The Connection Between Poverty Concepts and Poverty Reduction Strategies: The Case of China Lai Junhao, China

The Connection Between Poverty Concepts and Poverty Reduction Strategies: The Case of China

By Lai Junhao, China

Introduction

Poverty is an obvious but elusive concept. In many cases, one can easily tell if a family is stuck in poverty. However, how conceptualising different types of poverty has always been a controversial issue in academic circles. More critically, different perceptions of poverty may directly influence the design of poverty reduction policies, potentially affecting the livelihoods and lives of thousands of people. In this essay, the author will analyse how different conceptions of poverty biased towards different poverty reduction strategies from the perspectives of China. To clarify my view, three concepts of poverty are introduced. The first one is related to production as poverty is a material shortage caused by low productivity. We discuss how this biased concept leads to oversimplified strategies that only focus on production. Then we discuss the capability approach which leads to human capital related strategies and essentially emphasises the importance of distribution in poverty alleviation strategies. In the last part, we compare the social exclusion approach with the above two concepts and point out the difficulties and opportunities for its accurate application in poverty alleviation strategies.

Part I

“It doesn't matter whether a cat is black or white, as long as it catches mice.” –– Deng Xiaopin3

Deng Xiaoping's famous "cat theory" used a cat-and-mouse metaphor to explain the most fundamental reason for China's reform and opening up - raising productivity to alleviate poverty. Deng believed that the root cause of poverty in a region was material deprivation caused by inadequate local productivity. In other words, this concept “frames poverty as deficient productivity” (Fischer, 2018, p. 190). The “productivity” here, specifically, refers to the output of every individual or the value-added they create. It is better described as “monetary value-added productivity” because it could be only measured by the money-metric approach in reality (Fischer, 2018, p. 189). Gross National Product (GDP) is usually the most important measure of productivity although its importance has waned amid much criticism. Some scholars believe that the change in individual income can be used to refer to the change in individual labour productivity, but this may be a tautology (Fischer, 2018). Even if productivity improvements do lead to higher personal incomes, they do not immediately translate into better living conditions (Pantazis, 2006). Above all, this concept of poverty focuses on the importance of growth in eradicating poverty, which by it is considered to be a lack of material and changes in poverty are observed through different moneymetric measures. This view is often criticised as an obsession with economic growth (Fischer, 2018), but it is not meaningless. On the contrary, changes in productivity do affect poverty. Productivity often sets a ceiling on income or wages. That is why proponents of this view always say, ‘let's make the pie

3 The translation of this Chinese sentence is taken from China Daily (Buckle, 2018). Available at: http://www.chinadaily.com.cn/a/201808/02/WS5b728ae4a310add14f385b4a.html

bigger’. For example, research showed a strong correlation between agricultural output per unit area and declines in poverty indicators, and it is “unlikely that there are many other development interventions capable of reducing the numbers in poverty so effectively” (Irz, Lin, Thirtle, Wiggins, 2001, p. 449). This research points out “a yield increase of one third might reduce the numbers in poverty by a quarter or more” (Irz et al., 2001, p. 462). A recent study supports this view but also points out that the effect of productivity on poverty reduction is small in industry and services, and that the effect of increased agricultural productivity on poverty reduction decreases as the former increases (Ivanic and Martin, 2018). In conclusion, productivity improvement may have a positive effect on poverty reduction regardless of the measurement problem. However, it is not a panacea and the effect will not last forever. This concept of production plays an important role in the action of alleviating poverty because it fits the intuitive imagination of many people, especially the people from the upper class. When they analyse their relative success, they often think that the successful people (or regions) have created a huge amount of value. In turn, it is normal for them to think that poverty is caused by a lack of productivity in underdeveloped areas. Thus, until now, increasing productivity has been at the centre of many poverty-reduction programmes. As noted above, focusing on productivity growth alone creates problems in poverty reduction action. I will start with the measurement issue and discuss how the fallacy of productivity reduction and the neglect of risk affect actual poverty reduction programmes. The trouble with measurement of productivity is that “they are generally based on monetary value-added measures, not actual output” (Fischer, 2018, p. 192). When we use value-added data to measure productivity, we measure “a combination of output and price” (Fischer, 2018, p.192), the latter includes the value of the wage. Moreover, in services or industries with no physical output. This measure tends to look at changes in the price of labour power as a commodity in the market rather than changes in productivity. For example, a Chinese TV star was recently prosecuted by the government for tax evasion involving more than 100 million yuan, which means he may earn more than 150 million yuan before tax in a year (Tian, 2022). His high earnings, and those of his peers, may not be well explained by rising labour productivity, considering the low income of actors 30 years ago in China4. Even in the industry which has physical output, this measurement is still problematic. China's blue-collar workers are considered to be among the world's most productive although their wages are still third-world standards and far below those of their American counterparts. The immediate reason for this is that labour power as a commodity cannot move freely in reality. In other words, workers from the Global South cannot simply move to the Global North to do the same jobs. They face at least two barriers including language skills and nationality (or legal). The latter is essentially a barrier to power, the exclusion of immigrant groups by groups with a stronger voice at the local level reflected in law. As a result, workers and farmers in the Global South are unlikely to vote with their feet, and their labour power as a commodity is actually in oversupply locally. From the perspective of the labour theory of value, it is difficult for these workers to obtain fair wages for themselves by improving their productivity because most of their surplus-value benefits the north of the country through the value chain. That is to say, in the Global South, Marx’s conclusion still works: “The cost of production of simple labour power, therefore, amounts to the cost of existence and reproduction of the worker. The price of this cost of existence and reproduction constitutes wages” (Marx, 1884, p.84). In other words, the increased productivity of workers in such

