Research suggests innovative approach to Inclusive Development in BRICS countries
Brasília – September 06, 2013 – Prof. Nanak Kakwani, former IPC-IG’s Director, visiting researcher at Ipea and Professor at the University of New South Wales in Sydney, presented at a IPC-IG Seminar his research findings in the areas of pro-poor growth, poverty and inequality, with a focus on BRICS countries. The Seminar was chaired by Marcelo Neri, President of IPEA, Minister of the Secretariat of Strategic Affairs (SAE) and co-author with Prof. Kakwani upcoming working paper to be published by IPC-IG. Jorge Chediek, Interim Director of IPC-IG, UN Resident Coordinator and UNDP Resident Representative in Brazil also participated in the opening session.
A new concept of inclusive development was presented by Professor Kakwani and well received by the audience composed of members of the diplomatic community, researchers, scholars, journalists and policy makers. Taking in consideration that policy objects vary from policy means, inclusive development, according to Kakwani, is based in three major goals that aim to enhance people’s wellbeing.
Thus, “it goes beyond poverty reduction and it acknowledges that all must be able to participate, create opportunities and share the benefits of development, as well as participate in the decision-making”, said Kakwani. Following this line of thinking, economic growth is the means to develop, not the end in itself.
Growth and wellbeing
The Gross Domestic Product (DGP) is used to measure countries performance and the pattern of growth indicates how people produce growth and determines how they live their lives. Therefore, economic growth can enhance economic output, which generates income that are either consumed or invested by people. In this context, Prof. Kakwani surgests that “governments could play a key role in determining the path of growth as they design the framework that will determine the standard of living”.
To measure inclusive development, Kakwani developed the Social Opportunity Function. A concept where opportunity is central to enhance people’s wellbeing through access to basic services: education, health, nutrition, sanitation, clean water and employment.
This approach aims to answer 5 questions: 1) Are all people able to living long and health life? 2) Are all people literate so that they can function in the society? 3) Are all children born able to survive? 4) Are all children able to get quality education? 5) Are all people able to freely express their views?
Defining Middle Class for BRICS countries
To Kakwani, analyzing social welfare policies is different from economic policies. For example, social welfare in Brazil is usually measured by income. Nevertheless, the Professor argues that most development economists forget to analyze the level of social welfare and there is a need to use judgment to identify what is working.
In China, standard of living and per capita household consumption are growing faster than in India, whereas the urban-rural disparity still remains bigger in China, as the growth is deeply concentrated in urban areas.
When analyzing Brazil, Kakwani found that the relative inequality decreased, but the absolute inequality did not drop and it is actually increasing. Poverty may cause social tensions and it could lead to loss of welfare. “When income decreases, it creates a feeling of deprivation, which is measured according to the poverty line”.
In distributing income from rich to poor to promote inclusive growth, someone will always be in a better position in relation to the other. Changing the distribution of income promotes social welfare, but it can also make societies more polarized. Inequality may cause social concerns, which can lead to upheavals and social unrest.
Hence, the size of the Middle Class is closely linked to the degree of polarization – and this is the case in Brazil. Thus, Prof. Kakwani demonstrates that loss of welfare can be measured by different levels in income, whereby severity of poverty is relative to absolute and relative deprivation.
According to his understanding, polarization also leads to alienation and deprivation. A polarized society is a society divided into groups and it is likely to experience tensions and social unrest. A person feel alienated if her income spreads from the middle.
Middle class combines income space and people space, which is used as the focal point to identify alienation. To Kakwani, the bigger the Middle Class, the smaller polarization among society will be. In terms of absolute and relative deprivation, polarization is decreasing in Brazil as the country is implementing poverty reducton policies. Over 40 million people have emerged from extreme poverty into middle class. Among BRICS countries, Brazil is closer to the Chinese situation than what one may observe in India.
Economic growth generates opportunities as it increases taxes, which are used by governments to create more opportunities to people feeling alienated or deprived. Social opportunities take in consideration the average and equity opportunities. So, the governmental goal is to increase the social opportunity index, by enhancing one of these two or both.
By developing the Social Opportunity Function, Professor Kakwani aims to provide a tool for policy makers to promote inclusive development. This research was developed during his time as a visiting researcher at Ipea, and the findings will be published soon by IPC-IG.
To know more about Inclusive Growth and Professor Kakwani’s work, please access IPC-IG publications:
One Pager #2 – Poverty measurement matters: an Indian story
One Pager #15 – Leaky Bucket
One Pager #19 – Women’s earning power and wellbeing
One Pager #22 – What is Poverty
Working Paper #28 – A note on measuring unemployment
Working Paper #29 – New Global Poverty Counts
Working Paper #31 – Global Estimates of Pro-Poor Growth
Working Paper #33 – Measuring the Impact of Price Changes on Poverty
Find the slides with Professor Nanak Kakwani’s presentation here.
Check out the pictures from the event at IPC-IG’s Flickr account.
By Tamara Santos
Short URL: http://pressroom.ipc-undp.org/?p=15413