The Political Economy of Chronic Poverty

The Political Economy
of Chronic Poverty1


Sarah Bracking


February 2003


Institute for Development
Policy and Management,
University of Manchester

Working Paper No 23

ISBN No: 1-904049-22-2






















1 With thanks to Professor David Hulme, Dr Ray Bush and Dr Anand Kumar for comments on an
earlier draft. Thanks also to Dr Uma Kothari for advice on social exclusion, and Professor Colin
Murray for an inspirational conversation.

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The Political Economy of Chronic Poverty


Abstract iii


1.0
Introduction
1
1.1 A review of research on the politics of poverty


2

2.0
Structured
adverse
incorporation
3
2.1 Differential incorporation and the ‘new destitutes’


5
2.2 Social effects of adverse incorporation



7

2.3 Moving from post ante to predictive research



9

3.0
Political economy approaches at work in agriculture

11

3.1
Commercialisation
of
agriculture
12

3.2 Commercialisation to industrialisation in agriculture

17



3.21 contract farming





20

3.3
Conclusion
22

4.0
Property
regimes
and
redistribution
22


4.1 Indigenisation processes: examples from South Africa

23

5.0 Global
regulation:

rules-based
systems
and
changing
the
rules
26

6.0
Conclusion
28

Annex Future research






30


Endnotes
31
References








32



ii

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The Political Economy of Chronic Poverty

“when the elephants fight the grass gets trampled”

Abstract

This paper critically analyses the relationship between political economy and the
incidence of poverty. It argues that far from globalisation providing widespread
opportunities for the poor in the short to medium term, the level of global poverty is
likely to increase in absolute terms, both in terms of incidence and depth. This is
because many of the poorest countries are involved in a historic transition from rural
smallholder agriculture to urban industrial machino-facture, and are currently
undergoing a rapid process of proletarianisation. 1 However, some of these
transitions, particularly in sub-Saharan Africa, are stalled or reversing due to
differential incorporation in globalisation processes.

It is not only unlikely that the international targets for poverty reduction will be met,
but probable that the period to 2015 will see an increase in absolute poverty.
However, this is not because of the widespread ‘exclusion’ of the poor from
integration into the global economy, but rather as a result of their integration on
adverse terms, whereby ‘exclusion’ is better understood as adverse, differential
incorporation. This adverse incorporation occurs at two levels: at the micro level
within the labour regime in terms of available formal work, working conditions and
remuneration; and at the macro-economy level where premiums for investment funds
are disproportionately higher for the poorest countries.

The outcome of globalisation processes is illustrated in this paper by an examination
of the commercialisation of agriculture and its differential impacts on relative and
absolute poverty. The case study illustrates how agricultural modernisation creates a
group of newly destitute people as a corollary of increased wealth stratification. The
commercialisation of agriculture often increases levels of transitory, relative poverty
and raises the likelihood that some segments of society will be pushed into chronic
poverty.

The paper then problematises possible policy action, theoretical and actually existing,
within the context of harnessing ‘political economy’ measures on behalf of poverty
reduction, by means of redistributive political action. While it remains difficult to
trace the global economy causation of poverty dynamics at the micro-level, it is
possible to extrapolate broad poverty outcomes from the social trends associated with
globalisation. The paper argues that processes of accumulation cause immiseration
for some, increased inequality, and geographical abjection, which are currently
insufficiently ameliorated by policy action. The contemporary policy orthodoxy of
economic liberalisation, social safety nets and empowerment fails to recognise the
radical policies, of redistribution and global regulation, that are needed to tackle the
processes within capitalism that create and sustain poverty. The paper proposes that
further research be undertaken to review the success or otherwise of government
policy to asset the poor by means of redistribution of economic rights and rents.

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1.0 Introduction

Chronic poverty has been defined as “occurring when an individual experiences
significant capability deprivations for a period of five years or more” (Hulme and
Shepherd, 2003: 6). The distinguishing feature here is extended duration, people who
remain in poverty for much of their life course, with the five years duration being a
‘somewhat arbitrary’ time lapse (ibid). Chronic poverty is generally passed on to
subsequent generations. Capability deprivations are here seen as multi-dimensional,
going beyond the usual income and consumption measures, to include tangible and
intangible assets, nutritional status and indices of human deprivations (see Hulme and
Shepherd, 2003: 1-17).