4 For example, a famous Chinese actor was only paid 2,000 yuan for a long-running soap opera in 1986 (Luju Bar, 2022) Available at: https://lujuba.cc/en/649578.html

places does not necessarily lead to higher incomes or better well-being. On the contrary, the more productive they become, the greater the oversupply of labour power in a given area, and the lower the wages. In conclusion, we may be measuring price and wage or the relationship of supply and demand when we measure productivity. If we believe that “monetary valuation can be used as an accurate approximation of productivity in a complex modern economy”, we may fall into the “fallacy of productivity reductionism” (Fischer, 2018, p. 192). In addition to this fallacy, the risks involved in improving productivity are often overlooked. The transition from farmer to waged worker is often seen as a good way to reduce poverty. For example, a central government official in China stated that "the fastest way to reduce poverty is for poor people to work outside the hometown" (Gu, 2020). Although an immigrant working in a factory is more productive, he or she faces an unfamiliar social environment and a more dangerous working environment. These risks may even be ignored by this individual. In a report from Love Save Pneumoconiosis, more than half of pneumoconiosis workers prefer to work in a high-dust environment because the income is relatively higher and they are not get sick immediately. Therefore, the risk of disease that has left them now economically poor is ignored (Love Save Pneumoconiosis, 2020). This ignorance of risk is also a huge problem with productivity-focused strategies. Under the influence of the focus on productivity, many poverty reduction programmes also try their best to "upgrade" the structure of agriculture, that is, the "upgrading" of subsistence agriculture to profitable commercial agriculture. In China, a common method used by local governments to reduce poverty is to instruct farmers to grow less food but "higher value-added" goods instead. This method did help some rural residents out of poverty, but it had unintended side effects. We can understand this from an oral history report of a street-level official in Yunnan as an example. In Yunnan, a mountainous province in China, various types of crops can be easily consumed in provincial markets because arable land is limited. However, with the intervention of local governments, farmers supported by microloans began to grow higher-value crops which tended to be homogeneous because the geographical and climatic conditions in the same area were similar. These crops are usually sold to coastal cities where the economy is better, bringing the farmers the expected profits (Ma and Lou, 2020). However, when most farmers began to produce this kind of high value-added crops, the oversupply followed. Most farmers had economic losses and the poverty of some farmers deepened (Ma and Lou, 2020). It can be described as a process that an excessive focus on supply-side accumulation leads to “lots of infrastructure or employment but with low rates of utilisation or value” (Fischer, 2018, p. 200). What is more, it is not difficult to think of another reason why these farmers suffer economically. They do not have capital security, ability to withstand the huge fluctuations in the price of their products in the market, and bargaining power. Therefore, the expansion of their production results in the higher risk. From this example, we can see the negative consequences of focusing only on productivity in poverty reduction practices. Whether an individual (or household) moves from subsistence to market-based commercial agriculture or becomes a worker, their productivity is likely to increase. However, their incomes (or wages) are squeezed in the distribution process preventing them from sharing in the fruits of growth consistently. As a strong supplement to this strategy, which focuses on increasing productivity, “reinforcing subsistence capacity can serve as an important wealth-supporting strategy” in the process of marketising (Fischer, 2018, p. 100). Productivity has a big role does not mean that the centre of gravity of the poverty reduction strategy is productivity because the well-being of the people is not just personal productivity. Moreover, the so-called "productivity improvement" does not necessarily reflect their income but let them suffer a higher hidden risk.

