Why we are poor?

7 03 2011

By Ambassador Ali Karume

Why we are poor?

A very catchy title that begs a plethora of answers, is quite poignant and curtly interrogative, but a more apt title should have been WHY WE ARE POOR. We need analytical answers as to why we are quagmired in the cesspool of poverty rather than be challenged as to why we belong at the bottom of the lower level equilibrium trap. We need helpful answers as opposed to helpless questions.

When a student of english literature was asked what was the story of Moby Dick all about, his answer was, Its about a Whale. In that vein, I am tempted to proffer the briefest answers to the question. We are poor because we are not rich. We are poor because we choose to be poor. We are poor because we are ignorant of a better social status, and ignorance is bliss. Those answers, however, will not serve the purpose and will not do justice to the questioner.

The We, in this particular context, is not the royal we, and I assume it pertains to a citizenry of a poor country. Should that be the case, then it should follow that we are talking about a group of people residing in a poverty ridden setting. A strong caveat will be to avoid definitional pitfalls. We should agree therefore, that we are dealing with poor as in poverty, rather than poor as in lacking physical or mental quotients or attributes.

Perhaps the poorest country, based on per capita income, is Bangladesh. And the richest country, based on the same tenets, is Luxembourg. Now, here is where the We comes into play. There are some people in Bangladesh who are richer than some people in Luxembourg and the Bangladesh GDP can rival that of Luxembourg. Overall, a resident of Luxembourg is richer.

The best way of answering the question, in my view, is to determine the socio-economic status of an individual in any given society. We do not have to determine why someone is rich, that we will leave for another day. We should, however, try to determine why someone is poor. We can start by segmenting poverty into traditional and modern poverty. The former arises from lack of resources-imputs, while the latter arises from the lack of income-output. Traditionally, we would need resources like land, labour and capital and turn those resources into inputs. The output will then be inversely proportional to the inputs, and the surplus production can be regarded as contributing to wealth and a departure from poverty.

Let us challenge the paradigm of income poverty. The post industrial age relies on income to create wealth. If you have a high enough income, you can take care of your basic needs and save the rest of the income-money in a bank, buy bonds or dabble in stocks. Fair enough, once you reach that status, you can say farewell to poverty as it encroaches on others. To avoid the bagger thy neighbor attitude, you can tell your neighbor, I got mine, now you go and get yours. And I can bet that you will not be neighbors for too long.

Fair enough, but what do they do with your savings in the bank, bonds, stocks, derivatives etc. It is loaned as capital and you will get a fair return which will keep you out of the poor ranks for as long as you do not live lavishly and exhaust those resources. Always remember that the gates to poverty will always beckon and harken you back, because poverty loves company. Now it is time for another brief answer to the question. We are poor because we have no money. A World Bank researcher visited a poor country and asked a poor man what the Bank can do to take him out of poverty. His answer was very simple. Since you are The World Bank, just give me a lot of money.

Most of the poor communities are not post industrial as most of them are not even industrialized. The modern poverty paradigm will not apply here, as wage earning employment does not exist and we need to interpolate the traditional income paradigm. A man, and this includes a woman in the biblical sense, needs to feed himself and since he cannot go to the Supermarket for lack of a wage based income, he has to till the land. But first he has to acquire the land, and if he gets a lot of it, he will take himself out of poverty by cultivating food as well as cash crops and lease the rest of the land to other producers. As you must have realized, traditional wealth comes from owning land. Will Rogers said, acquire a lot of land because God does not make that stuff anymore. As if God was ever in the real estate business.

The landowners, landed gentry, gentleman farmers, that was the beginning of the acquisition of resources. Remember Adam and Eve, and the garden of eden. Land, land, land ruled the day. Slave labour, sharecropping, serfdom, fiefdom, all were underpinned by working the land. Call that land a piece of ground, and I will assure you that, you will never get out of poverty if you have no ground to stand on. Land, labour and capital, why do you think land starts first. Food comes from land, houses, factories, buildings, infrastructure and all the backbones of a modern economy need to be supported by land. Why are we poor-can we own land and how much do we have of that stuff will determine whether we are rich or poor.

