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Multi-dimensional Poverty Measurement and Targeting

Multi-dimensional Poverty Measurement and Targeting

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Title : Multi-dimensional Poverty Measurement and Targeting

Commencement Date : Tue Mar 06 2018--

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Abstract Summary :

Multidimensional poverty is poverty caused by deficiency or lack of well-being (including social services). It reflects the poverty situation during the socioeconomic transition between the failure of original welfare mechanisms and the gradual establishment of a new welfare supply system. When a family cannot afford basic non-income welfare with its income, these results in an ever-increasing “social cost externalization" on society that ultimately is the result of conflicts in policy. Then multidimensional poverty emerges.
Multidimensional poverty is poverty caused by deficiency or lack of well-being (including social services). It reflects the poverty situation during the socioeconomic transition between the failure of original welfare mechanisms and the gradual establishment of a new welfare supply system. When a family cannot afford basic non-income welfare with its income, these results in an ever-increasing “social cost externalization" on society that ultimately is the result of conflicts in policy. Then multidimensional poverty emerges.

Introduction :

1.1The concept of multidimensional poverty in China


Multidimensional poverty is poverty caused by deficiency or lack of well-being (including social services). It reflects the poverty situation during the socioeconomic transition between the failure of original welfare mechanisms and the gradual establishment of a new welfare supply system. When a family cannot afford basic non-income welfare with its income, these results in an ever-increasing “social cost externalization" on society that ultimately is the result of conflicts in policy. Then multidimensional poverty emerges.


The concept of multidimensional poverty was first put forward in the mid-to late 1990s, and has been adopted for China’s poverty alleviation strategies and practices since the beginning of the 21st Century. The pluralism of poverty has been taken into account by the eight identifiable indicators of poor groups in the Whole-Village Poverty Alleviation Strategy and by Participatory Poverty Assessments. An empowerment mechanism has been adopted for select projects with villager participation. The China State Statistical Bureau has used the term “multi-dimensiona! poverty” in China Rural Poverty Monitoring Reports since 2007.


As China progresses from an overall “well-off" (Xiao Kang) stage to an all-around “well-off’ stage, the basic social contradiction between people’s growing material and cultural needs on the one hand, and limited social productivity on the other, is becoming increasingly acute. More specifically, as society progresses to new stages, individuals will no longer be satisfied with basic subsistence; rather, their needs will increase further.


Individual needs differ according to circumstances, such as those of endowment, employment and basic social insurance. However, fundamental rights granted to every citizen by the Constitution (including equal rights to education and health, the right to know, and the right to participation), have become a part of people’s basic needs. Many needs related to well-being cannot be purchased with income. Thus, a strict income- poverty concept does not address people's basic needs of well-being, nor can it adapt to the building of an all-round, well-off society where common progress is required to meet political, economic, social, cultural and ecological needs.


As the first poverty alleviation and development program 2001-2010 is coming to the end, we need to clarify the concept of multidimensional poverty and adopt it for the country’s new policy system. It should be clearly stated that as society advances, besides income poverty, we need to consider poverty caused by inadequate health, education, employment, etc. This means a broader concept of poverty with connotations beyond monetary aspects.


The scientific study of poverty has been undertaken for more than 100 years in China. Only a few western countries use the concept of multidimensional poverty since the welfare distribution in these countries is sufficiently well established to reach most citizens, and the extra income received by each individual is regarded as earnings. It is particularly important to introduce multidimensional poverty and related indicators in China, for the following reasons: firstly, multidimensional poverty can reveal inequalities in the supply of basic social services and the degree of poverty; secondly, since the multidimensional activities implemented in poverty reduction practice have not been formally integrated into national policy, it is important to do so in order to provide policy safeguards for poverty reduction in the new era, and thus to promote consistency between policy and activities in poverty reduction.


1.2The connotation of multidimensional poverty


The concept of multidimensional poverty involves the basic needs of income necessary for people-centred development, and the realization of entitlements for the development of an all-round well-off society. The concept of multidimensional poverty has three aspects, as follows:


1)Multidimensional poverty is a socio-political concept and is not limited to the field of economics. People are often influenced by the poverty line standard proposed by mainstream economists and accustomed to considering poverty as a strictly economic issue. While formal rules in an economic system are defined and guaranteed by political systems, so political systems include variables that determine economic performance. This has been proven by the achievements in China’s poverty alleviation which have been “guided by the government with participation by the whole of society" since China’s Reform and Opening.


2)The concept of multidimensional poverty contains a strategy for the pursuit of equality. Equality means equal opportunities, and begins with equal basic conditions, access to equal processes for development, and finally equality in results that lead to common prosperity. This is a process focusing on livelihoods and development achievements that are shared by the people.