Part II

“A book does hold a house of gold; a book does hide a charming bride.” –– Emperor Zhenzong (Zhao Heng, n.d.) 5 This section begins with this slightly vulgar quote because it is a popular quote that has been used to emphasise the importance of being successful in the formal educational system in China ever since (ironically, it is from an emperor) and encapsulates many people's perception of the importance of human capital enhancement in poverty reduction strategies. Poverty, these people argued, is not a lack of productivity or income but rather “a failure to achieve certain minimum capabilities” (Sen, 1985, p. 669), or “a failure to convert functionings into capability” (Fischer, 2018, p. 128). “The conversion of real incomes into actual capabilities varies with social circumstances and personal features” (Sen, 1985, p. 670), so we need to realise there is a distinction between a matter of productivity (or income) and a matter of achieving minimum capacity (Sen, 1985). During the Han Dynasty in China, for example, even wealthy merchants could not legally live a luxurious life (such as wearing clothes made of silk) while scholars who passed examinations to become officials were not restricted (Zhang, 2013). Here, the merchants have “endowments”/functioning (wealth), but they face ‘failure of exchange entitlements’ (Rangasami, 1985) leading to their relatively lower standard of living. In contrast to the first concept of poverty in this article, the capability perspective focuses more on the demand side than the supply side, i.e. productivity growth. Therefore, poverty measurement and poverty intervention policies under the guidance of this perspective also tend to examine if individuals achieve certain minimum capabilities. Despite Sen's objections (Sen, 1985), "universal" “multi-dimensional” standards were devised, and one of them was the Multidimensional Poverty Index (MPI). It applies the measure across three dimensions: health, education, and standard of living (Alkire and Santos, 2014). It seems to measure capability but essentially measure functioning, which does not automatically represent the potential of capability (Fischer, 2018). For example, education indicators in the MPI include "years of schooling" and "school attendance" (Alkire and Santos, 2014). The implication assumes that the higher years of schooling, the higher opportunity to be successful from getting high rewarding work. But we know that this may not be the case or even the opposite. More students in a school often mean less rooms for individuals to receive personalised education, let alone the stratification in the education system. It is simpler to measure functioning and assume that it will translate into capability. However, it is also more biased which can mislead the practice of poverty alleviation actions. On this measure, well-run local authorities are likely to funnel as many school-age children as possible into an education system that operates based on the number of pupils in the previous stage. At present, education systems (often on the margins of the budget system) are suddenly under increased budgetary pressure, and they may not be able to provide the educational services as expected. As a result, the quality of services would be inevitably deteriorated, unless the support for this social provisioning was significantly increased. Moreover, even if a poverty reduction programmeme could guarantee the transformation of individuals from "functioning" to "capability" over the lifetime of the project, it could not guarantee the sustainability of such success. China is a case in point. As mentioned in the quotation at the beginning of this section, success in the education system has long been considered a good way out

