CHAPTER TWO:
LITERATURE
REVIEW: THEORETICAL
LITERATURE
There are many
theories on poverty and inequality. In this work, we shall consider those,
which provide us with better insight for the understanding of the problem of
poverty and poverty alleviation. Some of these theories includes:
The individual attribute theory of poverty.
The mutual circumstantial theory of poverty.
The income or personal income distribution
theory of poverty.
The power theory of poverty.
The five finger fallacy of poverty.
THE
INDIVIDUAL ATTRIBUTES THEORY OF POVERTY
Angaye (1998: 55)
in discussing the theory of poverty, inequality and development, sited the
individual attribute theory, which argues that “the poor individuals are
responsible for their own plight since an individual location in the society’s
hierarchy of income and wealth is presumed to be determined, above all by his
abilities, motivations and aptitudes”. Relating on the individual attributes
theory of poverty Agris (1999: 12) claimed that it is different to deny the
fact that individual attributes cannot determine one’s position in the society
but he observed that we can also realize that one’s position in the structure
of possibilities and within a structure of possibilities and power system in
every society. Taking Nigeria as an example, Agris identified such forces to
include corruption, political instability, market imperfection, tribalism, poor
government policies, ethnic conflicts, etc. he therefore concluded that an
individual in Nigeria who is self motivated, full of strength, stamina, vigour,
vitality and above all equally having high aptitudes might still remain poor
due to the above mentioned forces. Thus, the greatest short coming or
limitation of the individual attribute theory.
THE POWER
THEORY OF POVERTY
Boye (1999: 51) in
Bullion published by the Central Bank of Nigeria in this discussion “Poverty
and measures for Poverty Alleviation” made references to the work of Akeredolu
Are (1975) and Shelfideen (1997) who provided some four theories of poverty
among which was the power theory of poverty.
According to Boye
(1999: 74), the power theory of poverty argues that the political power
structure in any society determines the extent and distribution of poverty
among the population. The theory further explains that poverty is regarded as a
necessary feature of any situation in which the few posses some political power
that can help them to organize the economic system in their own selfish
interest.
Akeredula (1976:
4) then concluded that the policy implication of the power theory of poverty is
that poverty will remain prevalent as long as there is no effective pressure
from the majority poor to restructure the distribution of political power in
the society in favour of all.
According to Boye
(1999:51), Angaye (1998:036) and Eyong (1999:7) the power theory of poverty
seems to be more relevant to developing countries in view of the tendency of
those without economic power to seek political power to amass ill-gotten wealth
either through means or through gun.
This is computed
according to Eyong (1998) by the low political consciousness of the generality
of the people, the high degree of centralization of national resources and the
tendency toward one partism and dictatorship. Eyong (1998) equally agreed with
the power theory of poverty that it explains the paradoxical situation in a
country like Nigeria, which is rich, but yet the generality of the people are
poor.
The policy
suggestion of the power theory of poverty has been criticized. Akeredolu (P30)
pointed out that the policy suggestion of the power theory of poverty that
poverty from below is brought to restructure the distribution of political
power in favour of the masses has generated heat debate.
“Akeredolu (P31)
sited the French Revolution on the 14th. Of July 1789, Nigeria 1967 to 1970
etc. and concluded that much attempts by the masses to overthrow the power
structure usually result to war. According to him, such suggestion is very
ridiculous since it is associated with killing. Akeredolu (P. 16) was supported
by Forgha (1998: 14) as he equally sited the situation in Burundi 1991, Mali
1992, Cameroon 1982, 1989, 1992 etc. as attempted by the masses to overthrow
the exploitative class. Forgha (1998) and Akeredolu (P. 23) both criticized the
power theory of poverty that it does not provide us with any policy suggestion
to alleviate poverty peacefully.
Iboronke (1999:
11-13) also criticized the power theory of poverty on the ground that even if
there is revolutionary response within the vast majority of the population to
overthrow the political structure in the society in question, such cannot be
possible in the short-run. For example, it took the people of federal Republic
of Congo 29 years to send away momentous Sessieko, 8 years for the dictatorship
of Ibrahim Badamosi Babagida of Nigeria, 5 years of Abacha of Nigeria, 23 years
of Alhaji Ahijo of Cameroon etc. Thus, the powerlessness of the power theory of
poverty to deal with poverty alleviation in the short-run and peacefully
constitutes the greatest shortcoming of the theory.