3)Well-being is usually realized through consumption, including consumption of both private and public goods. However, as public goods such as education and medical services are transformed into quasi-public goods due to inadequate supplies, or monopolised into private goods due to limited resources, a large number of ordinary people will no longer be able to afford an adequate level of social well-being, due to their limited incomes. This will give rise to a reverse wealth formation process that could further increase the numbers within the low-income or underprivileged stratum.


If no effective preventive measures are taken before these ''stratum" solidify into “classes”, a more equal society may only be realized via a “revolution”. This runs counter to the idea of building a harmonious society, Therefore, the concept of multidimensional poverty has connotations of policy sensitivity that precede the ossification of underprivileged "stratum” into such “classes”.


1.3Why multidimensional poverty alleviation policies in China?


Based on the challenges of poverty alleviation, China’s population dynamics, and current international conditions, we view this as an opportune time for China to adopt multidimensional poverty alleviation policies.


Firstly, China has achieved world renown in the area of poverty alleviation during the last 30 years; however, the present challenges arising in poverty alleviation for a well- off society are different from problems faced during the “subsistence poverty” period, in that the previous poverty alleviation policy system has failed to meet the actual needs in the current stage. This is not purely a technical problem of targeting. This is a problem of replacing the old system with a new one that meets needs in the new stage. Additionally, there is a general institutional problem experienced by many developed countries, that underprivileged groups cannot enjoy benefits due to the lack of a clear means for testing and monitoring horizontal transfer payments for multidimensional poverty alleviation. The previously set criteria for one-dimensional poverty (that took income and consumption as leading factors) cannot reflect the actual status of poverty, and can hardly facilitate effective resource allocation or poverty monitoring for poverty alleviation. It is an arduous long-term task for China to further eliminate poverty and realize common prosperity.


Secondly, from the perspective of China’s future and the development of human wellbeing, forward-looking strategic research is needed. In the past 250 years along with the progress of industrialization, less than 1 billion of the population has been modernized, and these people are concentrated mainly in the developed countries. In the future 50 years, the world modernized population including those from China may exceed 2 billion or more; however, research must be conducted focusing on the resource and environmental problems emerging during the process of population modernization, and a feasible path must be explored for sustainable development and poverty reduction.


Thirdly, China now has entered into the “inclusive growth” era, but there is no widely recognized indicator system for this period. Economists focus on indicators such as head count ratio of poverty population, Gini coefficient, expenditure of public education and healthcare, employment and the gaps between urban and rural areas. However, here we are proposing a more inclusive analytical poverty framework in order to contribute to inclusive growth. We recognize poverty alleviation is an improvement in the status of well-being, which at least in principle includes the following: 1) material living standards (income, consumption and assets); 2) health; 3) education; 4) individual activities including work; 5) political voice and governance; 6) social connections and relationships; 7) the environment (current and future conditions); 8) economic or physical (in) security. Since well-being is multidimensional, poverty alleviation must be adapted to the variational requirements of well-being.


Fourthly, understanding of the multidimensional poverty concept has been sufficient until now but it still rests on operation and monitoring levels. There is still a strong need for a breakthrough at the policy level. According to studies and analyses of poverty alleviation and China’s development, the opportune time to develop a policy system for multidimensional poverty is during the transition from traditional to inclusive growth. This will be crucial for development and poverty alleviation in the new era.


Fifthly, China’s model of poverty alleviation is worthy of study by other countries. One of the most notable outcomes of China’s peaceful rise is its poverty alleviation. Peaceful development is an important objective of global poverty alleviation. In case- study examples from Yunnan Province we can see that China is ranked highly in multidimensional poverty alleviation. It is necessary for us to sum up China’s experiences in multidimensional poverty alleviation, combine future multidimensional poverty alleviation objectives with sustainable development objectives, and further explore the systematic and operational concept of multidimensional poverty alleviation. This would be a great contribution to global poverty alleviation. Based on China’s active involvement in poverty alleviation and international exchange and cooperation in the development field, China is ideally positioned to make international contributions to this field, by adopting multidimensional poverty alleviation strategies.

Content :

2.Analytical Framework for Multidimensional Poverty and Tentative Indicators


Poverty alleviation is an integral part of a country’s overall development strategy. Based on the target of eliminating absolute poverty in China by 2020, as well as the experiences learnt from the Minimum Livelihood Safeguards scheme that education and healthcare are key fields with low security, this report will mainly explore the core issues of multidimensional poverty related to human development: namely healthcare, nutrition, education, employment of disadvantaged groups and problems related to provision for the elderly.


