CONADEV

Group 3
Macatugob, Angelica
Paras, Jose Lorenzo
Recede, Alyssa
Soriano, Noel
Tomolin, Jewel

“It is generally recognized that economic growth is a necessary but not a sufficient
condition to eradicate absolute poverty? Explain the reasoning behind this argument and present
your views about this argument.”

Introduction

Economic growth is essential in generating wealth for the country that it may provide a
society that is able to deliver the essentials in living a better quality of life, but it does not
necessarily lead to a better quality of life. In numerous cases, nations have similar GDP levels or
average income levels, yet differ substantially in levels of national health and education. At the
same time, some poorer nations fare better than some richer nations in terms of life expectancy,
infant mortality, and other indicators of well-being (Sen, 2005). Lack of sufficient income and
poor opportunities cause absolute poverty. ​Since the publication of the first Human Development
Report in 1990, countless actions have been made in diminishing poverty and helping the health,
education, and living conditions of numerous people. However, as great as these gains might be,
they have been distributed unevenly. Strong inequality in human development remain between
countries and within them and such disparities have been caused by a variety of reasons.

Analysis

Skewed distribution of income; factors that exist within groups like race, gender,
ethnicity, and those that form between communities; and the existence of biased policies that
mostly strain the lower social classes are the roots for these disparities in human development.
Various and simultaneous forms of discrimination are faced by hundreds of millions of people,
and the outcome of the interaction among them shows the extent of separation they experience.
A combination of vertical and horizontal inequalities can create an intense exclusion and
marginalization, which at the same time, maintain absolute poverty and inequality (Grynspan,
2016).
 In the study of Dullah Mulok, Mori Kogid, Rozilee Asid & Jaratin Lily (2011), the
country of Malaysia was studied regarding economic growth being sufficient for poverty
alleviation. Malaysia has been one of the developing countries in Asia and for the past few
decades, poverty rates and life expectancy rapidly went down. The researchers wanted to
determine whether economic growth is a contributor in eradicating absolute poverty. Results
show that indeed poverty was reduced due to the economic growth of the country, however, it is
not sufficient to claim that economic growth is sufficient for poverty reduction.

Another study in Mexico focused on the relationship between economic growth and
poverty by analysing all 32 mexican states (Campos and Monroy-Gómez-Franco, 2018). It was
found that there was a negative relationship between growth and poverty in the short term.of
majority of the mexican states. However in other states, there was no relationship between the
two. It was also found that there was variability in the sensitivity of poverty to changes in
economic growth. Northern states showed greater sensitivity than southern states. This is because
in southern Mexico, infrastructure and basic services are nonexistent being a hindrance for the
residents to contribute to the economic growth. States that have better access to services and/or
basic needs tend to have a greater capability to reduce poverty through economic growth.

Moreover, Lee and Sissons (2016) studied the relationship of economic growth to
poverty in British cities for the years 2000 to 2008. They concluded that there is very little
association between reduced poverty and economic growth. This implies that growth should be
inclusive to have more effect on poverty since there is also inequality which makes economic
growth attributable to those that belong in the population of income earners.

Despite the attained high rate of economic growth in the Philippines in the year of 2015,
poverty incidence and subsistence incidence is still very evident in the country today. According
to the Philippine Statistics Authority (PSA), the proportion of Filipinos whose income is below
the annual per capita poverty threshold in the year 2015 is estimated at 27.6% in comparison to
the 25.2% per capita poverty threshold in 2012. This only means that economic growth does not
necessarily lift the standard of living of everyone in the country. Sometimes, it even makes it
harder for those under the poverty line to escape poverty.

Conclusion

Although economic growth is necessary, it does not always mean it is sufficient to

eradicate poverty and inequality. As long as the wealth and income in the economy is not evenly
distributed, there will always be inequality. Early studies show that poverty eradication and
economic growth do not always go together. A constantly debated question in development
economics is whether or not economic growth in itself is enough to reduce poverty. Evidence
from the majority of the world’s poor now live in middle income countries (which by definition
has in fact, experienced a reasonable amount of economic growth) suggests that growth alone
would not suffice to eradicate poverty. The incessant problem of poverty in the developing world
has led many to examine the efficacy of economic growth and development as a means to
alleviate poverty.

Sound macroeconomic policies and openness to the world economy may be vital in
poverty alleviation. Previous studies show (Roemer & Gugerty, 1997) that countries with better
macroeconomic policies grow faster and this growth, in turn, eventually reduces poverty. In the
late 1990’s, the prevalent strategy was to target basic social services as a means to lessen
poverty. Since then, development intermediations were dissected for measurable evidence of
direct impact on the poor. After all, what was the point of growth and how could it last if poverty
remained as is? As in Lustig et al.’s (2002) study, policies that are targeted at improving the lives
of the poor are rather reinforcing. Thus, if there is complementarity, economic growth may be
deemed effective in reducing poverty.

The challenge the world faces in facing future growth is how to translate these numbers
into inclusive growth to achieve higher development not only in wealth, but also in the standard
and quality of life for every citizen of the country. The goal should not be making a country
richer, but making everyone in the country richer. Yes, economic growth is necessary and is
what allows a country to achieve a higher standard of living for its people, but it is through
looking past the illusions of growth and politicizing economic policies, that people will be able
to realize that growth is not a solution in eradicating poverty.

References

elsevier.es/en-revista-cuadernos-economia-329-estadisticas-X0210026612536068
https://chicagopolicyreview.org/2018/03/06/does-economic-growth-help-or-hinder-poverty-allev
iation-a-case-study-from-mexico/
http://eprints.lse.ac.uk/66806/1/Lee_Inclusive_growth.pdf

Grynspan, R. (2016). ​Why economic growth is not sufficient to tackle inequality.​ Retrieved from,
https://www.weforum.org/agenda/2016/04/why-economic-growth-alone-isnt-enough/