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Markets, Poverty Alleviation, and Income Distribution: An Assessment of Neoliberal Claims1

Published online by Cambridge University Press:  28 September 2012

Stephan Haggard
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Abstract

If individuals are such rational and maximizing agents, why has history demonstrated that government intervention in economics plays a consistently positive role in a developing country's economic performance? This article emphasizes the inevitable link of the political arena with progress of economic success, primarily in the developing world, thereby rejecting the neoclassical view of pure market-driven economics. The author highlights the market-oriented accomplishments of the Asian NICs (Newly Industrialized Countries) and some Latin American countries, such as Argentina, Brazil, Chile, Uruguay, and Turkey, pointing out time periods when authoritarian regimes acted as indisputable impetus for economic growth spurts in these countries. Because the poor are afflicted most heavily during transition periods, the author advocates that governments ensure the involvement of the poor not only in the market reforms but most importantly in the policy-making process. Governments must ensure proper allocation of national resources, income distribution, and commitment to poverty alleviation through direct intervention in the economy to stimulate growth and success. Under these circumstances, Haggard concludes, the poor will demonstrate a higher level of success in the emerging economies than many expect.

Type
Articles
Information
Ethics & International Affairs , Volume 5 , March 1991 , pp. 175 - 196
Copyright
Copyright © Carnegie Council for Ethics in International Affairs 1991

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References

2 For a review of political and intellectual developments impinging on the adjustment debate, see Miles Kahler, “Orthodoxy and Its Alternatives: Explaining Approaches to Stabilization and Adjustment,” in Joan Nelson, ed., Economic Crisis and Policy Choice (Princeton: Princeton University Press, 1990).

3 See, for example, the essays in Eliott Berg, Policy Reform and Equity: Extending the Benefits of Development (San Francisco: International Center for Economic Growth, 1988).

4 For a striking example of this contrast, compare Deepak Lal, The Poverty of Development Economics (Cambridge: Harvard University Press, 1985) with Hernando de Soto, The Other Path (New York: Harper and Row, 1989).

5 Amartya Sen, On Ethics and Economics (Oxford: Basil Blackwell, 1987), p. 32.

6 See John Rawls, A Theory of Justice (Cambridge: Harvard University Press, 1971), pp. 75–80.

7 Hollis Chenery, et al., Redistribution with Growth (New York: Oxford University Press, 1974), p. xiii.

8 For a recent review of evidence, see Gary Fields, “Changes in Poverty and Inequality in Developing Countries,”World Bank Research Observer (July 1989), and “A Compendium of Data on Inequality and Poverty for the Developing World,” unpublished manuscript., Cornell University, 1989.

9 Irma Adelman and Cynthia Morris, Economic Growth and Social Equity in Developing Countries (Stanford: Stanford University Press, 1973), p. 189.

10 For a fuller exposition of this theme, see the World Bank's, World Development Report 1990: Poverty (Washington, DC: The World Bank, 1990), Chapter 7, pp. 103–20.

11 Simon Kuznets, “Economic Growth and Income Inequality,”American Economic Review, Vol. 45 (March 1955), pp. 1–28. The following draws on Stephan Haggard, Pathways from the Periphery: The Politics of Growth in the Newly Industrializing Countries (Ithaca: Cornell University Press, 1990), pp. 223–25.

12 The most comprehensive effort at testing the Kuznets thesis was M. Ahluwalia, “Inequality, Poverty, and Development,”Journal of Development Economics (1976), pp. 307–42. For a critique, see A. Saith, “Development and Distribution: A Critique of the Cross-Country U-Hypothesis,”Journal of Development Economics (1983), pp. 367–82.

13 Fields' survey is based on the Gini coefficient, which measures the deviation from an “ideal” state in which every individual or household receives exactly the same income. See Gary Fields, “Poverty, Inequality, and Economic Growth,” in G. Psacharopoulos, ed., The Political Economy of Poverty, Equity and Growth (New York: Pergamon, forthcoming).