We use a simplified three-dimensional diagram to explain the concept of multidimensional poverty (as shown in Fig. 2). individual poverty in a given area is influenced by individual capabilities, the social environment and overall economic well-being. Deficiency or deprivation in any one dimension indicates being poor (the areas marked with A, B and C). Deficiency or deprivation in any two dimensions indicates being very poor (the areas marked with D, E and F). Deficiency or deprivation of all three dimensions indicates abject poverty (the area marked with G). Any status not restricted by these conditions is defined as non-poverty (the area marked with H).

From the above figure, we can see that poverty is the result of the interaction of multidimensional factors. The more dimensions that are involved, the more severe the poverty will be, and the more efforts that will be needed for poverty alleviation. If the poorest of the poor (in the core area marked “G") are to be lifted out of poverty through poverty alleviation, those obstacles that are preventing them from getting ahead in each dimension must be removed. While the aspiration is good, if the external macrocircumstances are unchanged, then attempts can only be made to change the systems of capability, social inclusion and economic well-being in order to achieve an ideal result. This is a great challenge.


Fig. 3 is an analytical framework presenting multidimensional poverty in its international perspective, but also modelled on China’s conditions. According to Dimension B in Fig. 2, the abstract factor of social inclusion is divided into two subsystems including political inclusion and cultural inclusion. Economic well-being is divided into economic inclusion and economic welfare. Many factors in these subsystems are interrelated, with “capabilities building" as the foundation. The key point is to find suitable jobs in the economic inclusion dimension, since farmers without jobs mean people without earnings and satisfactory well-being. The platform for social support is referred to as the “hardware” of social infrastructure and the “software” of social services, while longitudinal factors form a development path for individuals to gain well-being.

This model clearly presents a people-centred development path, and shows that it is the government’s responsibility to provide software and hardware support for development in any external or integrated poverty alleviation environment. From the perspective of multidimensional poverty and flowing individual development paths, remove some indicators which are difficult to measure and hold other indicators, which are more easily to monitor. Strategic poverty alleviation indicators can be screened and identified based on the following principles: “adhering to people-centred development, securing and improving people's livelihoods, establishing a social safety-net covering all residents, paying attention to solving problems related to education, labour employment, medical health and sanitation, safeguards for the aged and shelter; realizing the outcome of development for the people, relying on the people and shared by the people.”


Some indicators that are difficult to use in measurement have been removed from the model, but not because these indicators are unimportant. Only the most significant indicators are selected for this research in order to clarify the concepts of multidimensional poverty and multidimensional poverty alleviation and to make them simpler and easier to use. Three of the dimensions - capabilities, economic inclusion and economic well-being in Fig. 3 should be included in future policy, poverty measurement and targeting.


Only some indicators in these three dimensions are adopted: the status of health and education level in individual capability dimension; the status of work in economic inclusion system, and the two interrelated indicators of household income and degree of satisfaction with financial status in economic well-being. Three indicators on political inclusion and social participation are selected (see Table 2), as a basis for measuring economic inclusion and individual capabilities.

The problem of housing is an important strategic issue, but it is dependent on institutional arrangements for land, ownership of which is the object of long-term reform. Additional constraining factors will need to be included in discussions on poverty alleviation, regarding housing, a domain related to government provision of social services; consequently, it will not be discussed for the moment in this report.


Eight of the nine selected indicators from the five dimensions are objective. The “degree of satisfaction with financial status" indicator is subjective, and is based upon individual household income and the country’s macro policies (e.g., polices for tax, prices, subsidies, etc.). Degree of satisfaction with financial status is the result of the interaction between private investment and interpersonal relations (prior to and after transfer income or payment) and a country’s tax policy and degree of inflation, which have a strong impact on people’s satisfaction, their well-being, and mental health. Therefore, this indicator can play an influential role during the process of building a harmonious society.


Among these dimensions, gender perspective is an implied prerequisite, though it is never directly reflected in the indicators. Every dimension needs to be considered and analyzed from a gender perspective. Data can be obtained directly from related departments, since the Central Government published its “Key Indicators in Gender Statistic for Programme for the Development of Women and Programme for Development of Children in China” by the General Office of the State Council (the State Council [2006]No. 1).


