Martin Ravallion on The Economics of Poverty

I’ve just finished working my way through Martin Ravallion’s magnum opus, The economics of poverty (Oxford University Press, 2016).  Ravallion was the leading economist in this field for the World Bank, and is now a Professor of Economics at Georgetown.  For Ravallion, there have been two ‘poverty enlightenments’: the early nineteenth century, when economists started to address the problems, and the 1960s and 70s, when poverty was ‘rediscovered’ and many contemporary techniques were devised or refined.   There has been a third wave since then, as people have come to understand the multidimensional and relational character of poverty, the political and legal dimensions of the concept and the importance of voice and empowerment; but Ravallion doesn’t have much time for all that.   Multidimensional indicators are ‘mashups’, poverty is at best ‘weakly relative’ with an absolute core and the experience of poverty is individual.

There’s lots to disagree with, then.  Most of the book is a review of economic techniques for the analysis of anti-poverty programmes; occasionally it’s heavy going.  Ravallion is at his best in the section on impact evaluation, even if I disagree with much about the basic approach.  Ravallion is a true believer in the value of multivariate analysis; missing values can be filled in by the computer (p 158), and the influences on poverty can be identified by letting variables “‘fight it out’ statistically to determine how much each variable matters” (p 249).

There are a couple of sideways mentions of my book, The idea of poverty, and the joy of blogging is that I can reply.  Ravallion is critical of the contention that structural adjustment made things worse for poor people. I’ve written more about structural adjustment, but in the book in question I had written only this brief comment:

In the 1980s, the International Monetary Fund and the World Bank promoted ‘structural adjustment’, a particular model of economic reform for developing countries – creating opportunities for international business, imposing strict financial discipline, increasing inequality and cutting the public sector.  Even when this worked, it generally increased the vulnerability of the poor.  When it did not, it could have very detrimental effects, because it weakened investment in human capital and cut away the main social protections that poorer people might have had.

Ravallion comments:

The critics of adjustment efforts argued that they were externally imposed and ill-conceived agendas for reform. In the 1980s it was often claimed that these programs increased poverty and inequality and one still hears such claims. [Note 174:   For example, Spicker (2007, 127) asserts that these programs generally increased inequality and poverty.]  The claims were rarely based on good evidence and, by and large, they did not stand up well to more careful empirical scrutiny.

Well, I did write that “Even when this worked, it generally increased the vulnerability of the poor.”  And another poverty expert wrote this:

This success against extreme poverty has come with continuing vulnerability to aggregate economic contraction, with one-in-six people in the developing world now living between $2 and $3 per day.

I wrote that the programmes increased inequality, and the same expert wrote, with a reservation I’d accept, that

Better (in the sense of “pro-market”) institutions … offer some hope for poor people, but it must be judged a rather limited hope based on experience.  The favored institutions tend in practice  to perform less well for poorer people. … [S]uppose that reforming developing countries fall into two categories: those for which pre-reform controls on the economy benefited the rich, keeping inequality artificially high (arguably the case in much of Latin America up to the 1980s), and those in which the controls had the opposite effect, keeping inequality low (as in Eastern Europe and Central Asia prior to the 1990s). Then economic policy reforms can entail sizable redistribution between the poor and the rich, but in opposite directions.

The expert in question is, of course, Martin Ravallion, on pages 448, 409-10 and 439 of this book.

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