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Sunday, April 3, 2005

Poor are getting better

I have always felt that while our income is certainly important, that is not all.

If we do not have a minimum income, our life can become hell. So, we must make sure that our income gradually rises. But to give income an importance over many other essential parameters of human life is not just wrong but dangerous.

There is a saying: expenditure rises to match the income (unless of course we have a very tight control over our purse.) So, high income need not necessarily be enough income. And, conversely, low income can sometimes be enough income.

I have noticed people who have high income haggling unnecessarily over small amounts of money (which they anyway have to part with). I haven't really understood why. On the contrary, people with lesser income, have their lives better planned and have money to spare.

This is a very important contemporary social issue. We have been seeing a trend wherein youngsters are sacrificing their genuine and innate interest for jobs like those in call centres just to earn a high income. Swamped by sudden wealth, they drift rudderless, searching for an anchor -- which actually is their innate interest in a particular work, which they had dumped for money.

As a consequence, today many youngsters are being counselled to give importance not just to income, but to job satisfaction as well.

Reason.com has a very interesting article: "The Poor May Not Be Getting Richer; But they are living longer, eating better, and learning to read". It's not directly related to my proposition. It looks at things from the poors' perspective. The article by Ronald Bailey is based on another article by World Bank economist Charles Kenny.

The article says, "Even though some of the world's poorest people are not earning much more than they were two generations ago, they're still living much better than they were. In fact, many quality of life indicators are converging toward levels found in the richer countries." Two countries he has picked are Britain and India.

"Incomes have been falling since 1950 in several countries... yet life expectancy, literacy rates and the percentage of kids in primary school have still gone up." One of the reasons for this is... "improvements (in life style have) become cheaper over time."

Read the article here

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The Poor May Not Be Getting Richer
But they are living longer, eating better, and learning to read

Ronald Bailey

Wealthier is healthier—and more educated, more equal for women, more electrified, automotive, and computer-literate.

So the conventional wisdom in development economics has long been that to boost the prospects of the world's poor, one needs to boost their incomes. This is still true, but as World Bank economist Charles Kenny points out in a provocative article titled "Why Are We Worried About Income? Nearly Everything that Matters is Converging," income growth does not tell the full story.

Even though some of the world's poorest people are not earning much more than they were two generations ago, they're still living much better than they were. In fact, many quality of life indicators are converging toward levels found in the richer countries.

To illustrate this point, Kenny compares what has happened to life expectancy in Britain and India. The average age span in both countries was 24 years in the 14th century, but Britain then began a gradual rise, and by 1931 its life expectancy was 60.8 years, compared to just 26.8 for its colony. Since then, though, the numbers have begun to converge—by 1999, Indians lived on average to 63, while Brits nudged upward to 77.

One of the main reasons for the gap-closing is the fall of infant mortality. In 1900 Britain, the infant survival rate was 846 per 1,000 births, compared to 655 in India. Today, 992 British infants out of every 1,000 survive, compared to 920 Indians.

Kenny notes that increasing life expectancy correlates with greater caloric intake. "Worldwide, the proportion of the world's population living in countries where per capita food supplies are under 2,200 [calories per day] was 56 percent in the mid-1960s, compared to below 10 percent by the 1990s," Kenny notes. And although he doesn't mention it, one reason is that buying food is a whole lot cheaper than it used to be—the real prices for corn, wheat, and rice have decreased by more than 70 percent since 1900.

Other social indicators, such as literacy rates, are also converging. In 1913, only 9 percent of Indians could read, compared to 96 percent of Britons. Today, 57 percent of Indians and 100 percent of people in the UK are literate. According to Kenny, between 1950 and 1999, global literacy increased from 52 percent to 81 percent of the world. And women have made up much of the gap: Female literacy as a percentage of male literacy has increased from 59 percent in 1970 to 80 percent in 2000.

Kenny also observes that what he calls "non-necessary consumption" has been increasing for the world poorest, too. For example, while the bottom 20 percent and the top 20 percent of the world's population both increased their beer drinking between 1950 and 1990, the bottom quintile's consumption grew five times as fast.

