefficient was developed by an Italian statistician Corrado Gini. It is a measure of the statistical dispersion and measures the inequality of a distribution. It tells how wealth is distributed in a particular region, or among the different classes living in the society. The Headcount Index gives the proportion of the people who are forced to live a life below the poverty line. If “p” people are considered to be living below the poverty line in a population of “n”, then the Headcount Index “H” can be calculated as H=p/n. To calculate the Headcount Index, the estimates of the individual economic condition and the poverty line of that particular region is required. Poverty in South America South America is a region of the world which has a very high poverty rate even though it is blessed with uncountable natural resources. Nearly all the countries of that continent are hit by poverty up to some extent. It is estimated that 70-75% of South America is one way or the other suffering from the effects of poverty. There are many reasons behind this but the most prominent is the lack of proper economic planning and its execution. In addition to that these countries have many internal problems which act as catalyst to the problem of poverty. But an improvement is seen in the economic growth of some of the countries in recent years. A brief overview of some of the major South American countries is discussed below. Brazil: Brazil is the largest country of South America but has a very high poverty rate. Brazil is famous for its slums in their metropolitan cities. These slums are the homes of millions of people, who are deprived of basic needs of life and are forced to live a life below the poverty line. A hunger eradication was initiated in Brazil which was aimed to provide the basic need of food to the poor people. Another anti poverty program was introduced, by the Brazilian President Luiz Inacio Lula da Silva in 2003; gives money directly to the poverty hit people so that they can pay for the education of their children. The poverty in Brazil is because of the economic inequality. In the Gini Coefficient index Brazil is ranked among the highest nations of the world. Colombia: Although Colombia has the 4th largest economy in South America, still it is a victim of extreme poverty which results in high crime rate and other social problems. The country is divided into many social bands according to the financial statuses of the people primarily because of the differences between the rich and the poor. The Gini Coefficient of the country is very high. In 2009 the country has the Gini Coefficient of 0.587; the highest in South America. The country is facing severe unemployment. About 48% of the total working force of the country gets their income from very small scale informal ways such as street vendors etc. But the recent steps and initiations taken by the Colombian Government has ensured some improvements. They have a poverty reduction strategy which primarily focuses on three segments; rural development, social & infrastructural services and equal distribution of wealth. Bolivia: Bolivia is ranked top among the poorest countries in South America. By the end of the year 2009, more than 60% of its population lives in poverty. More than 80% of the people have no access to electricity and running water while about 50% of the people have no sewage system or connections at all. This shows the extreme poverty that the Bolivian people are suffering from. The unavailability of basic infrastructure, health and education facilities to the majority of the people makes the task of economic development extremely difficult to achieve. Although the governments have recently set out economic development targets aiming to provide better health and education facilities, yet it will take some time to bear fruits. Ecuador: The oil boom during the 1970`s helped Ecuador to improve its economy and provide it stability, yet nearly 40% of its population is suffering from poverty one way or the other. It is estimated that about 1 million of the people, out of the total population of 13 million, are living a life below the poverty line, primarily in the rural areas. The malnutrition rate is comparatively high which is due to worse health care facilities. This is due to the high unemployment rate due to which the people are unable to even access proper food and shelter. Venezuela: Although the country is very rich in oil resource yet 70% of its population is poor. The agriculture and manufacturing sector of the country is declining at a rapid rate due to which the development process has suffered a severe drawback, increasing the unemployment rate. The rural population is deprived of electricity and running water and is forced to live below the poverty line. Peru: With a poverty rate of over 30%, Peru suffers from extreme low employment rate. The people of Peru have very low income jobs which act as a primary reason of living a life below the poverty line. Although the government has initiated social welfare programs but the increasing population of the country and the scarcity of resources make it a very difficult task. Chile: Chile has a much better economic condition compared to its neighboring countries, with a poverty rate of just 17%. The life expectancy rate, education rates, housing rates, better infrastructure etc, all has helped to decrease the poverty of the country. The economy of the country has shown improvements through better social welfare programs but the problem of income inequality still remains. Uruguay: Historically, Uruguay has been on the better side in matters of its economy. Its poverty rate has always been on the lower side, but from 1960s until the mid 1980s the country suffered from high inflation and low economic growth rate. However, the poverty declined immensely from 1986-1999, from 46% to 15%. The rate of absolute poverty is just 3% in