Since poverty reduction activities depend to a considerable extent upon location, the above tentative indicators currently are used mainly in guiding the planning /regional targeting process in poverty reduction. These indicators, unlike those used in former income-based poverty reduction, are closely related to overall national socioeconomic development targets. With regard to indicators to be used in sectoral poverty reduction and poverty effect evaluation, detailed indicators should be designed after the multidimensional poverty concept has been incorporated into national policy. Additionally, within the indicators set, those belonging to the first three dimensions (in individual capability, economic inclusion and economic welfare) are core indicators for measuring poverty, and those belonging to the political inclusion and social inclusion group can be used as auxiliary indicators.


3.Status and Analysis of Multidimensional Poverty in China


3.1Status of multidimensional poverty in China


Since the founding of the People’s Republic of China, and especially after Reform and Opening-up, China’s economy has been developing rapidly. People’s living standards have continued to improve, and the number of poor has substantially decreased. According to the poverty alleviation standards set by the Chinese Government, the number of rural poor in China has declined from 250 million in 1978 to 35.97 million in 2009, from 30.7% rural population to 3.6%. China is the first country to meet UN Millennium Development Goals (MDGs) by halving its extremely poor population . China is making a significant contribution to global development and poverty alleviation.


However, the task of poverty alleviation remains very challenging since China is still a developing country, with lower per capita income and severely unbalanced development; there is still a large poor population with relatively severe, deep-rooted poverty. There are numerous factors causing impoverishment. The core issues of multidimensional poverty in China are mainly those of nutrition, health, education and the slow rate of increase in family possessions for disadvantaged groups.


3.2International research and experiences of multidimensional poverty alleviation


3.2.1Research progress on multidimensional poverty


Generally, research on multidimensional poverty focuses on methods and operations. Research concerning institutions and policies is mostly focused on MDG-based poverty alleviation strategies, and their monitoring and evaluation initiated by the UN system. Since poverty differs from one country to another, most research on institutions and policies of poverty alleviation, with the exception of certain case studies, is focused on methodological discussions. More methodological research, however, has been conducted since the beginning of the 21st Century.


A recent UN report on Rethinking Poverty: Report on the World Social Situation 2010 confirmed an urgent need for strategic change, a shift from the market fundamentalism, policies and practices of recent decades to sustainable development and equality- oriented policies suitable for different countries. It also indicated that an analytical method of social exclusion would not only place people at the center, but would also be used to analyze the root causes of poverty.


The UNDP’s 30 countries assessment of the challenges of achieving the MDGs shows that economic growth cannot transform into development achievements without effective and responsible rules, systems, processes, and political will. In addition, gains achieved through hard work and efforts may be overturned when funds are withdrawn or a financial crisis occurs. MDGs will only be meaningful achievements for the development of humanity if they can be sustained beyond 2015.


Paul Clements establishes the significance of the Capabilities Approach to Project Analysis (CAPA), which includes the fundamental requirements for developing human capabilities such as nutrition, health and education. Clements points out that if international organizations replace the cost-benefit analysis approach with CAPA, then development intervention would do more for human development in affected countries. As a rule, investing in the development of people’s capabilities can help with economic growth, and the latter is dependent upon the former. This can lead to an economy that can grow on a more equal basis, and which in turn lays a more people-oriented foundation.


Studies on multidimensional poverty have been conducted in many disciplines such as education, medicine and psychology. Most of the research focuses on the measurement of multidimensional poverty. A standard method for analyzing multidimensional poverty is to monitor the sub-goals in the MDGs. However, some critics have pointed out that MDGs are technocratic formulations with too many assumptions; for instance, the availability of funds. Recently, the International Fund for Agricultural Development (IFAD) developed the Multidimensional Poverty Assessment Tool, which measures rural poverty.It has been tested in Gansu Province, China and in India. This tool includes ten thematic indicators, but it is still a open question as to what extent this set of indicators can be made adequately operational (for instance, in sensitivity tests for grain and nutrition), and whether the assumptions of agricultural and non-agricultural assets can be effective at the same time. Sabina developed a multidimensional poverty index focused mainly on international poverty comparison, with indicators closely related to the indicators of the MDGs, which thus is not strictly relevant for poverty reduction in China.


3.2.2Experience in multidimensional poverty alleviation in some countries


Malaysia is now a middle-income country. As a multicultural developing country, Malaysia adopted a unique mode of development with equity in the 35 years from 1971 to 2005, which set National Unity as the ultimate development goal. In the process of continuous and fast economic development, a dual strategy of poverty elimination and social reconstruction was adopted to achieve this goal. Between 1970 and 2005 the poverty rate in Malaysia decreased from 49.3% to 0.5%, respectively.

In this example, the most important point for China is to learn from Malaysia’s special attention to solving the problem of development in rural areas while maintaining rapid economic growth. From 1971 to 1990, expenditures by the Malaysian Federation Government on the poor population and the development of rural areas took up 19.1% of the total expenses on development (MYR$172.1 billion in total). From 1991 to 2000 the percentage increased to 22.5%.


