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Al-Ahram Weekly 29 July - 4 August 1999 Issue No. 440 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 29 July - 4 August 1999 Issue No. 440
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Profile Travel Living Sports Time Out Chronicles People Cartoons Letters Truly representative, fully accountable
By Nader Fergany *
Poverty should be defined, particularly in light of the goal of its eradication, in terms of generating a low level of human well-being. Perhaps the best definition is that offered by the UNDP: the incapacity to realise humanity's entitlement to well-being.
From this perspective, poverty is more or less equivalent to social powerlessness, which in turn is the result of the insufficient satisfaction of basic needs. In broader terms, poverty is the shortage of various forms of capital: material, financial, human and social. This definition of poverty makes it possible to expose what generates and reproduces poverty, thereby enabling the formulation of policies to alleviate and eradicate it.
It is unfortunate that most studies on poverty have given disproportionate emphasis to the low-income spending index based upon the so-called "poverty line". Apart from the methodological inconsistencies inherent in this approach, it does not furnish a complete definition of poverty. More importantly, it does not give sufficient scope to the possibility of remedying poverty-generating mechanisms and, therefore, cannot offer solutions capable of eradicating poverty. Instead, it tends to confine itself to the alleviation of poverty through the process of income transfer in the form of social safety nets.
Any strategy that aims to eliminate poverty and that can hope to meet with a measure of success must emanate from a comprehensive understanding of poverty-generating mechanisms. The eradication of poverty in Egypt will be a long and arduous process. The alternative, however -- the steady expansion and entrenchment of poverty -- must be avoided at all costs. Thus, the first requirement in formulating an effective strategy for the eradication of poverty is a critical analysis of our current circumstances. If all is as it should be, why do these circumstances continue to breed poverty?
The second requirement is our willingness and ability to make the necessary changes for the effective elimination of poverty. It will always be possible to nibble away at the corners of poverty through a variety of partial solutions. Any tangible progress towards the eradication of poverty in a country such as Egypt, however, where poverty is rampant and intractable, demands an assault on all political and economic fronts. Anything less will only render future generations of "poverty alleviation programmes" further testimony to the aggravation of poverty in Egypt.
POVERTY-GENERATING MECHANISMS: We must recognise poverty in Egypt as the product of complex structural processes rooted deep within the political and economic edifice of the country. If we are to formulate an effective strategy for the eradication of poverty, we must identify its major causes in this complex edifice.
The spread and entrenchment of poverty represents the ultimate failure of developmental efforts and, in fact, of any economic system. Thus, the primary cause of poverty in Egypt can be encapsulated in the failure of the development strategies that have been implemented since the middle of this century. These include the massive economic changes that were introduced first under state control and then under unbridled capitalist restructuring. This unfortunate blend has manifested itself in the failure to accumulate material, financial, human and social capital, and in the general difficulty of access to capital. Capital deprivation leads to fewer productive and profitable work opportunities and, in turn, to a low level of social prosperity.
The state's domination of the economy contributed to slowing development by spreading inefficiency and distorting the price structure. Structural adjustment, however, has also contributed to aggravating poverty. Cutbacks in public expenditure have caused public services to decline. The sale of public enterprises to the private sector has not necessarily helped improve efficiency, but it has resulted in higher prices and has frequently permitted private monopoly to supplant government monopoly. Under conditions of economic stagnation and rampant inflation, unemployment has risen and actual wages have dropped. Poverty had to worsen.
More importantly, there are few opportunities for the eradication of poverty given the current form of structural adjustment being implemented in Egypt. According to the prevalent logic of structural adjustment, capitalist restructuring makes private capital the primary stimulus of economic activity. This mentality fosters a bias for capital at the expense of labour. Obviously, those who own capital in a poor society represent a small minority; income from wage labour remains the primary source of livelihood for the overwhelming majority of the population. Giving precedence to capital, particularly big capital, especially against a backdrop of economic stagnation, generates unemployment and further extends the scope of powerlessness.
The social and political context of the structural adjustment programme, furthermore, does not bode well: the absence of transparency, the prevalence of favouritism, corruption and risk avoidance all prevent free access to information and fair competition. Worse still, this form of structural adjustment helps to exacerbate the distortions of the market, since it does not give high priority to institutional reform. Specifically, such reform conflicts with the interests of the new capitalists who, not infrequently, accumulate wealth through the purchase of public enterprises. The inevitable consequence is increasing inequality in the distribution of income and wealth, and therefore power -- another impediment to economic development, which further strengthens the vicious circle of poverty.
