The inequality challenge: perspectives on growth, poverty and inequality.

Poverty to a great extent has been a thorn in the side of the road to progress and development for many nations across the globe, and economists would agree. Its scourge has been driving many researchers over the past few decades to study poverty-related topics and increase attention to poverty alleviation by Governments.

Tackling the global effort head-on is one of the United Nations Millennium Development Goals (MDGs), which calls for reducing by the year 2015 the proportion of people living on less than one dollar a day to half of the 1990 level. Such initiatives are encouraging, but many researchers say that a shift in focus and policy stance has yet to take shape while addressing income inequality.

"Inequality matters", said Anthony Shorrocks, Director of the World Institute for Development Economics Research of the United Nations University (UNU/WIDER), in introducing three new studies on growth, inequality and poverty at UN Headquarters in New York. "Inequality is important and should be given more attention when you are designing economic development policies for poverty alleviation."

While many countries with closed-door economies have thrown open the doors for domestic liberalization and globalization, also known as the Washington Consensus, the UNU/WIDER study says that issues pertaining to high and rising inequality, its impact on poverty and growth, and the measures to contain it have largely been sidelined because of this situation. Even though economic growth has soared in many developing nations, it has not necessarily improved the conditions of people living below the poverty line. "We are most concerned about the growing income differentials", Mr. Shorrocks said.

According to the study, the economic reforms initiated in China in 1978 and broadened in scope over the next two decades led to a massive economic boom, which benefited large sections of the population with huge falls in poverty rates. However, the inequality factor during the growth period, from 1978 to 1984, remained rather stable with no signs of falling; furthermore, it has become less equal since 1985. This trend threatens further advances in poverty reduction, as well as the continuity of rapid rates of growth. There are now massive disparities between the coastal belt--a middle "rust belt" home to many obsolete State-owned enterprises in need of radical restructuring--and the developing and under-served western regions, the study states.

With China's entry into the World Trade Organization, the inequality factor is likely to exacerbate, according to the study, as agricultural tariffs will need to be halved by 2004 and manufacturing tariffs reduced even more, resulting in further pressure on the most vulnerable sectors. For that reason, Giovanni Andrea Cornia, professor of development economics at the University of Florence and former Director of UNU/WIDER, said that policy reform initiatives needed to be remodelled in tune with the specific conditions of each country. The "spirit of MDGs" will only be achieved if poverty reduction is addressed at the "country level and sub-national level". Such restructuring can determine whether policies have pro-poor or anti-poor connotations, for which trade liberalization could be a test case in point. The bottom line is that "we need to dwell more on inequality, and that it is good for sustainable economic growth", Mr. Cornia added.

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By Namrita Talwar, for the Chronicle