Japan and the Four Asian Tigers (Hong Kong, Taiwan, South Korea and Singapore) are also recognized as countries and regions that have successfully engineered a leap from middle-income status to high income status. It took Japan and South Korea about 12 years to become high-income countries.Compared with the comparatively long process of industrial revolution experienced by Western developed countries, we can learn more from Japan and South Korea. In addition to upgrading the industrial structure, both countries paid considerable attention to people’s livelihoods and trying to narrow income gaps.


Despite the financial crisis, the U.S. is still the most advanced country in the world. It’s continuous economic growth has benefited from extensive government investment and emphasis on education. For example, the National School Lunch Act issued in 1946 as a national security measure, supported basic healthcare and nutrition. China can learn from the United States in the areas of income distribution, poverty alleviation and employment training.


3.3Analysis of China’s multidimensional poverty


Poverty is a multidimensional phenomenon, and poverty alleviation requires a set of integrated strategies to link regional and national economic growth, for instance, pro-poor growth for poverty alleviation. Historically, domestic and foreign experiences indicate that limited access to basic education, training and healthcare services in the process of population growth will lead to negative societal gap between economic growth and social well-being. Nutrition, basic healthcare, education, and training are indispensable for people’s health and decent employment, and are core issues of multidimensional poverty in China. The five main reasons for this:


(1)To eliminate poverty and meet the fundamental needs of the people, on a macrolevel, provision of basic social services can reduce inflationary pressures while satisfying people’s basic needs. On a micro-level, providing adequate social services can prevent a vicious circle in which poor farming households cannot afford the required public goods and services with their income.


(2)Provision of basic public facilities and services such as healthcare and education is affected by wide range of factors such as politics, economics, culture and society, thereby reflecting the interests of fairness. In the short term, these may not have remarkable effects on economic growth, but in the long run, these services have permanent and sustainable benefits for society. The rapid economic growth after China’s Reform and Opening would have not been possible if basic education and medical services had not been supported so strongly since the founding of the People’s Republic of China. This has been proven again in the case of free medical services in Wuqi County, Shaanxi Province.


(3)Poverty alleviation is a complex non-linear process of seeking the change of the well-being of the poor groups. It is still not known whether the linear thinking originating from reductionism in Western countries- especially the goals of development and poverty alleviation initiated by neoliberal thought-can be realized, or to what extent these thoughts can be shaped into the objectives of improved well-being, even if they are realized. Therefore, analysis of multidimensional poverty in China should be conducted in the context of China’s situation.


(4)The capability approach proposed by Amartya Sen provides a philosophical and social basis for poverty alleviation. However, due to its being deliberately incomplete in its operation and with a slow effect on education, this approach has proven to be too abstract to guide operations in poverty alleviation practice. Most of the indicators developed based upon this approach devote more attention to objects rather than people. This emphasis makes them unsuitable to guide specific and comprehensive poverty alleviation practices in China in the near future. Analyzing poverty alleviation in China from the perspectives of basic nutrition and health, education and employment is at the heart of the issue. Other needs originated from different individual situations and capabilities are not within the scope of poverty alleviation. Instead, these needs will be met in the process of all-around people-oriented economic and social development.


(5)In the development arena, the concept of poverty has often been too broadly defined and has led to the stigmatization of disadvantaged groups. This in turn harms the formation of a harmonious society. Poverty is defined as the gap in economic and social development goals (groups and regions that have not realized the goals are defined as poor), is impartial and beneficial to reducing the stratification of social groups and ossification of social strata, so as to help build a weli-off society in an all-around way. This has been proven by the effectiveness in the practice of targeting health and education and funds allocation in the urban minimum living standards program in China.


3.3.1Nutrition and health


·Poverty caused by poor nutrition and basic healthcare


The malnutrition rate for children in China decreased substantially during the 18 years from 1990 to 2008. However, the rate of growth retardation is presently about 14%, and nearly 20% in rural areas, which puts it at a level of intermediate severity. In poor rural areas, rates of growth retardation and low body weight for children under five years old are notably higher than those in ordinary rural and urban areas. Experts are calling for the inclusion of child nutrition indicators into the monitoring system for poverty reduction. We will put enhancing early-stage supplementary food and breast-feeding on an equal footing and work out anti-poverty strategies targeting early childhood development.


