The more unequal a society is, the bigger the investment needed to eradicate poverty
Op-Ed by Kiki Gbeho – As we get ready to launch the United Nations Development Programme’s (UNDP) flagship Human Development Report (HDR, 2016) in Namibia, it is a good time to reflect on the importance of human development.
This year’s report focuses on how human development can be ensured for everyone. The report is opportune as countries deliberate on pathways to implement the Sustainable Development Goals (SDGs). The report, Human Development for Everyone, highlights the nexus between the SDGs and the human development approach as both stem from universalism: enhancing freedom of choice for every human being and leaving no one behind.
Development is not just about factories, dams or roads; it’s about people, who must remain central in all economic, social, political and environmental efforts. To quote Nobel Laureate Amartya Sen, development is, “to advance richness of human life rather than richness of the economy in which human beings live”… which is only part of the story.
UNDP’s human development approach builds upon Amartya Sen’s seminal work on human capabilities. This approach is about improving the lives of people and giving them the freedom of choice to live the lives they value. This approach emerged from the 1980s, when increasing evidence showed that economic growth alone was not sufficient for sustained development.
For example, Structural Adjustment Programmes in less developed countries did not consider social indicators. Hence we saw a less than optimal impact of economic growth in these countries. Even in more developed countries, economic prosperity was accompanied by inequality of income. A realization therefore emerged that quality is as important as quantity of growth.
As the Human Development Report notes, despite significant gains in human development levels over the past decades, this progress has not been equally shared by all. In almost every country, certain groups are more disadvantaged than others and these disadvantages are often multiple (e.g. economic, social, cultural), mutually reinforcing and dynamic. Moreover, gender inequality and the lack of women’s empowerment remains a key challenge everywhere to achieving human development.
These issues resonate well with Namibia’s situation. With a human development index (HDI) value of 0.640, Namibia is classified in the ‘medium human development category’ and ranks 125 out of 188 countries. The HDI measures human well-being: education, health and standard of living.
Much of Namibia’s progress is due to an increase of approximately 69% in its gross national income (GNI) per capita, between 1990 and 2015. However, when inequality levels are considered, the HDI value falls to 0.415, even lower than the average for low human development countries at 0.497. Thus, there is a loss of 35% due to inequality in the HDI indices.
Indeed, despite sustained progress, Namibia still faces one of the highest levels of inequality not only within Africa but also globally. It therefore makes sense that Namibia has launched a war on poverty, elaborated the Harambee Prosperity Plan and charged all of us (whether private or public sector, academia or civil society), to focus our efforts on eradicating poverty in order that no Namibian will feel ‘left out’.
From an analytical point of view, the links between growth, inequality and poverty have been extensively investigated. Research results confirm that inequality matters for poverty eradication. Recent estimates, (Kraay, 2004; Affandi and Peiris, 2012) state that about two thirds of poverty reduction within a country comes from growth; and greater equality contributes the other third.
However, evidence (Ravallion, 2013; Kireyev,2017) also confirms that high initial levels of inequality partly offset the expected benefits of growth. A 1% increase in income in the most unequal countries produces a mere 0.6 % reduction in poverty, while in the most equal countries it could yield up to a 4.3% decrease in poverty. This perhaps explains Namibia’s slow progress on human development; an increase of 10.7% compared to global progress of 20% between 1990 and 2015.
It must however be noted that Namibia is doing something right as it has managed to reduce inequality while growing its GNI. This is no small feat. As noted by Joseph Stiglitz when he visited Namibia last year, “Namibia’s Gini coefficient (the standard measure of inequality based on income distribution) has fallen by some 15 points since 1993; the poverty rate has more than halved, from 69% in 1993 to under 30%, with extreme poverty (the number of people living on less than US$1,90 a day) falling by a similar margin, from just under 53% to less than 23%.”
Stiglitz also noted that Namibia’s early focus and investment in the social sector especially education has borne fruit; “this approach is instructive and should be ‘emulated’ by the world and especially Africa.”
Going forward, the policy implications from these results are rather straightforward.
Structural transformation (accelerating potential economic growth) with a focus on social sector spending should still be pursued to reach higher levels of growth and lower levels of poverty and inequality.
Given the challenging international environment and the current constrained budgetary position, high sustained levels of growth are less certain. Moreover, as explained earlier, economic growth alone will not be sufficient to have a strong impact on poverty if it is not complemented by well-designed public policies that promote inclusiveness.
Without such policies, and given the existing level of inequality, Namibia would have to achieve a much higher rate of income growth (compared to a less unequal country) for an identical outcome on poverty reduction.
It is equally important to create an environment and policy framework that ensures that ‘no one is left’ behind and that appropriate redistributive policies ensure that resources are directed at those who need them the most. One of the best entry points for this is strengthening gender equality, which is a multiplier to catalyse economic and social development.
In sum, to accelerate its growth trajectory and realise human development for everyone, Namibia should continue to build on its achievements and address the remaining challenges through its national policy frameworks enshrined in Vision 2030, the National Development Plan, the Blue Print on Wealth Redistribution and Poverty Eradication as well as the Harambee Prosperity Plan.
The success of these policies in enhancing human development outcomes requires them to be pursued in a coherent manner not only through multi-stakeholder engagement but also through buy-in and implementation at local and sub national levels. A seamless integration of these documents with international frameworks such as Agenda 2030 and AU 2063 will ensure that national policies and programmes ‘leave no one behind’.
About the Author: Kiki Gbeho
Ms. Kiki Gbeho is the current United Nations (UN) Resident Coordinator and United Nations Development Programme (UNDP) Resident Representative to Namibia. She hails from Ghana.