The central purpose of this paper is to review what is known about how economies
work in relation to the poor, and how governments might behave to enhance poverty
reducing public economic policy. While (international) political economy is a blunt
research tool in terms of either defining who are the chronically poor on a micro or
individual level; or in generating nationally based social policy instruments to
alleviate poverty, it does have a number of benefits useful to our agenda. It can
analyse historical processes that effect market ‘terms and conditions’. Given these
bodies of knowledge it can then help us to predict which sections of the population
are likely to benefit from economic trajectories, and which are liable to face further
prolonged destitution, or to be made newly destitute in the coming years. There are
similarities between this emphasis on prediction, and the ‘prospective approach’
outlined by Murray (2001, 4) within livelihoods research, which has its roots in
influencing future policy and action in policy circles, and also seeks to harness
historical experience and trajectory in order to do so.

The next section (1.1) will review the current state of research concerning the
relationship between chronic poverty and political process. The purpose here is to
establish how political economy can fit into the more general debate concerning
political process per se. The contention here is that it is tackling the differential and
adverse incorporation of the poor within economic processes that provides the best
long-term solution to reducing poverty. In section 2 we then look more closely at
processes of political economy incorporation experienced by the poor and chronically
poor using the concept of adverse and differential incorporation. We look at the social
effects of adverse incorporation (2.1); differential incorporation and the ‘new
destitutes’ (2.2), and then return to the role of political economy as a predictive
research and policy instrument (2.3).

In section 3 the paper examines what it is about current globalising economic
processes that are adversely incorporating the poor. In section 4 these concerns are
analysed through the example of agricultural modernisation, and subsequent
incorporation in global agro-industrial markets. I have chosen to cover this particular
historical social process because it is the route along which many of the chronically
poor are currently embarked. Section 5 provides an examination of potential and
actual policy instruments which could be used to change property regimes, which
emerge in political economy processes, in order to effect poverty reduction. The final
section 6 returns to the issue of pro-poor global regulation.


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1.1 A review of research on the politics of poverty

Three observations can be made about the current state of research concerning the
relationship between chronic poverty and politics. First, that it suffers from ‘neo-
classical bias’ in its individuation and corresponding subsequent assumptions of
equality of access between 1) citizens and the state; and 2) workers and consumers
within markets. Second, that the poor are seen as passive consumers of policy and
donor solutions while their prior exclusion from ‘normal’ production and markets
remains unproblematised. Third, that there is a disarticulation between formal
institutional power structures and the relationships of power in many countries, and
particularly in Africa. This latter I see as being particularly deleterious of successful
poverty policy and implementation since private power-holders can frustrate poverty
reduction agendas. Additionally, it is precisely this disarticulation that frustrates the
expectations of normative political scientists attempting to pursue the good
governance and democratisation agendas, which are generally understood as ‘pro-
poor’, but in actuality have varying effects on poverty in practice (see Potter, 2000:
374-379). This paper will discuss the first two of these observations, leaving the latter
for future review (Bracking 2003b).

Returning to the first observation, the neo-classical bias of generic political research
can also be observed in political economy. It is, for example, widely assumed that
within globalisation processes, and within national political economies, the most
competitive states and individuals respectively can access and participate in markets.
That is, that equality of access to markets occurs, regulated by a meritocracy of
entrepreneurial and motivational attributes. This is akin to the ‘neo-classical bias’
referred to above. In practice, however, the poor, and the chronically poor among
them, are often characterised by their relative exclusion from transnational economic
processes, whatever the rational or potential ‘competitiveness’ they possess. For
example, despite extreme processes of devaluation which render exports highly
competitive, and the cheapest labour globally, more than 300 million people live in
extreme poverty in sub-Saharan Africa, most in rural areas, while Africa’s share of
global exports is about half of Belgium's (Guardian, 2002).