A survey of the nutritional status of 1,324 children under six years old in poverty-stricken areas in the Guangxi Zhuang Autonomous Region showed that the rate of growth retardation for children was 22.18%, a rate of low body weight of 28.17%, an emaciation rate of 11.12% and an anaemia rate of 16.19%. Among all the surveyed children, the 12-month-old category had the highest rates of growth retardation, low body weight, and emaciation rate. These children take in less than necessary amounts of milk and meat and have limited food variety. However, their relatively high snack food intake resulted in insufficient energy-protein intake, which is an important cause of child malnutrition.


The World Health Organization (WHO) stated in a report in 2008 that “the possibility of decrease in income for any malnourished individual would be higher than 10% in his I her life." This indicates that lack of nutrition is interrelated with and affects low income or poverty.


Though China has made significant achievements in poverty alleviation in the past 30 years, it has also experienced a rural health crisis.The gap in healthcare resource allocation between urban and rural areas has become wider, which further increases the cost of medical services for the migrant population. The current system for allocating healthcare services is no longer suitable for the balanced development of both urban and rural areas. People in poverty-stricken rural areas are victims of poor-quality food, due to asymmetric information and the widening income gap between urban and rural areas. This phenomenon is related to China's public health safety policy, and also reflects the extreme vulnerability of poor groups.


It is estimated that by 2040, the population over 60 years old will reach 430 million in China, accounting for 30% of the total population; and the population over 65 years old will reach 320 million, accounting for 22% of the total population. Consequently, health and general welfare provision for the elderly must be incorporated into the agenda for inclusive social growth.


One of the main tasks of population and social development in China, and also a requirement of the MDGs, is to reduce the maternal mortality ratio, infant mortality rate and under five mortality rate. The Government of China's Programme for the Development of Women in China (2001-2010) and Programme for the Development of Children in China (2001-2010) both stated that by 2010 the maternal mortality ratio in China will decrease by one fourth, to 39.8 per 100,000 persons compared with the rate in 2000. Infant mortality rate and under five mortality rate will decrease by one fifth compared with those in 2000 to 25.8%o and 31.8%o respectively. The UN Millennium Summit set the goals that reduce the maternal mortality by three quarters to 22.2 per 100,000 persons, and under-five mortality rate by two thirds to 20.3%o. At the United Nations Special Session on Children held in 2002, it was proposed that by 2010, all three "mortality rates" should have decreased by one third compared with those in 2000, to 35.3 per 100,000 persons, 21.5%o and 26.5%o respectively. Compared with the goals set in the above-mentioned programmes in China, the goals set by the UN have brought forward higher requirements and new challenges, which make them more difficult to realize.


·Health and illness-induced impoverishment


Impoverishment caused by ill-health has been a common phenomenon among poor rural populations and low-income urban groups. Generally, it is difficult for farmers in poverty- stricken mountainous areas to see a doctor. Medical resources are concentrated in urban areas, so that farmers in remote areas cannot access those services (especially in the case of serious and stubborn diseases). More importantly, poor farmers cannot afford high medical fees.

Inadequacy of medical service has become a serious hindrance for rural economic and social development, especially for the development of remote and poverty-stricken areas. Although the Central Committee of the Communist Party of China (CCCPC) and the State Council announced a new requirement in October 2002 in the Decision on Further Strengthening Health Work in Rural Areas that “a new rural cooperative medical system be gradually established”, by 2007 the participation rate of poor farming households had remained low in many areas. Even in project areas with higher participation rate, the reimbursement rate was quite low.

Illness is a type of external impact that may not necessarily lead to persistent poverty, unless it is internalized, becomes chronic, the negative impacts cannot be eliminated within at least 20 years.


·Prevention of AIDS among migrant workers


The number of migrant workers in China has exceeded 200 million thus far. Of those, 120 million are migrant workers working in other provinces. They are poorly educated without professional skills, and have low-incomes, low ability to acquire resources, and live in low-security, poor quality conditions with poor hygiene conditions and a weak awareness of HIV/AIDS prevention. They have insufficient access to medical services and AIDS- related guidance. Therefore, migrant workers are a large vulnerable population.


Once infected with HIV, infected migrant workers and their families suffer heavily. Given the difficulty in detecting and treatment of HIV/AIDS there will also be a heavy burden on the whole society. Therefore, HIV prevention in migrant workers is a key health risk to be addressed in the process of poverty alleviation and development in the new stage.


3.3.2Impoverishment caused by poor education


Within the nation, there has been a focus on educational equality. However, even though the situation has become better for compulsory education with tuition fees reduced or removed, the impoverishment caused by poor education still remains. In poverty-stricken areas in western China, there are still many school-aged children who cannot complete compulsory education. It is estimated that there are still 5 million dropout children.


