Pro-Poor Growth

THE TERM PRO-POOR GROWTH became popular in mainstream economic circles in the late 1990s as opposition to the negative impacts of neoliberal globalization on poor people around the world grew among grassroots organizations and global civil society groups. Pro-poor growth has encouraged mainstream economists to analyze how changes in both growth and inequality affect poverty reduction. Advocates of pro-poor growth, especially those within the World Bank, argue that in the long term only pro-poor economic growth can bring poor countries out of poverty. While there is much debate about the issue of distribution, [Page 873]pro-poor growth also focuses on changing the distribution of relative incomes through growth.

Still, after decades of debating various notions of pro-poor growth, there is little clarity or agreement either about what the term means or how to measure it. In addition, policymakers remain uncertain about policy programs to increase the pace of poverty reduction through economic growth. Questions also remain about the role and impact of country-specific conditions in affecting distributional growth patterns.

In order to address these lingering issues, the World Bank has undertaken a Program for Operationalizing Pro-Poor Growth. This program attempts to define and measure pro-poor growth, identify policy drivers for pro-poor growth, and determine the extent to which this understanding is reflected in specific countries' poverty reduction strategies. The program is based on case studies from a number of countries, including Bangladesh, Bolivia, Brazil, Burkina Faso, El Salvador, Ghana, India, Indonesia, Romania, Senegal, Tunisia, Uganda, Vietnam, and Zambia. The program has confirmed regular tradeoffs between growth and poverty reduction.

Recent research and policy discussions identify two definitions for measuring pro-poor growth. The first is a relative definition, which compares changes in the incomes of poor people with reference to changes in the incomes of people who are not poor. Under this definition, growth is pro-poor when distributional changes accompanying growth favor poor people. This definition emphasizes inequality reductions rather than poverty reductions per se.

The second absolute definition considers growth to be pro-poor only when poor people benefit according to a standard measure of poverty. The measure of pro-poor growth depends on changes in the rate of poverty with reference to both the rate of growth and distributional patterns. Attempts are made to measure the “pro-poorness” of growth under each definition.

Underlying most perspectives on pro-poor growth is an unquestioned commitment to growth based on economic liberalization and the belief that higher rates of growth are essential in fighting poverty. Emphasis remains placed on competitive market economies that favor private-sector productivity and investments, and this preference, to the exclusion of alternatives, frames most discussions of pro-poor growth. The World Bank bias toward growth is clear in its assertion that while reductions in inequality might be welcomed, even becoming policy objectives, they are of limited operational use if they do not account for the impact of such actions on growth. There is no conclusive means for determining the extent to which poverty reduction is an outcome of growth. Similarly, one cannot predict with any confidence that economic growth will translate into reductions in poverty.

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