In all political economies, a deficiency in the various forms of capital and unequal access to capital are the most immediate causes of poverty. It is by being deprived of an adequate education and health care that humanity is first condemned to poverty. This deprivation tends to be harsher on women. Certainly, the lack of access to education and the poor quality of educational services are strongly linked to poverty. Disease is one of the obvious manifestations of poverty. Conversely, good health is an indicator of the ability to work. This factor is of particular importance to the poor, who generally must work in physically exhausting occupations. As wage remuneration for work is the only means of survival for the vast majority of poor, illness can only spell aggravated poverty.
All these ills lie within the scope of social security networks. Several indicators point to the decreasing ability of poor families to support the costs of basic education and health care. The growing dependency on the private sector to provide essential services combined with the spread of poverty is increasingly eroding the capacity of the poor to afford these expenses.
As the poor, by definition, lack capital assets, they possess very limited, if any, collateral. As a result, their ability to obtain credit, especially through official channels, is minimal, even more so in the case of women. In traditional societies, difficulty in obtaining finance generally gives rise to forms of usury which reinforce the vicious circle of poverty.
Frequently, structural adjustment exacerbates the problem by encouraging big capital, on the assumption that it generates large-scale production and innovation and, consequently, higher productivity. Major investors therefore enjoy huge privileges such as tax holidays, easy terms for the purchase of land and infrastructure, freedom to transfer profits abroad, etc. Their political contacts further enhance their privileged status through preferential access to information and available deals.
In contrast, small-scale businessmen or entrepreneurs, besides the obvious disadvantages they face, must deal with a dense forest of red tape and other hurdles in order to establish their enterprises. In particular, the problem of terms for small credit has not been fully resolved.
The bulk of the population resides in rural areas and is largely engaged in agriculture. Likewise, the poor are concentrated in rural areas, generally as small-scale farmers or marginalised landless peasants. Clearly, access to land holdings and water resources is indispensable to sustained life in rural societies. Even this fundamental right is frequently jeopardised, however, especially as a result of the redistribution of agrarian land ownership in favour of the rich.
In the final analysis, the poor are deprived of the right and ability to effectively participate in and influence social and political institutions, and specifically those institutions that are presumably intended to help them overcome poverty. The marginalisation of the poor in social and political institutions is the ultimate form of deprivation, because it enforces the major cause of poverty -- powerlessness -- and renders them a silent majority in the determination of domestic and national affairs. As such, the poor are deprived the fundamental rights of citizenship and, consequently, the essential capacities to extricate themselves from poverty. This is the crux of the issue.
THE ERADICATION OF POVERTY: The prevailing consensus holds that the most effective way to eradicate poverty is to empower the poor. Yet the only capital generally available to the poor is their labour power and their creative talents, which are repressed by poverty. Therefore, empowering the poor requires that the government, as the custodian of the interests of all citizens, adopt policies and programmes that give the poor access to social, human, financial and material capital.
Perhaps the most important form of capital is human capital, which is constituted through education, training and health care. As poverty is synonymous to lack of power, however, the poor must be furnished with social capital in the form of institutions guaranteeing that their voices will be heard and their interests protected. Money, of course, is also essential in enabling the poor to establish small enterprises, which are one of the most effective means to generate jobs and income. In predominantly rural societies, such as Egypt, land holdings and the availability of irrigation water are other primary exigencies for sustainable livelihood, and must be guaranteed at all times.
The fact that the state is responsible for empowering the poor by enabling them to obtain capital does not necessarily imply that the state itself must assume the burden of producing essential commodities and furnishing necessary services. In fact, recent history has proved this assumption fallacious. On the other hand, the state must guarantee that the poor have access to the various forms of capital through equitable distribution. Indeed, such measures are a fundamental component of all mature capitalist societies.
The domination of private economic activity is doomed to fail in the fight against poverty. It does generate economic growth in the narrow sense, however, which itself is difficult to achieve in societies with underdeveloped human capacities and high discrepancies in income and wealth distribution. The successful eradication of poverty requires the formulation of a new social contract providing for close interaction between an efficient and dynamic government, a competent and socially responsible private sector and a strong and genuine grassroots civil society.