High tuition fees for non-compulsory education prevent many students from rural households from continuing their education. With enlarged enrolment of higher education and the commercialization and internationalization of higher education in the new century, many poor households can’t afford the higher education, which causes-education related impoverishment and social stratification.


Education policies are deficient in supervision and monitoring such issues as high tuition fees, and educational loans and scholarships only provide “reverse incentive" in China which is completely opposite to the American system. In contrast to the American system, vocational and higher vocational education is discouraged in China, while college degree education and post graduate education are given more resources. Such a system has definitely increased the social cost of poverty alleviation for students of poor families, and they are unable to change such a system.


3.3.3Slow increase in disadvantaged groups' family possessions


Due to deficiencies in basic medical services and education, vulnerable groups are disadvantaged in getting vocational training, thus they can only obtain positions with relatively lower income. Increase of family assets requires income accumulation and comparatively stable earnings or cash flows. Ordinary families often choose to sell off some possessions to pay for necessities of life or services when funds are needed. However, poor families that have no possessions to sell can only live on loans.

Even families temporarily moving out of poverty are quite likely to return poverty, when they need to pay high medical fees or tuition fees for their children. Under such circumstances, the risk of impoverishment for vulnerable groups is higher.


3.3.4The root of fundamental multidimensional poverty


Domestic and foreign studies on poverty analyze internal and externa! causes, including factors such as the external environment, institutional factors, investment factors, and social, cultural and personal factors. Starting from the path of development, we explore the root causes of fundamental multidimensional poverty in China from the perspective of the economics of income redistribution.


·Development paradigm and path


The Chinese Government has denied the so-called “Beijing Consensus" and has put emphasis on building an all-around, "well-off” society. Though different in discourse, China has adopted the same development paradigm as the West, especially since the period of reform and opening. This paradigm is similar to the Western growth-based paradigm.


Throughout this process, it is not difficult to see that China has adopted a catchup strategy (See Appendix One) of economic growth since Reform and Opening. Nonetheless, in order to truly realize sustainable development we have to avoid the problems that Western countries have experienced during their development, such as “overexploitation” of natural resources, or the “pollution first, treatment later” practice.


The notion of Developmentalism, as developed in some western countries, prioritizes high-speed economic growth. No one can deny that economic growth plays a role in increasing social wealth, but this doctrine of growth sees economic growth as a superstructure over human needs and environmental survival. It constructs growth as an ideology that excludes policy options, since the doctrine of growth has presumed that policy options have been determined by market demands and economic growth.


Such a development path with economic growth as its goal has proven to be a failure. Since conditions, basic economic systems, and social and cultural situations differ from one country to another, efforts to realize development and poverty alleviation simply by depending on the power of liberal markets often end in market failure, contrary to expectations. Under development with economic growth as the goal, public services such as education and healthcare often put too much emphasis on efficiency and overlook people’s basic needs.


·Economics of income distribution


Historically in China, each dynasty in its rising stages focused on the issue of distribution. In the process of production-exchange-distribution-consumption, distribution is the key point. In this context, distribution can only be optimized through government intervention, while other problems will naturally be solved by individuals. During the period between 1979 and 1984, income distribution for farmers was well arranged. Though the government did not intervene in farmers’ production, nonetheless farmers’ incomes and agricultural production increased substantially. This is also the period with the most rapid poverty reduction. Currently however, greater attention has been paid to production growth, and consumption is not fully stimulated; thus violating somehow the development rule of history.


In Western economics, well-being is referred to as a basket of goods and services that can be purchased with money, including private and public goods; all the things are included in a liberal market. When there are adequate products and services that people can afford with their earnings, people’s basic needs can be satisfied. However, when public goods are needed or public services deficient, public goods will transform into expensive private goods. When people cannot afford these new private goods with their earnings, multidimensional poverty takes place.


Even in the United States withadvanced infrastructure, basic health care and education, there are many relatively poor groups who cannot afford basic needs. There are huge gaps in comprehensive national strength and per capita income between China and the United States. Therefore, without considering the vast investment in infrastructure and public services, simply following a U.S. model of development will undoubtedly trigger multidimensional poverty caused by lack of public goods and public services.

More critically, since funds for poverty alleviation are distributed through transfer payments, when horizontal transfer payments for a minority group are made, they are likely to fall into the hands of powerful interest groups. This can lead to funds for poverty alleviation being used more by non-poor groups than poor ones. There are detailed studies in the United States on the deviation of funds caused by lack of detailed definition of access threshold value in the system.