As we have seen from earlier CPRC working papers, there are often physical, material
and resource reasons why patterns of differential exclusion exist (see in particular,
Hulme et al 2001; Amis 2002; Bird et al 2002). However, there are also political
reasons that militate against the economic participation of the poor, which are the
subject of this paper. Political economy is fundamentally about power (Palan, 2000,
1-18), particularly in the ‘post-rationalist’ strand of global political economy
influenced by Foucault. Analysing power by means of political economy then has a
direct relationship to issues of poverty, since power and privilege are the handmaiden
of poverty (Wallerstein, 1999). This idea is found in Murray, who also argues that
poverty should be analysed in relation to other social classes, and that the term
“’differential [or adverse] incorporation’ into the state, the market and civil society is
perhaps more appropriate than the now conventionally predominant idea of ‘social
exclusion’ from the state, the market and civil society” (2002, 5).
In terms of livelihoods research, but of relevance here, he argues that historical
analysis of social relations, or rather a ‘structural or relational view of poverty’ leads
us to an understanding of the persistence, intractability, or ‘deepening’ of poverty
‘driven’, as these are, ‘by questions about inequalities of power’ (ibid).

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In terms of the second observation above, without an adequate understanding of the
barriers to productive economic participation, the chronically poor are often relegated
to the category of passive recipients of safety-net social provision (Deacon, 2000: 37-
38; Manji F, 2000; Tendler, 2002). It is the contention of this paper that it is in
ameliorating their prior exclusion, or inclusion on highly adverse terms, within
economic processes that offers the best long-term solution to reducing poverty. This
paper seeks to isolate what it is about markets and more generally political economy
processes that explains economic disempowerment, evinced in the denial of effective
economic participation. It looks at markets from an institutional perspective.

An institutional perspective can be expressed in policy terms as instruments designed
to change the ‘rules of the game’ in markets. Change can be organised around 1) entry
into markets, for example, qualification criteria in terms of current asset holdings, 2)
the ability to remain in a market when shocks or depressions occur, for example in the
public provision of credit and/or business infrastructure, and 3) the terms of
remuneration for economic activities carried out, and whether this is sufficient to meet
the costs of participation. This paper, however, analyses broader social processes that
necessitate such policy prerogatives. It looks at how the ‘rules of the game’ in markets
are formed and (re)formed.


2.0 Structured adverse incorporation

Gilpin defined international political economy thus:
“The parallel existence and mutual interaction of ‘state’ and ‘market’ in the modern
world create ‘political economy’…In the absence of state, the price mechanism and
market forces would determine the outcome of economic activities; this would be the
pure world of the economist. In the absence of market, the state or its equivalent
would allocate economic resources; this would be the pure world of political scientist
(sic)” (Gilpin, 1987: 8)
However, this exclusive dichotomy between economic and politics is now seen as
deeply unsatisfactory. The sterile state versus globalisation debate which results from
the idea of two separate realms has lead nowhere of relevance for policy makers bent
on reducing the costs, or making the most of the opportunities derivative of
globalisation processes. The duality of state/power/public and market/capital/private
is untenable, as “power and capital manifest themselves in both state and market
necessitating a truly political-economic form analysis” (Palan 2001, 4).
Corresponding to this theoretical trend, empirical work has concluded that various
transmission belts, epistemic communities, or institutional practices and norms of
behaviour have a more potent impact on the distributional benefits and geographic
exclusion zones associated with globalisation processes than does any structural
inbuilt process of market relationships (see various authors in Palan, 2001). I do not
intend to cover these in this paper, but instead prefer to relocate political economy
within relationships of power, privilege, and poverty.