14 See Francois Bourguignon and Christian Morrison, External Trade and Income Distribution (Paris: Organization for Economic Cooperation and Development, 1989).

15 See, for example, Stephan Haggard, Pathways from the Periphery; Alice Amsden, Asia's Next Giant: South Korea and Late Industrialization (New York: Oxford University Press, 1989); Thomas Gold, State and Society in the Taiwan Miracle (Armonk, NY: M.E. Sharpe, 1986).

16 Irma Adelman, “Beyond Export-Led Growth,”World Development, Vol. 12, No. 9 (September 1984), p. 938.

17 The World Bank, Country Economics Department, Adjustment Lending Policies for Sustainable Growth (Washington, DC: The World Bank, 1990), pp. 81–90.

18 Amartya Sen, Poverty and Famines: An Essay on Entitlement and Deprivation(Oxford: Clarendon Press, 1981).

19 Data and conclusions in this paragraph and the following ones are drawn from Joan M. Nelson, “Poverty, Equity, and the Politics of Adjustment,” in Stephan Haggard and Robert Kaufman, eds., The Politics of Economic Adjustment: International Constraints, Distributive Politics and the State (Princeton: Princeton University Press, forthcoming); and World Bank, World Development Report 1990, Chapter 3.

20 Giovanni Andrea Cornia, Richard Jolly, and Frances Stewart, Adjustment with a Human Face: Protecting the Vulnerable and Promoting Growth (Oxford: Clarendon Press, 1987).

21 Unless otherwise specified, data in the following two paragraphs draws on Nelson, “Poverty, Equity, and the Politics of Adjustment.”

22 Ann Maasl and and Jacques van der Gaag, “World Bank-Supported Adjustment Programs and Living Conditions,” unpublished manuscript, The World Bank, 1990.

23 Nelson, “Poverty, Equity, and the Politics of Adjustment.” Nelson points out, however, that the countries with the most severe malnutrition were victims of famine and civil war as well as deteriorating macroeconomic conditions and adjustment imperatives.

24 World Bank, World Development Report 1990, p. 46.

25 Ibid., p. 92.

26 Alan Berg, Malnutrition: What Can Be Done?(Baltimore: Johns Hopkins University Press, 1987), pp. 14–22.

27 Carol Graham, “The APRA Government and the Urban Poor: The PAIT Program in Lima's Pueblos Jovenes,”Journal of Latin American Studies, forthcoming.

28 Richard Jolly, “Poverty and Adjustment in the 1990s,” in John P. Lewis, et al., Strengthening the Poor: What Have We Learned? (New Brunswick: Transaction Books, 1988), p. 167.

29 Among the more convincing analyses is Robert Bates, Markets and States in Tropical Africa: The Political Bases of Agricultural Policies (Berkeley: University of California Press, 1981).

30 For a summary of the debate, see Stephan Haggard and Robert Kaufman, “The Political Economy of Stabilization and Structural Adjustment,” in Jeffrey Sachs, ed., Developing Country Debt and Economic Performance (Chicago: University of Chicago Press, 1989).

31 Two interesting exceptions are the Indian states of Kerala and West Bengal, which achieved quite extensive land reforms under democratically-elected Communist parties.

32 Albert O. Hirschman, Journeys Toward Progress (New York: W.W. Norton, 1973), pp. 251–98.

33 This point is made by Nelson, “Poverty, Equity, and the Politics of Adjustment.”

34 Two primers on reform tactics are William Ascher, Scheming for the Poor: The Politics of Redistribution in Latin America (Cambridge: Harvard University Press, 1984), and Joan Nelson, “The Politics of Stabilization,” in Richard Feinberg and Valeriana Kallab, Adjustment Crisis in the Third World (New Brunswick: Transaction Books, 1984).

35 Atul Kohli, The State and Poverty in India (Cambridge: Cambridge University Press, 1987).