Interesting advice for how the extractive indsutires can make long term and sustainable investments in Mozambique – prioritise the poorest! See below…
May 21, 2012
Prioritize the Poorest – Helping the Bottom Billion is Good — and Good Business
Robert Jenkins and Anthony Lake
ROBERT JENKINS is Associate Director for Policy, Planning, and Programme Monitoring at the United Nations Children’s Fund. ANTHONY LAKE is the Executive Director of the United Nations Children’s Fund.
The world of international development has long been divided between idealists and pragmatists. The idealists give more weight to addressing the needs of the world’s most destitute. The pragmatists are driven more by impact at the aggregate level, such as increasing GDP per capita. A growing body of evidence, however, suggests that the interests of these groups coincide. In many cases, it is most cost-effective to focus on the poorest groups.
In part, the convergence is due to the fact that, although many development indicators have improved at the national level — including an overall reduction in poverty and child mortality and increasing school enrollment — there are growing disparities within many countries. That is, as broad indicators improve, the gulf between the best and worst off is widening. A recent UNICEF study found that, in 26 countries, the mortality rate for children under five has declined by ten percent or more since 1990. But in 18 of those countries, the gap between the child mortality rates for the richest and the poorest quintiles of the population remained unchanged or grew. A specific example: between 1990 and 2008, measles immunization rates increased by ten percent among the wealthiest quintile of the population in West and Central Africa. They only increased by around three percent among the poorest quintile.
Across the developing world, children in the poorest income quintile are still less than half as likely as those in the wealthiest quintile to have benefited from prenatal care; nearly three times as likely to be underweight; twice as likely to die before their fifth birthday; and, among girls, are three times as likely to get married before the age of 18. In addition, the disadvantaged have suffered the most from rising food and fuel prices, too often leading the poorest families to sell off vital economic assets and withdraw their children from school.
These and other disparities are an injustice. Beyond the moral imperative to correct them, there is also a practical, economic case for investing in equity.
For decades, development experts have maintained that a public policy focused on helping the most disadvantaged is desirable in principle, but not cost-effective. Further, many believed, a rising economic tide would float all ships. But the past 15 years have shown that economic growth alone does not necessarily help the poorest of the poor.
The development community increasingly recognizes that approaches that emphasize greater equity are, in fact, cost-effective. Picking the low-hanging fruit does not necessarily produce the greatest results per dollar expended. We know intrinsically that the greatest results can be achieved where the needs are greatest. The same vaccination program in an area of widespread disease saves more lives than one in a less afflicted area. Opening a new school in an area that has none will boost education more than opening one in an area with several. The question is whether the greater impact outweighs the additional cost of working in the hardest-to-reach areas.
The answer is yes, it does. According to “Narrowing the Gaps to Meet the Goals,” a recent UNICEF report, an equity-focused approach is actually more cost-effective than one that simply focuses on improving national averages. In countries with the highest under-five mortality rates and the worst poverty, a $1 million pro-equity investment will save up to 60 percent more children than a traditional $1 million investment. Even in middle-income countries, such approaches generally save as many children per dollar as traditional ones.
Investing in services for the poorest groups not only saves more lives but also promotes economic growth. This is true in developing and middle-income countries and in richer ones, too. Evidence shows that developed and developing countries with deep inequality tend to grow more slowly. A recent IMF staff study found that a ten-percentile decrease in inequality increases the expected length of an economic growth period by 50 percent. To see how investing in the social sector can promote and sustain growth, consider efforts to improve education and address malnutrition.
In both rich and poor countries, an increase in learning achievement (as measured by test scores) of one standard deviation is associated with an increase in a country’s long-term growth rate of around two percent annually. Countries in which large sections of the population are denied quality schooling are thus wasting a hugely important and productive resource.
And that is especially true of those countries that deny girls an education. One extra year of primary school can boost their future wages by between 10 and 20 percent — an increase that also benefits their families. A 2003 study found that women and girls worldwide reinvest 90 percent of their income into their families (men reinvest only 30 to 40 percent). South Asia and sub-Saharan Africa, in particular, are held back by gender inequality in education. Estimates suggest that between 0.4 and 0.9 percent of the differences in the growth rates of those two regions and that of East Asia is attributed to their large gender gaps in education. In other words, educating the poorest — especially the poorest girls — is not only the right thing to do. It is the economically smart thing to do.
Addressing malnutrition reaps similar gains. A hundred and eighty million children around the world are stunted, a permanent condition from chronic early malnutrition that prevents children from ever growing as tall or as cognitively developed as they should have been. The price of malnutrition is thus paid later in reduced earning capacity — some estimates show by as much as 22 percent. And that, in turn, can have a devastating impact on a nation’s economy.
Stunting can be relatively easy and inexpensive to prevent. Promoting improved feeding practices and providing micronutrients, such as Vitamin A, zinc, iron, and iodized salt, are examples of proven interventions that have had significant positive results in reducing malnutrition. The impact on economic development of such interventions can be tremendous. The World Bank estimates that improving early-childhood nutrition can add two to three percent to the GDP of a poor country. More concretely, the Copenhagen Consensus, a group of leading development experts, calculated that every dollar of Vitamin A supplements can eventually yield a return as high as $100.
In addition to contributing to growth, an equity approach helps promote stability. Inequality, if unchecked, contributes to weak social cohesion, poor institutions, and bad governance. All else being the same, the more unequal a society, the likelier it is to have higher infant mortality rates and lower life expectancy, poorer educational attainment, more teenage pregnancies, and a higher number of homicides and imprisonment rates.
Reducing disparities makes communities more resilient. For example, Brazil and Indonesia have been able to withstand the global recession better than other countries. A recent report by the International Labor Organization and the World Health Organization shows that earlier investments in the “social protection floor” helped maintain more demand for goods and services among the most disadvantaged. In addition, Bangladesh’s improved response to natural disasters in recent years has been attributed, in part, to its more diversified economy and its poverty reduction programs, along with its efforts to support remote, disadvantaged communities in disaster-prone areas.
A society in which children’s opportunities are limited by their gender or race, the income of their parents, or where they live is not only unjust. A country that fails to tackle these issues is also one that is limiting its potential for long-term growth, stability, and resilience. It is thus time for idealists and pragmatists to work together toward greater equity not just because it is the right thing to do but also because it is deeply practical.
Copyright © 2002-2012 by the Council on Foreign Relations, Inc.