Meanwhile, globalisation theorists suggest to us that a wholly new deepening of
international interactions has been reached in the present era. However, in comparison
with the late nineteenth century some argue that the world economy has become
considerably less, rather than more, ‘global’, as developing economies have become
less important to its functioning (Gordon, 1988; Burbach et al, 1996). For example, in

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an illustrative example cited by Thompson, John Maynard Keynes is said to have
remarked in 1919, about the spread of mail order commerce, that
“The inhabitant of London could order by telephone, sipping his morning tea in bed,
the various products of the whole earth, in such quantity as he might see fit, and
reasonably expect their early delivery upon his doorstep”
(Thompson, 2000: 5-6 . Citing Keynes in the Economic Consequences of Peace,
1919).
If one substitutes ‘personal computer’ for ‘telephone’, the impact of technological
developments in telecommunications in recent years do not seem as revolutionary to
social relationships as they have been touted. The scope of access to communication
has risen, but qualitative changes in human relationships are harder to find. This
globalisation debate is not one I will reiterate here, albeit to state that I see political
economy as a discipline as equally as efficacious in the ‘new’ era as the old.

The effects of globalisation on the world’s poor are unclear, partly due to a nebulous
understanding of the concept itself (see DeJong et al 2001, 33-4). More particularly
the numbers ‘don’t add up’ to suggest a widespread benefit to the world’s poor from
‘globalisation’ Taking, for the moment, flows of foreign direct investment (FDI), as a
proxy for the ability of poorer countries to obtain investment capital and thus ‘join in’
globalisation, the picture is complex. Foreign direct investment is seen to have a
developmental potential, yet “there may be no other area of economic inquiry where
so much has been written and yet we know so little” (Balasubramanyam, 1999: 29).
The growth of FDI during the 1980s and 1990s was large, with “Annual average
flows of FDI accelerated from $55 billion over the period 1981-6 to $243 billion
during the years 1991-6” (ibid). However, several factors indicate a low propensity
for the poorest countries to benefit. First, in 1996, 47 per cent of all FDI flows were
actually cross-border mergers of existing firms. Second, while annual flows of FDI
increased dramatically from $20 billion in 1987 to $129 billion by the end of 1996,
some three-quarters of this went to just 10 middle-income countries, while the least
developed countries accounted for less than 1 per cent of total flows, or $0.4 billion
(Balasubramanyam, 1999: 31). These countries are almost certainly those with the
highest levels of chronic poverty (Hulme and Shepherd, 2003).

Taking FDI as a proxy for globalisation, however, misses perhaps the most important
global economy relation within societies where the chronically poor live, which is
remittances by the diaspora. For countries like Bangladesh, Mexico, Pakistan,
Palestine, and Zimabawe, and regions such as Kerala, the most significant linkage
with the external world is money sent back from relatives abroad. In the case of
Zimbabwe, for example, the professional classes have responded to crisis by swelling
the diaspora, and have made remarkable efforts to help family members who remain.
Zimbabweans abroad now repatriate at least 20 million pounds per month. However,
ironically and tragically, efforts to help individuals and families in this way result in
the wider impoverishment of the mass of the people by fuelling inflation and raising
asset prices (Zimbabwe Financial Gazette, 17 October 2002). The rural and urban
poor in Zimbabwe fail to access food at inflationary prices and rely on government
fixed pricing schemes for staples. However, this access has also largely failed as
companies, such as bakers, millers, and seed companies, will not, or cannot produce at
the fixed prices.


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If political economy is to become useful for analysing the chronically poor then FDI
inflows are insufficient to understand globalisation. Arguably, of more significance
for areas containing the chronically poor are the remittances from migrants.
Appadurai (1990) introduces the idea of a ‘financescape’ into a model of global
networks and flows, as one component of social relationships linking people and
places. This was contextualised within wider ideas of the role of migration in the lives
of the chronically poor by Kothari (2002, 20-22; see also DeJong et al 2002, 22).
Financescapes are joined by ethnoscapes, technoscapes, mediascapes and ideoscapes
in the larger model of networks and flows. This model is of use to explain financial
flows that are not in the official domain, although they may be recorded in banking
transactions or conversely, travel invisibly. They are nevertheless important to the
sustenance of the poor, and the pattern of their flows is derivative from all the
‘scapes’ provided for in the framework. For example, where a financial diaspora
exists it is most likely to be in another space linked by ideas and ethnicities, that is in
an expanded ‘ethnoscape’, such as its former colonial power. Those sharing similar
‘technoscapes’ involving modern internet-based communications will sustain
relationships within the diaspora better, which is likely to enhance monetary flows. In
sum, bilateralism in monetary flows can then emerge as both a vulnerability and a
strength to the poor left behind by processes of migration (see Kothari, 2002, 14-16,
on the significance of those who stay behind as a likely category of the chronic poor).

