Of upside down anti-poverty policies

There is a general agreement in Malawi that poverty is the country’s most ubiquitous and insidious social problem.

According to the National Statistics Office (NSO), around 51 percent of the Malawi population lives in poverty—surviving on less than $1 (roughly K440 at present exchange rates) per day as defined by the World Bank.

Elsewhere, however, the poverty rate covers those who survive on less than $2 (K880 per day)—but if that were to be applied to Malawi, we could as well be talking of 75 percent of the population being in dire poverty.

An even simpler definition of poverty was provided by Adam Smith in the 18th century, explaining it as the inability to buy necessities required by nature or custom; or, as the Copenhagen Declaration defines it, “a condition of severe deprivation of basic needs.”

The persistence of poverty in the country is baffling given the many policies Malawi has implemented targeting destitution, albeit using private sector-led economic growth as the panacea, but whose effectiveness remains dodgy.

You just have to look back and recall the widely discredited structural adjustment programmes and the poverty reduction and growth facilities, among others.

These were, of course, World Bank and International Monetary Fund (IMF)-driven policies aimed at restructuring the Malawi economy largely through privatisation and liberalisation.

Even the Malawi Poverty Reduction Strategy—with its emphasis on strict monetary policy, austere fiscal management, privatisation and price liberalisation—had a shrilling neo-liberal agenda ring to them, although the messaging was that it was a ‘pro-poor’ policy document.

These were policies that the former president the late Bingu wa Mutharika disdained with passion, famously declaring this other day that the Washington Consensus’ “obsession with macroeconomic stability is dangerously misplaced”.

“The Washington Consensus tells us that African countries must stabilise first in order to grow. And I am saying no, Africa must grow first and then stabilise,” declared Mutharika, then African Union (AU) chairperson.

Yet even the so-called home-grown policies that the late Mutharika personally championed—initially as Malawi Growth Strategy (MGS) and then later the broadened Malawi Growth and Development Strategy (MGDS I and II) currently in use—have barely reduced poverty.

Indeed, despite the more than seven percent average growth in gross domestic product (GDP) achieved under MGDS I, the output expansion did not bring the stability that Mutharika preached would come.

Most importantly, the economic growth rates—even at more than the six percent development practitioners say is needed to meaningfully cut poverty—had very little dent on poverty levels in the country.

Given this turn of events—poverty levels remaining unchanged even when growth has been higher—is it time to seriously rethink the notion that economic growth can reduce poverty?

While studies on the relationship between GDP growth and poverty levels are sparse in Malawi, or if the conventional trickle down wisdom were true, shouldn’t poverty levels have sharply dropped between 2006 and 2010 when GDP growth rates averaged more than seven percent—one percentage point higher than the six percent required to have an impact on poverty?

I should point out here that I am not saying focusing on GDP growth is unnecessary—far from it. In fact, it is a must. My point is: are we attacking poverty in the right way or we are just continuing with the same failed approaches imported from Washington, for example?

What I am saying is that top-down economic growth only alleviates the poverty of those at the top—the less than one percent of our population, leaving behind the 99-plus percent stuck in the unforgiving dungeons of poverty.

I am also saying that to really fight poverty in Malawi, we must put in place carefully targeted poverty alleviation measures that, while slashing poverty directly, also promote economic growth at the same time.

I mean a seed grows into the soil first where its roots strengthen to tap in the nutrients before sprouting out with leaves. It does not start with leaves and then roots!

I am talking about anti-poverty measures that aggressively upgrade the skills of the poor so that they not only participate in the labour market but also create products and services from where they can generate their income while simultaneously contributing to national output. I know there are pockets of such activities in the country, but the implementation is half-hearted and without strong government leadership hence, very little impact.

Surely, building houses for the poor or subsidising building materials so that they can construct their own houses won’t just do it when they do not have the skills and the means to raise the money for redeeming the goods, let alone feed their families, pay for their education or health care.

In the end, this only creates welfare dependency or poverty traps in the same way the Farm Input Subsidy Programme (Fisp) has done after deviating from its primary objective of building poor farmers’ capacity to produce more for, say, five years after which they were supposed to graduate out of the initiative and sustainably contribute to national output. But, no, politics took over and then here we are.

I digress.

Apart from upgrading the skills of these poor folks, we must also meaningfully invest in their children’s education—the great equaliser. It goes without saying that cost-effective investment in education and training boosts human capital and—in most parts of rural Malawi and peri-urban areas—education is the only escape route out of poverty.

I am also saying that to deal with economic underdevelopment, we must have markets that function—including agricultural and financial markets.

And, of course, we must kick out politics out of the markets because things like favouritism in awarding of contracts and selection of beneficiaries of government programmes worsen poverty.

These are obviously not the only ways to help cut poverty dramatically in Malawi, but they are some of the key ones. What we need as a country is to put our heads together and be serious about what we agree to do. And then do it.