THE
NATURAL CIRCUMSTANTIAL THEORY OF POVERTY
The natural
circumstantial theory of poverty expounded by Sheriffdom (1997:31) identified
some geographical location, inadequate natural endowment of some areas in which
people live, unemployment, old age, physical and mental disabilities etc. as
explanatory variables of poverty. This theory therefore suggests that for
poverty to be eradicated there should be sectional and regional developmental
policies and welfare measures that should be directed to the unemployed, the
aged and the disabled. Fanwi (1998:16) pointed out that although the policy
suggestion of this theory is very useful on a poverty alleviation measure, many
developing countries are still not making effective uses of this suggestion as
it has instead encouraged laziness, corruption and mismanagement of state
funds.
According to
Fanwi, statistical result have revealed that gifts or aids directed to those
victimized by transitory poverty such as drought, floods, pests, eruption,
landslides and other form of natural disasters are not usually directed to the
victim in good faith. Hence, the limitation of the natural circumstantial
theory.
THE DIVINE
THEORY OF POVERTY
Erone (1998:301)
cited the work of Anikpo on explaining the divine theory of poverty and the
five fallacies. According to Erone (1998) there is tendency among divine
theories to explain ways poverty arises from a divine design. Thus the theory,
which is closely related to the natural circumstantial theory of poverty,
explained that the inequality in natural endowments is a sufficient reason for
the existence of poverty in our world. For example, some animals are strong,
others are weak, some trees are either taller, others are short; a man is
stronger than a woman, etc. Arising from this understanding, Erone explained
the divine theorist’s thinking that is logically consistent that there is bound
to be inequalities in term of our material acquirements.
Erone therefore
accepted with Mark Anikpo that poverty is rationalized as a natural order of
phenomenon ordained by God and the poor are expected to accept their conditions
with humility and hope for better days ahead in God’s kingdom where they may
appear much richer and happier. To him, the wealthy are entitled to their
wealth and may choose to help the poor by giving alms and other acts of
generosity.
Erone explained
that such arguments by the divine theorists have been dismissed on the ground
that it is merely rationalization as shared in Mark Anikpo’s views; that such
explanation by the divine theory is theological in conception and erroneous in
application. To him, it confuses a man-made phenomenon with natural ecological
imbalances; it encourages graft and legitimizes fraud thereby making religion a
major obstacle in the understanding and eradication of poverty.
THE INCOME
AND INCOME DISTRIBUTION THEORY OF POVERTY
Solomon (1980:
16-20) reviews the Marx’s economic theories among which are the theory of
income and income distribution. According to him, the starting point of Marx’s
analysis was the labour theory of value. Specifically, the theory of income and
income distribution focuses attention on the labour market and the determinants
of labour’s income, based on demand and supply factors, which also depends on
the educational levels, motivation, regional location and age among others.
According to
Angaye (1998: 56) the classical economists (Adam Smith, Thomas Malthus, David
Ricardo) supported the income distribution theory by saying that income
inequality means a higher income for the working classes, rise in their consumption
and population, fall in savings investment and economic growth. To the
classical economists, equality is preferred to income inequality.
Lewis (1998: 16)
explains that the share of profits in national income should be increased
because the larger profits accruing to the capitalist sector (which perpetuate
income inequalities) will mean larger savings, which will be invested for
larger capital formation and higher growth rate.
Angaye also argues
that although wealth and income inequalities in 19th. Century western Europe
led to larger savings and investment on the part of the wealthy classes, there
is no guaranty that the rich in developing nations like Nigeria will utilize
their savings in productive investment, in fact many of their incomes on conspicuous
consumption, foreign travel deposits in foreign banks and hoarding of foreign
currencies.
According to Eyong
(1998: 16) the income distribution theory further explains that since majority
of families or households rely on labour market earning for most of their
income, any rise in unemployment may result in large income decline
particularly among those whose income are low. Thus, the theory according to
Eyong predicts a positive relationship between unemployment and poverty rate.
The theory also predicts
that the increase in employment without a corresponding increase in output of
goods and services (disguised unemployment) will generate more poverty, such a
situation will result to inflation which will tend to benefit debtors at the
expense of creditors, causing falling value of money and balance of payment
problem, especially during galloping and hyper inflation. Eyong pointed out
that such an environment of rising prices would generate high incidence of
poverty especially amongst low and fixed income earners. This also shows a
positive relationship between the rate of poverty and the level of inflation.