Uruguay, the lowest in the region. Paraguay: The national surveys show that only 20% of the population is suffering from poverty. But the unavailability of standard social welfare programs, migration and health facilities are acting as catalyst in increasing the poverty of the country and quick and result based governmental actions are urgently required. Argentina: With a population of 40.4 millions, the economy of Argentina is the 3rd largest in the region. The country is classified as of upper middle income. The country has very high natural resources and a good number of Argentineans, about 97.7%, are literate. The country has export oriented agriculture and a very expanded and spread out industrial infrastructure. At present the GNI of Argentina is 343.636 billion US$ while the GDP rests at 370.3 US$. But these good statistics do not mean that the country does not have poverty. The uneven economic performance over the years, harsh recessions and uneven distribution of wealth has resulted in the increase in poverty. Early in the twentieth century Argentina was regarded as one of the richest country of the world but now it is just regarded as an upper middle income nation. But experts believe that it still has the potential to rise and is considered as an emerging economy of the region. At present the HDI of Argentina is 0.889 which ranks it at number 45. Argentina’s economy gave a great fifteen year boost after 1958 which ranked it among the richest of nations. But its economy had a fall down during the military dictatorship from 1976-1983. This was due to the corrupt and unorganized policies of the chief economist of that time, Jose Alfredo Martinez de Hoz. His policies increased the debts on the country. It was the time when over 400,000 companies of varying sizes were destroyed and went bankrupt by the year 1982. The economic steps taken from 1983-2001 went unsuccessful to do any good. Serious issues like tax avoidance by the elite class, payments of heavy debts and their interests, and the shifting of capital severely damaged the economic situation. In order to counter these issues, economist Domingo Cavallo took some steps and pegged the Argentinean peso to the U.S dollar in the year 1991. He along with his team then went on board on a path of privatization and trade liberalization. It was the time when the GDP grew by one third in years and the inflation has a fall down. But good days were not to last too long and the crumbling economy finally collapsed in 2001. By the year 2002 Argentina had defaulted, its GDP reduced immensely, unemployment at its peak and the Argentinean peso devalued for about 70%. The Government was left with no money at all. Technically the country went bankrupt. The Argentine debt restructuring offers started its debt payments of its $100 billion in 2005 and 2010. Increase in exports and the expansion based economics policies gave a boost to the GDP from 2003 and onwards. Jobs and better employment has been provided since then. Although the country got hit by the global recession from 2007-2010, but the GDP was maintained at 8.5% in 2010. The Government of Argentina which took the office in 2003 focused its policies in the rebuilding of the economic structure of the country. With the cooperation of the U.N goals were set up and the government adapted the Millennium Development Goals (MDGs) which reflected the needs of the country. These goals include the eradication of poverty, primary education of all, promotion of women rights and equality, improvement of child and mother’s health and fight against HIV and AIDS, and all those epidemic diseases which pose threat to the poor people in particular. To ensure the fulfillment of these goals, the targets are monitored by the National Council for Coordination of Social Policies that reports directly to the President. Many provinces have localized the MDGs to transfer its fruits to the grass root level. Conclusion: South America is regarded as the most unequal region of the world. The income of the poorest 20% of the people of the continent makes just 3.5% of the total income. “The country with least inequality of income in Latin America has the highest inequality of any Organization for Economic Cooperation and Development, OECD, country member, including all the east of Europe.” (World Urban Forum) Brazil is ranked top with 10% of the richest people holding a total of 50.6% of its wealth. It is followed by Argentina with 41.7% of wealth going to the richest 10%. The equation is similar in Colombia, where 49.1% is taken up by the top 10%, in Chile it is 42.5% while in Venezuela the figure is 36.8%. Rich in natural resource, the continent has a huge potential to grow economically and the countries have immense opportunities to raise the standard of living of their people. But this all depends upon better financial and economic policies which are more targets oriented. The stability in the political system is very much needed in these countries, only then they can achieve the hard economic targets. Reference: Sen, A. Development: Which Way Now? Economic Journal, Vol. 93 Issue 372. Pp.745-762. 1983 World Bank. World development indicator. 2003 World Bank. Argentina: from insolvency to growth. 1993 World Bank. The invisible poor: a portrait of rural poverty in Argentina. 2010 F. Abbott, Lewis. Theories Of Industrial Modernization & Enterprise Development: A Review. ISR/Google Books, revised 2nd edition 2003, pages 1–2. Project Mercy. Poverty in South America. http://www.projectmercy.com/southamerica.html Luongo, Michael. O'Malley, Charlie. Pashby, Christie. Frommer's Argentina. 2011 Pollitt, Ernesto. Halpern, Robert. Eskenasy, Patricia. Ford Foundation. Poverty and malnutrition in Latin America:  early childhood intervention programs : a report to the Ford Foundation. 1980 M. Cypher, James. L. Dietz, James. The process of economic development. 2008 Read More