Labour comes next, but if you ask me, I will vouch that Land and Labour should share the first spot. The combination of the two as inputs will yield outputs whose surplus will account for Capital. Before we leave the land and jump to labour, we should hasten to note that the quality of the land also matters as does the quality of labour and capital. Arable land commands more value because you need a lesser quantity of it, and less labour as inputs to yield a higher output. A desert will not be of much help unless you discover oil or maybe an oasis. Yield per acre, that should say it all. But then you should not forget inputs to make the land more productive with the use of fertilizers, skilled labour and capital goods like tractors and other implements, not to forget Research. When President Nyerere met Reagan in Cancun, Reagan offered two farmers from Kansas to help Tanzania feed its people. Nyerere asked, why two, to which Reagan replied, one to think and the other to plough the land.

Labour, skilled labour, is what we are talking about. At the end of the day, we have to look at productivity. A more productive labour force will yield more input, and remember that the output is inversely proportional to the input and the output will increase with more productivity. You can eke a living by your labour and still be below the poverty line, or you can horn your skills, be more productive and get yourself out of poverty. That, however, takes a good education and a good education costs a lot of money-capital. And if you think education is very expensive, try ignorance. At the end of the road ignorance is never bliss. Education, education, education, that means primary, secondary and tertiary which will also include polytechnics. American prosperity started with the State Universities especially the A and M. Agricultural and Mechanical. At the turn of the last century, 32% of the American labour force was engaged in agriculture, today, only 3 or 4%. That released a lot of skilled workforce to engage in other productive labour in investments rather than consumption, and the growth in the service Industry. Translation, Jobs, wages and the reduction in Income poverty. However, the trick with education is that it should be valued by the community. Otherwise, no rational actor will invest in human resources development if employment is not based on merit. The public sector should value it by employing skilled public servants who are very productive. The same can be said about the private sector, if they want to be productive and competitive.

I have explained at length as to how capital is accumulated. It is surplus output that is not consumed but is saved for capital formation. Foreign capital investment can help, but you need home grown capital to sustain a viable economy. The difference between GDP and GNP is basically what is produced domestically including foreign investments less what the country produces abroad and what is produced at home plus investments abroad less foreign production at home respectively. We rely on GDP to calculate the per capita income and on the GNP to calculate the wealth of a Nation. Do not bother about how the nation fares in GNP, just grab a job even with a foreign company and lessen your income poverty. We cannot talk about skilled labour without talking about Leadership. In both the public and private sector, leadership needs skill and experience. Skill is more important because it is usually acquired from higher institutions of learning where they research the information before imparting or disseminating it, and information is power. The drawback of experience is that some operators do the same thing the same way, all the while hoping and praying that they will get better results. Good leaders and captains of Industry eschew that approach.

You are right in thinking that you do not have to take my route in taking yourself or your community out of poverty. Yes, there are other options like chancing an oil gusher, gas deposits or fancy and expensive minerals. I should remind you that in building a modern economy, you should not leave anything to chance, that is the stuff of fairy tales. The second largest economy in the world, until yesterday, was Japan and they do not produce a drop of oil let alone valuable natural resources. Most of their economy was built on skilled labour and even the Chinese, who have supposedly the second biggest economy in the world, owe much of their economic growth to both skilled and unskilled labour. The Chinese have tied the Japanese in the size of their economies, but for every Japanese there are ten Chinese. Translation, the per capita income of a Japanese is ten times that of a Chinese. This goes to say that a community must monitor its population growth, the Chinese have done a good job at that. For an individual, it is important to watch the size of the family. You can prospect for oil, gas and exotic minerals like uranium, all that can be translated into foreign exchange that will improve the value of the local currency which is the basis of local capital accumulation. A stable currency that is convertible can avert the lingering scourge of imported inflation and support measures at taming general inflation. But all the natural resources or the size of the Sovereign Wealth Fund will depend on the size of the population. Norway and Singapore have more SWF per capita than China.

In conclusion, it is safe to postulate that productive land, skilled labour and a lot of valuable capital should start you well in getting your community out of poverty. As for yourself, try to acquire one or all of the three factors that I mentioned. If you are only good at focusing at one item at a time, start with human resources development, invest in yourself and make sure you are marketable. Start with being a salary man to get yourself out of poverty. Should you consume less and save more, look at investment opportunity. That will not only shield you from poverty, but it could get you on your way to economic prosperity. And once you are there, avoid the crab syndrome and help pull some people out of poverty.

Reading my piece as a response to ways and means of combatting poverty will not in any way cure your affliction if you are already poor. But, if you read it carefully, it will help you avert one factor that contributes to chaining poor people to their affliction. It is called POOR JUDGEMENT. Avoid it.


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