Emphasis on informal economic sector for poverty alleviation
Persistence of poverty is a moral indictment of our times. Never have we seen so much wealth while so many continue to live in abject poverty. For individuals, poverty is a nightmare. It is a vicious cycle of poor health, reduced working capacity, low productivity and shortened life expectancy.
For families, poverty is a trap. It leads to inadequate schooling, low skills, insecure income, early parenthood, ill-health and an early death. For societies, poverty is a curse. It hinders growth, fuels instability, and keeps poor countries from advancing on the path to sustainable development. For all of us -- and for all these reasons -- the cost of poverty is far too high.
Today, more than one billion people in the world live on less than one dollar a day, another 2.7 billion struggle to survive on less than two dollars a day. More than 800 million people go to bed hungry every day. Every 3.6 seconds another person dies of starvation. In Bangladesh, 25 to 30 million are chronically poor and about 24% of the total population currently lives in extreme poverty.
Poverty eradication in developing countries relying on external aid is a growing contentious issue. Some think-tanks have argued that monetary aid often only serves to increase poverty and social inequality, either because it is conditioned with the implementation of harmful economic policies in the recipient countries, or because it's tied with the importing of products from the donor country over cheaper alternatives, or because foreign aid is seen to be serving the interests of the donor more than the recipient.
Critics also argue that much of the foreign aid is stolen by corrupt governments and officials and that higher aid levels erode the quality of governance. Policy becomes much more oriented toward what will get more aid money than it does towards meeting the needs of the people.
Cutbacks in health, education and other vital social services around the world have resulted from International Monetary Fund (IMF) and World Bank prescribed structural adjustment policies as condition for loans and repayment. In addition, developing nations governments are required to open their economies to compete with each other and with more powerful and established industrialised nations.
To attract investment, poor countries enter a spiraling race to the bottom to see who can provide lower standards, reduced wages and cheaper resources. This has increased poverty, inequality, and the historic unequal rules of trade.
No one deliberately opts to be a beggar by sacrificing self-dignity, honour and freedom, until forced by extreme disability. Thus, we see a rapidly growing informal economic sector globally, which deters living on others' mercy and encourages earning a livelihood, though meager, with pride. Apparently, this is the sector, which accommodates the poorest of the poor looking for self -reliance, and can be the best model for any resource-starved nation to gear up the economy and add to poverty alleviation without getting tied to external aid.
Street vendors and rickshaw pullers in Dhaka; jeepney drivers in Manila; garbage collectors in Bogota; and roadside barbers in Calcutta -- those who work on the streets or in the open air -- are the more visible occupational groups in the informal economy. The streets of cities, towns, and villages in most developing countries are lined with cobblers, garbage collectors, and vendors of vegetables, fruit, meat, fish, snack foods, and a myriad of non-perishable items ranging from locks and keys to soaps and detergents and clothing.
Less visible informal workers work in small shops and workshops. Down the crowded lanes of most cities, towns, or villages are small workshops that repair bicycles and motorcycles; recycle scrap metal; make furniture and metal parts; tan leather and stitch shoes; weave, dye, and print cloth; polish gems; sort and sell cloth, paper, and metal waste -- and more. The least visible informal workers, most of them women, sell or produce goods from their homes: embroiderers; incense-stick rollers; cigarette rollers; paper bag makers; kite makers; hair band makers; and food processors.
The ILO estimates that around 74 million young women and men are unemployed throughout the world, accounting for 41 percent of all the 180 million unemployed globally. The cost of youth unemployment in economic and social development is extremely high. It perpetuates the inter-generational cycle of poverty and is associated with high levels of crime, violence, substance abuse and the rise of political extremism.
In some countries, virtually the only paid occupation open to many young men is joining the various armed groups involved in civil conflict. For young women, the dangers of entrapment in the sex industry are rife.
We need a planned drive to elevate the informal working group within the formal economy. It is a long and complex process that requires all elements of society to work together. Informality is principally a governance issue. The absence of an appropriate framework for the governance of markets in general, and labour markets in particular, creates an environment of insecurity which prevents the accumulation of physical, financial, human and social capital. Without a strategy for the gradual extension of formal regulations to meet the needs of informal workers and enterprises in the developing world, the productive potential of the world's working poor will remain untapped, acting as a brake on growth and a source of increasing poverty and social tension.
Breaking the cycle of poverty is really about creating a new cycle of opportunity and local wealth. Skills are essential for improving productivity, incomes, and access to employment opportunities. Yet, a striking feature of most poverty reduction strategies is the absence of vocational education and training -- even though the vast majority of working people living in poverty cannot afford, and have no access to, training opportunities.
To bridge the gap, public-private partnerships are key to understanding the changing patterns of skills demands. It is impossible to build an enterprise without access to credit. Poor people all over the world have little access to formal financial services. Microfinance activities go hand in hand with entrepreneurship, enabling the poor to borrow for productive purposes, saving, and building their assets.
People living in conditions of material deprivation draw on enormous reserves of courage, ingenuity, persistence and mutual support to keep on the treadmill of survival. Many have improved their lives through their personal agency and struggles, but the progress on this front has been too slow.
With greater resource mobilisation, prioritisation of the needs of the poorest, ensuring of protection, rights and representation, appropriate education and vocational training by the government and, above all, good governance, an assault on chronic and extreme poverty is feasible today.
With so many demerits, is a mere 7% external aid in our current budget too difficult to reject? Work is the best route out of poverty and external dependence. With due emphasis to our informal economic sector, we can bring a dramatic change to individual poverty level and add to our economy the needed fuel for self-reliance and sustainable development.
Dr Zulfiquer Ahmed Amin is a specialist in Public Health Administration and Health Economics.
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