Beneath The Surface
Impact of recent crisis on poverty
VARIOUS estimates on poverty are now available. The consensus conclusion is that the recent economic crisis has thrown more people under the poverty line than before. One multi-lateral donor agency estimates that an additional 4 million people went below the poverty line due to recent turmoil. Some economists put the figure at 10-20 million.
Respecting all such attempts, we thought it wise to submit a different scenario drawn upon a Brac-survey of repeated sample households for 1988, 2000, 2004, and 2008. Since the estimates are derived from panel data, we claim that the estimates are likely to be more accurate. Besides, in our analysis, we shall also draw upon a recent presentation in an international seminar by Dr. Mahabub Hossain on the Pathways out of Poverty.
At the very beginning, the readers are requested to remember few things. It is not true that economic crisis always cripples poor households at large. Some lucky ones could withstand the onslaught by ways of higher wages, accessing social and financial capital in and around, renting-in land or banking on government dolls at their doorsteps, etc.
The unlucky ones would face the fire in the absence of these factors. Second, roughly one-third of rural households always remain poor (chronically poor) no matter whether the sun rises or sets. About half of the rural households tend to remain non-poor through thick and thin. Therefore, the movement in and out of poverty relates to one-fifth of households. And finally, it would be erroneous perhaps to attribute the increase in incidence of poverty only to recent international price hike and domestic disturbances.
We shall skip poverty trend for 1988-2004, because all available documents relating to incidence of income poverty confirm that poverty has declined over this period. They differ on the degree of decline in poverty levels, but agree on the positive outcome.
The reasons for a decline could be comfortable rates of economic growth, expansion of communication and credit networks in rural areas, downward movement of rice prices, improvement in schooling conditions, etc.
The "economic holocaust" in fact took place during the period 2004-2008 since we observe that poverty level picked up since 2004. For example, our estimates show that head-count index shows that 47% of the rural households remained poor in 2007 compared to 44% in 2004. This means that 2 million more households (approximately 10 million more people) went below the poverty line during this period.
To confirm our conclusions, we need to note that during 2004-2008, 19% of households became poor from a non-poor situation (descent) while 14% moved from poor to non-poor condition (ascent). This also shows that roughly 5-6% of rural households experienced a negative shift in poverty status.
But the "holocaust" hovered around 2006 and 2007 with soaring prices of rice and energy, two consecutive attacks from natural calamities, infringements on formal and informal sectors in the name of anti-corruption and cleanliness, political instability, etc.
How many have fallen into poverty between 2006 and 2007 due to these factors? It is very difficult to answer this question since we do not have data separately for 2006. However, we had a question to the respondents with respect to economic condition over the last one year (2006-07): improved, same, or deteriorated?
We observe that 60% of the poor reported that their economic conditions deteriorated for the last year, while all of them reported that economic conditions improved between 1988-2004. Besides, the major reasons for deterioration were thought to be steep rise in rice prices and natural shocks both of which haunted the households between 2006 and 2007.
By and large, we can possibly conclude that 10 million people were added to the vast pool of already existing poor of which 6 million joined last year and the other 4 million during 2004-2006. In other words, the national and international crises of 2006-07 pushed an additional 6 million people into poverty in 2007 while another 4 million had already been added in the previous two years.
Mahabub Hossain seems to believe that traditional tools to poverty reduction are becoming "unsuccessful" and bringing only "peripheral" changes. For example, occupational mobility matters very little these days since low-productive non-farm sector could hardly sustain livelihoods. Nor a shift from agricultural labour to farming serves the soup to the poor in the presence of low return from tenancy.
Therefore, the "successful" strategies should embrace, inter alia, geographic mobility, increase in earning members for the households, increase in education for earning members, and increased use of MV rice. The final factor is access to electricity that has tremendous effect on poverty reduction.
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