·Poverty reduction practices in China


Though multidimensional poverty alleviation has been introduced into practical operations, a single income standard is still in use for targeting poverty-stricken areas and poor groups. During the process of resource allocation, it is quite difficult to identify deprivation (or relative deprivation) of rights in other fields. The utilization effect and efficiency of poverty alleviation resources cannot be monitored adequately due to the lack of non-income standards in the policy.


If poverty-stricken counties are initially designated by the Ministry of Agriculture according to the per capita net income of rural residents from the perspective of the “economic development of poor areas”, what is the specific criterion for future identification of poverty-stricken counties? For example when the number of poverty counties increases to 592, what criteria are used? No public criterion was found, and it seems the criteria for identifying poverty stricken counties are more subjective than objectively based. The relevant research reveals that some non-poor counties have in fact “wedged” themselves into the list of poverty-stricken ones in order to get more financial investment from the government.


Targeting the village level is presently conducted according to the national poverty line. This standard builds upon income data from the statistical authorities, including straw and stalk which is difficult for farmers to calculate, thus, the first deviation takes place in this process. Since different regions re-calculate the income levels of their own communities according to local price systems and consumption structures, there arises the second deviation. Thirdly, the number of poor is purposely increased to get more poverty alleviation funds from the state. Given that the approval agency dealing with poor villages lacks staff and other means for verification, the third deviation would be sufficient to cause significant deviation in the distribution of poverty alleviation funds.


The assumption of household level targeting is that poverty alleviation funds should go to the poorest households. Yet these are small groups in any village, and funds are easily withheld by opposing interest groups due to unclear means of monitoring and verification.


Presently there is no systematic poverty monitoring for provinces, because of financial reasons and the lack of specific tools and standards for measuring multidimensional poverty. The China Poverty Monitoring Report has adopted multiple indicators for monitoring. However, the results from monitoring are included in the income indicators because there is no target of multidimensional poverty reduction.


Poverty alleviation in China has entered a new stage of tackling “hardcore" poverty. Though some positive results have been gained in the village approach, sustainability of poverty reduction results needs to be proven in the future. During the process of poverty alleviation, diversified demands dispersed limited funds, and specialized projects are separated from comprehensive regional strategies for economic development, thus increasing the cost of specialized projects. Furthermore, no one knows whether specialized poverty alleviation investment will change the overall economic situation of a village. If clinical economics is used and funds are assumed to be the remedy to treat village-level poverty, then it is an open question that how much medicine is needed to "cure” poverty.


The system of "provincial governors be responsible for rice bags" and “mayors for vegetable baskets", which was popular in the past, does not exist anymore. With rising inflation and much lower bank interest rates, the Engel’s Coefficient for poor households remains high even after substantial changes have taken place in the nationwide basic consumption structure. In these households, income growth almost keeps pace with that of expenditure growth, making the wealth growth mechanism difficult to take shape for vulnerable households.


The main problem is that poor people cannot benefit from economic growth due to the unfair distribution of social welfare and the widening gap between rich and poor. Inadequate provision of fundamental welfare including nutrition and health, education and employment results in emerging multidimensional poverty.


In sum, multidimensional poverty is the root cause of many social problems in China. Poverty will become increasingly multidimensional in the coming decade; therefore, the key to solving the problem of poverty lies in people-oriented solutions and making resource allocations and monitoring accurately target to the causes of multidimensional poverty.


3.4China’s strategic direction for poverty alleviation


In the period when a traditional catch-up strategy was adopted, the Chinese Government provided generalized preferential medical services and public education services for vast rural areas. Though at a relatively low level, equality was given priority in social development. Poverty alleviation adopted a social relief strategy based upon distribution on the basis of labor under the same initial conditions (primary distribution). However, this strategy disappeared when China entered the stage of pursuing fast economic growth.


Since the beginning of the 21st Century, the Chinese Government has set people- oriented development goals, promoting human development, and realizing sustainable growth. With a better understanding of poverty alleviation, in recent years the Central Government has adopted the whole-village poverty alleviation strategy. The objective of that strategy is to permanently solve the subsistence problem for poor populations, and to improve their living and production conditions. Furthermore, the government also highlights adhering to integrated exploitation and all-around development, and emphasizes both construction of infrastructure and the development of science and technology, education, health and culture. It strives to improve living standards and community environment, and promote balanced development in poverty-stricken areas.


More importantly, the whole-village poverty alleviation strategy emphasizes public participation, and the designing and implementing of poverty alleviation plans in a bottom-up participatory way. From this strategy we can see that China has integrated multidimensional poverty into the practice of poverty alleviation, even though the concept of “multidimensional poverty" has not been clearly defined at the policy level.


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