Government Involvement in Solving Poverty

Government Involvement in Solving Poverty

Poverty is one of the greatest challenges facing the international community in the twenty-first century (United Nations Industrial Development Organization 3).  Despite the great strides made after the Second World War, poverty remains widespread in most parts of the world. According to the World Bank dollar-a-day poverty line, 1.4 billion people are living in poverty worldwide. The projection showed a decline in poverty from the 1981 poverty forecast of 1.9 billion people. The dollar a day poverty line was revised in 2008 to $1.25, up from $1-a-day. The decline was partly attributed to the poverty reduction in East Asia and Pacific. However, the poverty remained high in Africa. Poverty mainly causes hunger and malnourishment, and this has resulted in 25,000 deaths daily, with Sub-Saharan Africa being the worst hit. The number of hungry population in the world is estimated to be 963 million people, representing about 15% of the world’s population (Food and Agriculture Organization of the United Nations 53). The government should, therefore, be involved to a greater extent in solving poverty within industrialized nations because it results in child deaths, inequality, and hunger.

Poverty reduction can be managed through supported economic growth, empowerment of the population and improvement of the income distribution. One of the strategies for poverty alleviation being debated is the combination of policies for growing the revenue of a whole country as well as the increase in revenue to those living below the poverty line. The United Nation recognizes two major approaches for poverty reduction. These are policy interventions to provide essential services and poverty-cum-growth approach. The intervention policy strategy aims at availing essential services such as basic needs, social services, primary care and sanitation, electricity, housing, water, and gas. Moreover, the poverty-cum-growth approach aims at accelerating the economic growth of individual countries, therefore, creating income opportunities for the poor (United Nations Industrial Development Organization 4).

One of the historical examples of dealing with poverty after the Second World War is through Labor-Intensive Industrialization. The labor-intensive industrialization features the significant involvement of low-income people and full utilization of cheap inputs. The technique was mainly prevalent during the East Asian industrialization of the 1960s -1970s (United Nations Industrial Development Organization 6). The Asian growth mainly featured government intervention, export orientation, and labor-intensive industrialization. Examples of labor-intensive industries which have met the demand of industrialized nations post World War II are garment industry in Bangladesh and Kenya as well as electric and electronic equipment industry in East Asian nations (United Nations Industrial Development Organization 5).

Most of the Asian nations that are now middle-income nations experienced tremendous economic growth from the garment industry (United Nations Industrial Development Organization 5). Countries such as Indonesia, Malaysia, Korea, Singapore, Taiwan, and the Philippines were majorly involved in assembly processes of production, which required a lot of labor. Later, the electric and electronic industry replaced the garment industry and is now one of the economic activities that have transformed the Asian countries from low income to middle-income countries (United Nations Industrial Development Organization 13). The electric and electronic industry comprises of two types of production processes: the labor-intensive assembly process and high-tech process (United Nations Industrial Development Organization 14). The high-tech production process is used in producing essential parts using one of the most sophisticated methods. The labor intensive section of the manufacturing process acts as an entry point for low-income countries with less advanced technologies to further industrialization. However, having a labor intensive industry should not bind a country to that country forever. As with the East Asian countries, experience in the labor-intensive industry opened windows for diversification into manufacturing which requires better technologies and less labor involvement.

The other historical example of poverty reduction after World War II is through Agro-Based Industrialization. Scholars in development economics regard this approach as a leading sector for poverty alleviation (United Nations Industrial Development Organization 5). The activity is mainly common in rural areas of most low-income countries while agro-based manufacturing is an important non-farm sector (United Nations Industrial Development Organization 5). In satisfying the criteria for poverty reduction, agro-based is characterized by extensive involvement of low-income earners in the production process and the utilization of low-cost inputs. The majority of the rural population is absorbed in the industry, and farmers supply raw materials to the manufacturing agro-industries. It is, therefore, competitive and contributes immensely to poverty reduction.

The problem hindering developing countries from fully pursuing the agro-based industrialization is their inability to increase the competitiveness of the agro-industry (United Nations Industrial Development Organization 6). The competitiveness may be extended through inter-industry linkages and industrial upgrading (United Nations Industrial Development Organization 7). Industries within the agricultural sector may link and provide support materials needed in the production process, either as raw materials or as component products for the production process. Industry upgrading means advancing systems that are in place as a way of reducing wastages and increasing efficiency in the production process. Having better systems will reduce the production time and improve the quality of manufactured products. Strong backward and forward linkages in the production process are crucial in promoting competitiveness within the agro-based industries, therefore lowering the production costs (United Nations Industrial Development Organization 6). Also, to increase production and employment, the range of economic activities should be widened, and the productivity of the industry enhanced (United Nations Industrial Development Organization 6).

One of the solutions for dealing with modern day poverty is the emphasis on horizontal diversification. Currently, the focus is on vertical integration which involves upstream to downstream production processes in the value chain (United Nations Industrial Development Organization 10). Most countries concentrate on rebranding and re-engineering existing products to remain competitive. However, this may prove futile in an environment characterized by many competitors of the same products, which could result in redundancy. An example, when a labor intensive industry is developed in a low-income country due to the cost advantages resulting from low wages and high intensity, existing industries with low wages and high intensity could be competitive leading to low unit costs (United Nations Industrial Development Organization 11). Therefore, horizontal diversification combined with the vertical diversification will produce favorable results, giving an entity a competitive advantage over the competitors. Diversifying across the industry will spread the risks while generating income to the poor people and reducing poverty.

While many poor people in wealthy nations may not be in absolute poverty as compared to the many poor people in second and third world countries, the high poverty and inequality create significant issues. These issues need urgent redress by the government. Governments should utilize all resources at its disposal to reduce poverty and enact policies that aim at addressing social problems brought about by poverty. While agro-based industrialization is a key method for poverty alleviation, the governments should incorporate labor-intensive industrialization in their strategies. Also, the governments should balance their focus on vertical diversification, with a greater emphasis on the horizontal diversification (United Nations Industrial Development Organization 7). Horizontal diversification has positive impacts the governments will spread the risks and generate steady income (United Nations Industrial Development Organization 6).

 

Works Cited

Food and Agriclture Organization of the United Nations. The State of Food Insecurity in the World 2008: High Food Prices and Food Security-Threats and Opportunities. 2008. Rome: FAO, 2008.

United Nations Industrial Development Organization. Combating Marginalization and Poverty Through Industrial Development.  2006. Vienna: UNIDO Research Programme, 2006.

 

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