A Tightening Jobs Market is a Hugely Powerful Engine for Poverty Reduction
Wednesday, March 26, 2008
D. Murali and G. Padmanaban
Chennai: Much has been talked about ?fortune at the bottom of the pyramid’. But do we find big corporates discovering the ?fortune’? Does it make good economics for the companies?
“At the very bottom of the pyramid there are no fortunes to be made because purchasing power is so low,” says Mr Paul Collier, Professor of Economics and Director of the Centre for the Study of African Economies at Oxford University.
“Further up the pyramid, however, there is huge scope for introducing such things as brands,” he adds. “Brands are essentially mechanisms for enabling consumers to know the quality of the goods they purchase because companies with brands are investing in building reputation,” elaborates Mr Collier.
So, some of the features of a market economy that superficially look utterly wasteful – such as advertising – actually have the potential to perform an important function for poor people, he argues, in an e-mail interaction with Business Line.
Earlier this month, Mr Collier’s book, ?The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It’ (www.oup.com), won the $15,000 Lionel Gelber prize for the best book on international affairs. Jury chair Barbara McDougall, Canada’s former secretary of state for external affairs commended the book for providing “a penetrating reassessment of why vast populations remain trapped in poverty, despite endless debate over foreign aid policy among wealthy countries and institutions.”
Global poverty is actually falling quite rapidly for about eighty percent of the world, but the real crisis lies in a group of about 50 failing states, the bottom billion, whose problems defy traditional approaches to alleviating poverty, Mr Collier observes.
His past and current research has centred on addressing developmental challenges facing low-income countries, including research on the economics of conflict, governance and macro-economics with a strong focus on the effects of aid, exchange rate and trade policies. Mr Collier has served as Director of the Development Research group at the World Bank as well as Senior Adviser to former Prime Minister Blair’s Commission on Africa.
Excerpts from the interview.
What should be the top priorities of India to remove poverty in the country?
I am not an expert on the Indian economy… However, looking from the perspective of an outsider, I would stress that a tightening jobs market is a hugely powerful engine for poverty reduction. In turn, the key engine for jobs growth is urban. So I would focus on trying to unblock whatever might be constraining the expansion of employment in urban services and manufacturing.