5 These two selected sentences are from Encouraging Learning, a poem written by Emperor Zhenzong.

of poverty in China (Sier, 2021). However, this kind of success is limited and can only be achieved through serious competition. Many poverty-alleviation programmemes, including some experimental ones, aim to help poor children to get better education and a good job. However, with the economic downturn in recent years, the demand for labour has been greatly reduced which has led only top students in the educational system to get decent jobs, resulting in excessive competition and common anxiety (R. Li, 2021). In recent years, young Chinese have begun to reflect on the necessity of such fierce competition and have adjusted the meaning of the word "Involution" to denote a denial of the unnecessary promotion of human capital (C. Li, 2021). As Ferguson said, “in these times having training or education is no guarantee of a job and having a job no guarantee of a decent living” (Ferguson, 2015). Similar to the dilemma described in the previous paragraphs, even though many poverty reduction projects are rightly focused on the path of turning functioning into capability, they sometimes experience a disheartening complexity of reality. The liberalism of Sen’s capability approach partly causes this dilemma, namely “conflicting of freedom” (Fischer, 2018, p. 135-6). These projects have greatly improved the human capital situation in developing countries Local people have managed to lift themselves out of poverty by working in the global North or in their own cities. In other words, the brain drain problem causes the areas with scarce human capital lose highly skilled workers more while the areas with abundant human capital gain more high-quality talents, aggravating the inequality between regions and even countries (Docquier and Rapoport, 2012). This is not only the case in China but also other countries. For example, health workers studying medicine in Malawi, working in the UK, earning more and achieving personal development, are examples of poverty improvement from the perspective of capability (Fischer, 2018). Malawi has not only lost talents but also spent money on them, the equivalent of a developing country subsidising a developed one (Britain). Such personal choices may be often condemned by nationalists. It is also unreasonable since the so-called "human capital" (functioning) must be in the "economic and political centre of gravity" to turn into the best effect (capability). In other words, in the practice of poverty reduction, the focus on individual capabilities and their free realisation implies the effect of directing the most capable individuals in marginal areas to the "central areas", leading to greater regional inequality. Many scholars have suggested that remittances might mitigate or even eliminate the brain drain. It remains debatable whether remittances, especially from skilled migrants (who tend to earn higher wages), offset their loss as a talent stream. The report by academics at the World Bank shows that migrants with higher education levels send more remittances using micro data from 11 main destination countries which is enough to address concerns about brain drain (Niimi, Ozden and Schiff, 2008). Another research, published around the same time, found that remittances in Ecuador helped to keep children in education during a shock (Calero, Bedi and Sparrow, 2009). However, after considering the endogeneity of remittances and education levels, studies show that migrants with higher skills (education level) send fewer remittances. Moreover, the negative effects of brain drain are not mitigated, let alone offset, by remittances. In other words, an intervention that succeeds in reducing poverty from a capability approach also tends to push the region deeper into poverty. These dilemmas are even more pronounced in East Asia. In East Asia, welfare systems are heavily dependent on the domestic sector, where the young are expected to have a responsibility to take care of the elderly (Croll, 2006). In effect, the intergenerational contract gives governments room to reduce welfare provision while preserving the basic rights of the disadvantaged (Croll, 2006). The Brain Drain in the fringe areas, however, is upsetting this delicate balance. For example, the research in China has found that older people in rural areas are more likely to commit suicide than older people in urban areas, and their suicidal impulses may be due to financial deprivation and

mental loneliness, or depression (Li, Xu and Chi, 2016). This may reflect the fact that while some people (usually the young and healthy) have succeeded in moving out of poverty according to Sen's theory of capability, others who are more vulnerable (usually the older and less healthy) have fallen deeper into poverty. In conclusion, the capability approach can offer scholars and workers a standard beyond the money-metric approach to analyse various types of poverty. However, it could lead to a more serious inequality problem among regions, since it is “unable to deal with systems, structure, and inequality” (Fischer, 2018, p. 139).

Part III

“A thousand miles from home, I’m grieved at autumn’s plight; ill now and then for years, alone I’m on this height.” –– Du Fu, On the Height6

The author of the above verse has lost contact with his family and suffered from illness after a war. He was just an immigrant experiencing social exclusion although he had been a government official. It is hard to argue that social exclusion is a kind of poverty, for even one of the greatest poets in China was also an excludee. Therefore, social exclusion tends to answer the question "why poverty" rather than "what is poverty", compared with the approaches discussed in the above two parts. It describes “various contextualised social causes and/or social consequences of poverty” and “bring in subtler sociological analyses into the existing field of poverty studies” (Fischer, 2018, p. 142143). The social exclusion perspective focuses on social relations rather than the productivity perspective discussed in Part I. It also emphasises on the dynamic process that causes poverty rather than the results of poverty, which is a supplement to the capability perspective discussed in Part II. It is worth noting that the concept of social exclusion originated in Europe and was originally used to describe the failure of the welfare systems of European welfare states to cover the unemployed people. This concept equates social exclusion with the failure of inclusion in the formal labour market or formal welfare system. If it was not modified, it would be meaningless in the Global South where large numbers of people in many countries are unemployed or in insecure employment (more than 90%), while the proportion is probably less than 20% in countries in the Global North (Fischer, 2018). On the other hand, welfare provision in these countries may be incompletely (and sometimes not at all) dependent on formal welfare systems, such as the Intergenerational contract in East Asia (Croll, 2006). Therefore, the follow-up development of this concept is necessary. It is defined in terms of “the social aspects of deprivation”, concerning how isolation cause or reinforce relative poverty. However, the “strong degrees of ambiguity” of this concept makes related strategies biased (Fischer, 2018, p. 152). First, social exclusion is often seen as a static state when this concept is put into practice (Fischer, 2018). Then it will be similar to the capability approach. Closely related to the first point, the relationship between social exclusion and poverty is also problematic (Pantazis, 2006, p. 8). If social exclusion does not lead to poverty, it is not noteworthy. This means what we are really concerned about is the overlap between social exclusion and poverty (Fischer, 2018, p. 162). A focus on social exclusion potentially becomes a focus on multi-dimensional poverty in a macro poverty reduction programmeme rather than “the questions of social membership” (Pantazis, 2006). However, how to define "relational" and "relationality" is still inconsistent (Fischer, 2018). If