2.1 Differential incorporation and the ‘new destitutes’

There are thus limits to the simple categories of inclusion and exclusion in the context
of the globalisation and poverty debate. These simple categories were popularised by
the Human Development Report in 1999, which argued that these disparities had
deepened (UNDP, 1999). However, there is greater accuracy in the term ‘adverse,
differential incorporation’ to describe and understand chronic poverty as a dynamic,
variegated and stratified category of individuals and groups adversely and
differentially incorporated into the global money economy by processes of
globalisation, or more generically, global political economy 2.

For example, Hulme and Shepherd (2003: 7-8) have proposed a five tier topology to
represent the stratification of poverty: categories of the ‘always poor’, the ‘usually
poor’, the ‘churning poor’, the occasionally poor’ and the ‘never poor’. They then
aggregate these categories further such that the ‘always’ and ‘usually’ poor can be
viewed as the ‘chronic poor’ while the ‘churning’ and ‘occasionally’ poor are the
‘transient poor’ and the non-poor are those that are never poor, through to the always
wealthy (Hulme and Shepherd, 2003: 7). This typology illustrates a certain degree of
movement between categories even as it retains an ‘always poor’ category. In the
context of South Africa, du Toit provides a detailed case study of casualised working
in Ceres, an area dedicated to export fruit farming (2003). He also argues for a
dynamic understanding of chronic poverty, a ‘move beyond any simple opposition
between “inclusion” or “exclusion”’ (du Toit, 2003: 36).

Meanwhile, Harriss-White (2002) further theorises the differences within this poorest
category, in her work on destitution in India. She notes that in traditional political
economy destitute people were theoretically nebulous subjects, verging on the
invisible, since they are, by definition, without income or assets. Thus, their
‘economic’ destitution is a contradiction in terms since they are without those assets

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and income-holdings necessary to define them as economic subjects (Harriss-White,
2002, 1-2). On the ‘social’ aspect of destitution she notes that “a process of
expulsion” and “denial of dependent status” are involved, such that one person’s
expulsion provides
“some of the many conditions necessary for the accumulation of wealth by others. It
is in this sense that destitution enters political economy” (Harriss-White, 2002: 1, 5).
Here, she is noting the relational status of the destitute to others.

Thus we have a highly calibrated, relational scale of socially defined categories of
chronic poverty, which, according to Harriss-White, can be understood in terms of
political economy by their de facto production of economic opportunities for others.
This analysis can be extended within the frame of the national economy, and within
discourses used to understand development and progress. A common
developmentalist ‘trope’, or narrative has been that, given a certain set of resource
endowments, an economy can be managed to be open and efficient which will
inevitably lead to progress, industrialisation and welfarism in a national context.
However, there is much evidence to refute this narrative, particularly in the case of
extractive resource-based economies, -such as minerals or oil -suffering from the
‘curse of resources’ (Bush, 2003; see also Auty, 1995; Karl, 1997;). Given this
evidence, from both an empirical and deductive viewpoint it is now clear that
differential processes of economic incorporation are misrepresented in modernist
discourse. That is, they are not linear and always progressing toward a more
beneficent end point. Instead, differential incorporation allows for movements toward
greater relative social remuneration to exist contemporaneously with processes of
decline in social remuneration for like, or similar groups. These movements may be
observed in regional geographies, countries, or social groups within countries, or
based in combinations of associated dynamics concurrent in two or three of these
‘spaces’.

