(pp. 60-61)
In many countries economic growth has been accompanied by widening disparities - the rich get richer in the midst of widespread poverty. This is ruthless growth. In many countries rising inequality is associated with increased integration with the world economy, as the forces of globalization intensify disparities within countries(box 2.7).
Some countries in Latin America provide examples of ruthless growth. Few of the regions countries have made serious attempts at land reform, and schooling policies have generally helped the wealthy, not the poor. Moreover, until recently industrial policy had been based on import substitution, often involving capital-intensive production and a bias against agriculture. Not surprisingly, the incidence of poverty in the region rose from 23% to 28% in 1985-1990 alone - a period of economic recovery.
Many East Asian countries, by contrast, have based their growth on the redistribution of assets, on investments in human capital and employment that is both skill- and labor-intensive - helping them make rapid strides in reducing poverty. Indonesia reduced its incidence of absolute poverty from 29% to 17% between 1980 and 1990. And Malaysia reduced its poverty incidence from 49% to 14% between 1970 and 1993.
One way of seeing how growth affects the poor is to consider the "growth elasticity of poverty reduction", derived by dividing the percentage decrease in the number of poor people by the percentage increase in per capita income. The higher the elasticity, the better.
Countries in Latin America have some of the lowest elasticity figures - 0.9 in Brazil and Panama, for example, and about 0.7 in Guatemala and Honduras. Several African countries do somewhat better: the elasticity for Ghana is about 1.7, but for Nigeria , whose growth has been less pro-poor, it is 1.4. At the other end of the scale is East Asia where the elasticities tend to be well above 2 - for Indonesia the elasticity is 2.8, for Malaysia 3.4 and for rural China 3.0.
Both the percentages of poor and the elasticity figures may offer useful ways of looking at poverty - but they are limited because they look only at the lack of income. Human deprivation has many other dimensions: poor people also tend to be unhealthy, malnourished and uneducated. This is "poverty of capabilities", captured in the new multidimensional measure of poverty introduced in chapter 1 - the capability poverty measure (CPM).
Some countries perform much better when ranked by the CPM than when ranked by income - Costa Rica, Jamaica, Mongolia, China and Viet Nam. But even for something of these countries it shows that capability poverty is more widespread than income deprivation. In China 11% of the people are income poor, while 17.5% are capability poor.
Several countries could use their resources more efficiently to reduce deprivation - among them Guatemala, Algeria, Morocco, Pakistan and Bangladesh. In Morocco 13% of the people are income poor, while about 50% are capability poor. And for Pkistan the corresponding figures are 34% and 61%.
But even such countries as Indonesia, Malaysia and Mauritius, which have had relatively equitable growth policies, could do better in reducing deprivation. While 17% of the people in Indonesia are income poor, 42% are capability poor. Rapidly growing countries such as Botswana, Thailand and Turkey could also do much more.
According to national income poverty lines, 21% of the people in the developing world are poor. The results for the CPM, however, suggest that 37% of the people are capability poor. Excluding China the figure is 45%. The 21% is based on high national poverty lines that reflect moderate poverty, not just extreme poverty. Although results for individual countries come from similar World Bank studies, they are not strictly comparable. But the sharp contrast between income poverty and capability poverty indicates that income poverty is significantly underestimated.
For certain regions the contrast between the two measures is very sharp. In South Asia about 29% of the people are income poor, while more than 62% are capability poor. In India 229 million are identified as income poor, but more than twice as many, 554 million, are capability poor. In Bangladesh the corresponding numbers are 55 million and 89 million. Clearly, South Asia needs to concentrate on developing people's basic capabilities.
Capability poverty results from a lack of opportunity, such as lack of access to basic health services. Such poverty tends to be more prevalent in rural areas because of the low coverage of such services. As indicated earlier in this chapter, ruthless growth is neither desirable nor efficient. Far from being essential it is counterproductive.
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