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Saturday, May 08, 2004

Angus Deaton on Poverty in India

A reader points me to research by crackerjack development economist Angus Deaton, that provides "less sanguine estimates of poverty in India." While it is true that Deaton's tone is less sanguine than mine, the difference is mainly one of nuance. Deaton's revised figures confirm that poverty has fallen dramatically in India in the 1990s, which was my claim.

Deaton seems to have two main points. One point is that conditions for India's poor were getting better just as quickly in the 1980s as in the 1990s, so we shouldn't jump to conclude that the economic policies of the 1990s were better. I quote his conclusions at the end of this post. The other point is that inequality has been increasing in India in the 1990s. Presumably, the poor were getting richer, but the rich were getting richer faster. So Deaton has found some dark wisps in what is mostly a brilliantly bright cloud.

I wouldn't deign to contradict Deaton on the first point: although India's progress has been stellar, I don't really know what has caused it (though I doubt that globalization has hurt).

On the second point, though, I think any angst about inequality in India is misplaced. In wealthy countries like the U.S., I think increased inequality is an important cause of unhappiness, and I'm in favor of decreasing the absolute level of living standards overall, and even of the poor too, if that's what it takes to reduce inequality (at least up to a certain point). But in India, increased living standards for the poor means that fewer children are dying, that fewer children are going hungry. We should be cheering, not carping that the richer are getting richer faster.

Deaton's conclusions (with my paraphrase in brackets):

First, there is consistent evidence of continuing poverty decline in the nineties.

[2. The decline in poverty is confirmed by another measure.]

Third, growth patterns in the nineties are characterised by major regional imbalances [across states].

Fourth, the intensification of regional disparities is only one aspect of a broader pattern of increasing economic inequality in the nineties.

Fifth, we have argued for assessing changes in living standards in a broader perspective, going beyond the standard focus on expenditure-based indicators. In that broader perspective, a more diverse picture emerges, with areas of accelerated progress in the nineties as well as slow-down in other fields. For instance, there is much evidence of rapid progress in the field of elementary education, but the rate of decline of infant mortality has slowed down.

[6. Too subtle for me to quote.]

Finally, we have argued against reading these trends simply as evidence of the impact (positive or negative) of 'liberalisation'.

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