Certainly, the profit incentive cannot guarantee that the poor will receive their entitlement to the forms of capital necessary in the fight against poverty. Primary education and basic health care for the poor, for example, do not offer any prospect of financial gain to attract the private sector. Nevertheless, it is possible to find ways to involve the private sector in these tasks. The voluntary payment of taxes is one method, provided, of course, that the government uses the returns from these taxes to empower the poor. Endowments are another method. Tax incentives could be an effective way of stimulating the private sector to adopt socially responsible modes of behaviour. Simultaneously, and perhaps more importantly, the poor need to be provided with protection against the brutality of capitalism in the absence of effective social institutions. In all events, the responsibility for empowering the poor in Egypt remains in the hands of the state -- that is, the legislative, judicial and executive authorities, not just "the government". This is certainly the case in mature capitalist societies. If the responsibility is to be assumed effectively, only the reform of civil service and government -- including local government -- will ensure that it actually represents and is truly accountable to the people. Such reform must constitute a fundamental component of the new social contract. Civil society constitutes the next most important actor in empowering the poor, provided that restrictions are lifted on the creation and activities of NGOs and that this sector is better equipped to contribute effectively to the fight against poverty.
INSTITUTIONAL REFORM: There is a clear need to enhance competitivity in the market. Toward this end, the government must launch an extensive campaign to protect free competition against monopolies and to foster competitivity by ensuring equal access to information and to the marketplace. This is essential both to the efficiency of the marketplace and to minimising the social detriments of unbridled capitalism.
Specifically, the labour market must guarantee freedom of access to information about available job opportunities and must furnish efficient employment mechanisms that match job opportunities to applicants. Labour markets must therefore be deregulated gradually, to ensure their flexibility in the framework of a competitive market. Thus, alongside the rights of management, the rights of labour must also be upheld. The right of association in trade unions, the right to generate the mechanisms for collective negotiations, guarantees of workers' rights upon termination of service (such as unemployment compensation indexed to rising prices), and real opportunities for productive employment through training programmes are the most basic mechanisms in this respect.
Governments in capitalist systems still retain major social and economic functions. The level of government efficiency has an important impact on economic activity in general and private sector activity in particular. Yet the governments of underdeveloped countries are notorious for their inefficiency. Therefore, civil service reform is an essential ingredient of institutional reform. To begin with, there is the need to reform the remuneration system in government service by ensuring the transparency of the wage structure, providing sufficient wages, reducing inconsistencies in wage scales and eliminating the discrepancies between the various sectors of public service.
In addition, a budget must be set aside for the equipment, operating expenses and maintenance necessary for the smooth functioning of government bureaucracies. Principles of sound public management should also be applied to raise productivity levels. Qualifications and performance should be the sole basis for appointment, promotion or termination of service. Since a reduction in the number of government employees appears inevitable, adequate compensatory measures must be introduced. These could include retirement or unemployment payments, training programmes and credit schemes.
In order to reduce the budgetary deficit, the tax structure must be overhauled to ensure fairness, on the one hand, and efficiency in collecting taxes, on the other, especially from the rich for whom tax evasion is easier than for the poor.
Civil society institutions, especially NGOs, can participate effectively in the fight against poverty. For their potential to become tangible, however, they must evolve into a social movement that is broader-based and more efficient than the state. This by no means entails doing away with the state or absolving it of its fundamental responsibility to empower the poor. On the contrary, the efforts of civil society should be seen as complimentary to those of the state. The ultimate value of this movement therefore depends upon the extent to which it supports collective civil action, which is ultimately the best way to fight powerlessness -- the essence of poverty.
Unfortunately, the poor are seen solely as recipients of aid and charity by most NGOs. These organisations have little influence and scarce funds. As a result, they are vulnerable to the influence of donors. However openhanded the financing of various projects -- which at any rate is extended only to a handful of fortunate NGOs -- the donor's position generates a form of dependency that, in turn, weakens the traditions of volunteer work and undermines the potential for sustainability.
It is clear that it is now necessary to lift the legal and administrative restrictions on the creation and management of NGOs. These organisations themselves, however, must work to develop into a broad-based grassroots movement capable of engendering self-sustaining, self-financed, collective social activities. It is useful, in this context, to support and encourage the efforts of unofficial civil society institutions rooted in local culture, which help to serve the poor, instead of attempting to "modernise" them. These institutions are better qualified to mobilise the efforts of the poor, focus their concerns and tend to their needs than organisations and programmes imposed from above.
Finally, a thoroughgoing legal and administrative reform is crucial if all Egyptians are to be guaranteed their full rights as citizens. Legislation must conform with fundamental human rights, particularly freedom of expression and the freedom to organise politically. It is also imperative to sanctify the rule of law through an absolutely autonomous judiciary.
If the voice of the poor is to be heard and their interests safeguarded, government must be truly representative and fully accountable to the people. Local government is not solely a means of bureaucratic decentralisation. More importantly, it can effectively guarantee the right of citizens, particularly the poor, to participate in the war against poverty. At both the national and local levels, the public's participation in governance through popular representatives implies free and genuine elections.
*The writer is the director of Almishkat Centre for Research.