For example, in a recent book on the decline of the Zambian copperbelt and its
anthropological effects, Ferguson proposes a 'redlined' form of dialectical economic
inclusion and exclusion associated with international capital (Ferguson 1999: 234-54).
Ferguson prefers the term 'abjection' to exclusion, since the former more accurately
models the experience of being “thrown aside, expelled, or discarded”, not merely
thrown out, but thrown down and humiliated (Ferguson, 1999: 236). This case
involves the decline of a globalised extractive copper industry, that once implied
modernity and industrialisation in Zambia. In Ferguson’s sense, the moment of
abjection in globalisation is where geographies are thrown out, or ‘red-lined’ as a
disciplinary mechanism. This happens within states as much as to whole states. He
explains that
"disconnection and abjection...occur within capitalism, not outside it. They refer to
processes through which global capitalism constitutes its categories of social and
geographical membership and privilege by constructing and maintaining a category
of absolute non-membership: a holding tank for those turned away at the
"development" door; a residumm of the economically discarded, disallowed, and
disconnected - to put it plainly, a global "Second Class" (Ferguson, 1999: 242)
However, while absolute exclusion for Ferguson means ‘non-membership’, it is clear
from his explanation that it is a global relationship between the privileged and the
weak which provides the context for a differential inclusion/exclusion moment.


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In a more general sense, there is an observable trend in some, particularly sub-
Saharan African, countries whereby the elites increase their global incorporation and
consumptive power at the expense of the poor’s inclusion. For example, there is an
observable emergence of financial dualism in post-colonial economies, where those
few privileged people have access to foreign exchange and a lucrative parallel
economy, while the real economy is subjected to periodic devaluations. This trend is
apparent in Zimbabwe, Zambia, Kenya and Nigeria and can be exaggerated by
criminal activity. The elites associated with resource rents can shore up their own
inclusion in global society and cosmopolitan consumption patterns by redlining other
parts of the national community within processes of abjection. In this way, a national
political project of development progress, or indeed a social contract associated with
redistributive politics, is rebuked in favour of a more limited project of elite
accumulation and popular exclusion.

This growth of privilege amongst poverty, and its contradistinction to inclusive
models of national growth and development, is not countered or criticised within the
neo-liberal mainstream. This leads to a paucity of policy and research related to
redistribution as a mechanism of poverty reduction. Because poverty is rarely
understood in a relational way, privilege is not subjected to questions of legitimacy in
public policy concerning poverty. This is related to the claim I made on page 2, that
research on poverty from a political science perspective suffers from a neo-classical
bias in favour of a horizontal individuation of its supposed equal citizen-subjects. In
this theoretical encounter, as in mainstream poverty discourse, poverty appears as an
accidental consequence or misfortune, unrelated to the privilege of others in the
context of scarce resources in a capitalist economy.

Similarly, the concept of ‘social exclusion’ implies a temporal dysfunction in relation
to the normative assumption of inclusive political equality found within neo-
classicism and its manifestation in liberal democratic theory. Many that use this
discourse associate the poor’s ‘exclusion’ with the lack of things that an ‘included’
person would have, read from a more wealthier class perspective – such as a salaried
occupation, pension, or house. However, it can equally be said that from the
perspective of the ‘excluded’ this narrative has little meaning: they are still very much
included in situations, for example, of over-crowded housing, perhaps intrusive
family networks and obligations, communal social events and church attendance. It is
just that this type of sociologically localised and participant-centred understanding of
inclusion is outside the boundaries of the assumptions of citizen inclusiveness in
liberal democratic discourse. The existence of the poor here is an affront to the
normative liberal assumptions of the political nation, and is to be met with policies
such as ‘Welfare for Work’ schemes, which re-order and control the subjects of the
supposed dysfunctional exclusion. The more structural approach advanced here, of
‘adverse, differential incorporation’, views the privileged and the poor in their
dialectical and reciprocal relationship to each other (Bracking, 2003b).

2.2 Social effects of adverse incorporation

The effort to explain adverse incorporation, inherent in the process of globalisation, is
made paramount by its social implications. This can lead to a malign politics of
identity, as loyalties are transferred from ‘national’ civil society to various primary
groups. Processes resulting from relative exclusion have been variously described as

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