6 This is a sentence from a Chinese famous poem, the translator for Xu Yuanchong. Available at: https://blog.sciencenet.cn/blog-300826-559691.html (partly in Chinese)

the rejection is an intentional behaviour between individuals, it no doubt ignores the structural problems such as the school district policy of China and the hukou system where which immigrants in the big cities cannot enjoy the same educational resources as the urban residents. It is essentially a kind of structural social exclusion that is not completely caused by discrimination between groups. Moreover, the exclusion can be occured across the economic spectrum, not limited to the poor. The historical rejection of the rich in China, described in part II, is another example. The above conceptual ambiguity makes it difficult for poverty reduction strategies themselves to have a clear direction. Similar to the limitations of the capability approach in the application of poverty reduction strategies, they can only intervene for "functioning" (Fischer, 2018). For example, poverty alleviation relocation in China is designed to “include” most of residents in the remoted area (especially in terms of public welfare provisioning although the research shows that it can potentially lead to deeper social exclusion with the influence of place attachment, especially for the immigrants in urban areas since their livelihood modes are drastically changed (Zhu, Jia and Zhou, 2021). However, social exclusion approach has its unique advantages in micro social work because it can help front-line social workers deeply analyse the life history of the client's unfortunate experience. It encourages front-line social workers to pay more attention to the complex history and dynamics of poverty rather than making superficial judgments about its consequences. In social work theory, the “Person-in-environment” perspective have well resonance with the social exclusion approach, “connecting everyday life directly to larger social structures in a dynamic way” (Kondrat, 2002). In other words, as a bridge from micro to macro, it is reasonable and helpful to apply the social exclusion approach in poverty reduction strategies. For example, the social workers in a social work programme in Guangdong, China, simultaneously practice three strategies after a life history study: "community organisation construction", "encourage excludes into community organisations" and "include the excludes in the corresponding social welfare system" (Zhang and Liao, 2021, p. 8493). These three strategies make a poor family successfully convert functioning into capability with the support of the community. This change is expected to be sustainable because the family is integrated into the community (the female head of this family was elected to be vice-captain of a women’s mutual-help group) where residences are grouped together. In this example, social workers change the trend of poverty through two kinds of integration. The first is the integration between the residents of the community, and another is the integration of excluded families and community activists. Through these two kinds of integration, social relations are rebuilt, and individuals and families could be supported against the possibility of falling into poverty when they are affected by shocks. The ambiguity of social exclusion may be a problem in macro poverty reduction strategies (such as poverty measurement programmes based on quantitative statistics techniques). However, it can be an advantage in micro social work poverty reduction strategies because it maximises creativity and sociological imagination of social workers regarding to their interventions.

Conclusion

In this essay, three approaches to conceptualising poverty and how they have influenced the practice of poverty reduction strategies and programmes were introduced. The fallacy of productivity reductionism may produce unpredictable consequences as it ignores the importance of fair distribution. In reality, the concern on capability might turn into the improvement of functioning and assume that it could be automatically converted into capability. The concept of social exclusion brings society into poverty analysis, but its ambiguity is still a problem when we apply this concept to poverty alleviation strategies. These concepts remind me of what we learned from another class, some thinking around pragmatist complexity (Ansell and Geyer, 2017) and wicked problems (Alford 23

and Head, 2017). In my opinion, the concept of poverty is a wicked problem with complexity. In other words, the problem of poverty, which itself does not take a single characteristic and cause, cannot be eliminated linearly. Since poverty is not a single economic, political, or sociological issue, poverty reduction strategies must be designed with an interdisciplinary mindset and a humble mind based on deep local field research. Furthermore, we should consider whether the strategy is reversible when we design it or whether there is room for remedy when we find a problem. In this way, povertyreduction workers may be more confident that the strategies have some degree of positive effects without causing irreversible negative consequences.

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