Incomes in the world's poorest countries have been rising slightly over the past 50 years, so perhaps these large improvements demonstrate that small changes in earning power at the lower income levels have dramatic effects? Surely that's been part of the story, but Kenny points out that incomes have been falling since 1950 in several basket-case countries like Cuba, Angola, Nicaragua, Mozambique, and Bolivia, yet life expectancy, literacy rates and the percentage of kids in primary school have still gone up.

So why is the quality of life for the world's poorest people improving, and in fact converging toward levels found in the richer countries? Because improvements become cheaper over time. Kenny notes: "Broadly, the results suggest that it takes one-tenth the income to achieve the same life expectancy in 1999 as it took in 1870.

Consider the virtuous circle of agricultural improvements, such as the way discovering how to properly use inorganic fertilizers boosted agricultural production, which increased the calories available to families, which in turn meant they didn't need their kids to work the fields full time, thus permitting them to go to school to become literate, which enabled them to more effectively adopt even better farming techniques, and so forth. Literacy makes educating people about the germ theory of disease a lot easier. Once-expensive medicines like penicillin eventually cost only pennies per pill. Although building infrastructure remains relatively expensive, technology can leapfrog entire costly steps, as has been demonstrated by the lightning-fast growth of cellular-telephone adoption from zero to 1.5 billion people.

The world's poor have clearly benefited enormously from spillover knowledge and technologies devised in the rich capitalist countries. But they would be a whole lot better off if their incomes increased, too. For that to happen, institutions like private property and the rule of law must be adopted. Poor countries remain poor largely because the incompetent despots who rule over them keep them that way. Poverty was once humanity's natural state, but today it is almost always man-made.

Ronald Bailey is reason's science correspondent. His book Liberation Biology: The Moral and Scientific Defense of the Biotech Revolution, Or Why You Should Relax and Enjoy the Brave New World will be published in June by Prometheus Books.

3 comments:

  1. I feel sorry when well-to-do people haggle with hawkers in the street for sums as little as Re 1. I wonder what they are losing (or saving) with this money. On the other side, this Re 1 could mean a lot to the hawker.
    Once I came across a blind person who was selling needles in the train (Rs 5 for 20 needles). A guy who bought a box did not pay till he finished counting them. The seller was getting restless. He had to move on to the other compartments. I wonder what would the buyer lose if there were only 19 needles instead of 20.

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  2. I think its hypocracy for most of us to talk about the rights and wrongs of haggling - well-to-do or not - first of all - its not about your social status - its part of personality. Whether you are rich or poor - if your personality is such that you bargain/haggle you will do it. (there is also this joke that the well-to-do guy actually became rich by making sure he didn't spend unnecessarily.)

    Now, its also cultural. If you go to buy vegetables in Kerala - the offer price is very often the final price. But if you go to buy the same stuff in say Calcutta - the first offer price is not the final price - and in most cases it will be hiked up. The final - after-bargain price will be more or less close to the first/final price offered in Kerala. So there is cultural element to it. After travelling to many countries (and regions within India) - this is rather obvious!

    Fianlly about the anchor - a job that you like - gives you lot of satisfaction - yes indeed thats a very good point - but the reason why there is huge rush towards the latest hottest market is not just money - its again a problem with our culture and systems.

    Money is important, it will be foolish to deny that reality today - but on the other hand equally important is the perception of "opportunity!" And also chance to actually spend time to understand what is it that you like - your skillset and so on. Unfortunately the way our system has developed both these aspects are screwed up. First about opportunity - I remember at one point it was PO - office in bank, then there was the time when it was becoming a professor - when UGC was new, then IT came along - and then Call centres and so on. Bcause somethign is new - ppl. tend to see opportunity there - not because they know more about it - but because they know for sure that whatever else there is - there is anyway not much opportunity!

    Then about chance to try and learn about our own skillset - where do we ever get a chance to do that - until our parents are generous enough and brave enough to accept that you might be trying out various things and yet not achieve anythign great in any field??

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  3. Somehow I'm reminded of these lines from Bombay Dreams

    Some live and die in debt,
    Others making millions on the internet

    :-)

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