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  • Anindo Banerjee

Markets and the poor

Updated: Dec 23, 2020

In the month of October, when over twenty five thousand landless agricultural labourers hailing from various dalit and tribal communities of India marched to New Delhi to press for their land rights and succeeded in securing a vital policy decision towards constitution of a high-powered National Land Reforms Council headed by the Prime Minister, they heralded a historic assertion against increasing market-led appropriation of vital resources like land, water, mines and forests. Given that the last two decades have witnessed countless instances of dispossession of the poor in developing economies from critical life-support systems, mostly at the behest of market-forces actively aided by agencies of the State, the issues concerning the role and obligations of market forces and agencies of the State towards poverty reduction need to be examined cautiously, with an eye on the impacts of contemporary trends and policies on the well-being of poor communities.


Markets and the Poor


The experiences of several African governments during the eighties and the nineties relating to policies aimed at overcoming acute fiscal imbalances are a good pointer to the potential impact of ungoverned market forces on critical sectors such as agriculture. Measures administered to this effect on the advice of international financial institutions like the World Bank included withdrawal of the public sector from sectors like agriculture, decontrol of prices, reduction of farm subsidies and increased privatization. The outcomes were equally radical: the drastic steps immediately affected over seventy percent of the poor in the region by drastically suppressing food production. A recently-concluded evaluation of World Bank’s role in African agriculture attributed the crisis to the inability of market forces to step in and jump-start agricultural growth. According to Professor Jeffery Sacks of Columbia University, “The whole thing was based on the idea that if you take away the government for the poorest of the poor, markets will somehow solve the problems, but markets can’t step in and won’t step in when people have nothing. And if you take away help, you leave them to die.”


The example of sub-Saharan Africa clearly illustrates the criticality of the role of a pro-poor ‘welfare state’ in safeguarding the survival needs of the poorest of the poor, who do not offer any investment-incentives to profit-seeking market forces. According to the UN-MDG report of 2007, the share of the poorest fifth of populations in developing regions in national consumption decreased from 4.6 to 3.9 percent between 1990 and 2004. Widening income inequality is of particular concern in Eastern Asia, where the share of consumption among the poorest people declined dramatically during this period. Inequality is the highest in Latin America, the Caribbean and in sub-Saharan Africa, where the poorest fifth of the people account for only about 3 per cent of national income, despite increased involvement of market forces in local economies. Internationally, 46 countries of the world have become poorer today than they were in 1990, according to Human Development Report 2004. Nearly 1300 million people live in absolute poverty, earning less than one dollar a day, while about 3000 million people, more than a half of the world’s population live on less than two dollars a day. According to the International Labour Organization, over 120 million people are officially registered as unemployed, besides an additional 700 million underemployed people

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