Eyong concluded
the explanation of the income distribution theory with its policy suggestion
that: a policy to eradicate poverty should be those that will reduce the rate
of inflation and equally deal with the problem of unemployment.
However, the
income distribution theory has not provided us with any particular economic
instruction to solve the twin problem of unemployment, inflation and poverty, which
remain the most contemporary problem of all society today.
Boye-Ilori (1999:
51) also discussed the capitalist entrepreneurial theory, which argues that
crude exploitation of workers through low wages and poor conditions of savings
leads to pauperization of the working class is considered very relevant in
Nigeria. Let us at this point, look at the other side of the coin.
Under the
empirical literature review, the works of the following authors are very
influential. Hence Blank and Blinder (1986), Cutter and Katz (1991) in United
State and Yoshino (1993) in Japan examined the relationship between poverty,
inflation and unemployment, while Blank and Blinder finds a significant
positive relationship between poverty, inflation and unemployment, Cutter and
Katz reported of a negative relationship between inflation, poverty and unemployment.
Gray (1996)
examines the Kuznet hypothesis, which stated that income inequality first
increases in the early stages of development but decreases in the later stages
thereby generating an inverted U-shaped curve. That is in simple language,
things must first of all get worse before they get better. The study by Gray
(1996) using cross sectional data covering 34 countries did not find any
confirmation of the Kuznets inverted U-shaped curve hypothesis; but his own
results were ambiguous. His result shows that income inequality and poverty
both decreased in some countries; they increased in others.
However, the
reasons for these differences were attributed to the different methods that he
used. That is income inequality in some countries while in others he used the
absolute poverty income approach.
Gray (1996)
concluded his study saying, “Rapid economic growth tends to reduce poverty as
was the cases of East Asian and Latin America countries”.
However, from
Fields (1990), Eyong (1998), Kabuin (1996), Jebbin (1996) and Amadi (1994), we
can deduce a different experience for other countries such as Sri Lanka and
Philippine and concluded that “economic growth is neither necessary nor
sufficient for poverty alleviation”. That, in addiction to economic growth,
other factors also determines the level of poverty in a society.
Furthermore,
studies by Torado (1992) indicate that higher levels of per capita income do
not guarantee a lower level of poverty. But that the understanding of the
nature of poverty problem in less developed countries must center on the
analysis of the size distribution of income, to him, the magnitude of absolute
poverty as based on the combination of many factors viz; low per capita income
and highly skewed income distribution consequently, the problem of poverty and
income inequality is not just one of economic growth and the political and
institutional arrangement according to which rising income are distributed
among a large segment of the population.
Unlike in other
countries, Okoh (1997) in Nigeria examines the conceptual and methodological
issues in poverty measurements. This includes the setting of the poverty lines
based on cost of basic need approach, the food energy intake method, the
poverty index using head count index, the poverty gap index and the
Foster-Grcertheorbecka squared poverty gap index. Using the basic needs
approach for instance, Okoh (1997) concluded that if the greatest proportion of
the population of a country lack adequate assess to the consumption of
nutritional specification like protein, calcium, vitamins, iron etc. such
country or person is said to be poor. Going by this, it is clear that the
greatest percentages of Nigerian are poor.
However, the basic
need approach measures can be criticized based on its arbitraries and neglect
of the utility compensation variation, which create substitution effects in
consumption. That is, the basic need approach takes into consideration only the
income effects as price changes, in neglect of the substitution effect.
In case of poverty
lines, he concluded that a food-energy intake yields deceptive poverty
comparisons between individuals or countries. The poverty lines can also be
criticized on the ground that poverty line do not have constant purchasing
power for the poor between different states in a country like Nigeria hence,
most comparison can be considered unreliable.
Considering the
headcount index, Okoh noted that this measurement of poverty is reliable since
it could explain the incidence and magnitude of poverty in Nigeria. However, it
equally fails to capture the severity and dept of poverty in Nigeria.
This is clear to
us that non of these measures of poverty are free from one weakness or the
other and are controversial. None of the measures also made specific focus on
the effect of macroeconomics conditions on the observed poverty rate in
Nigeria.
Englama and
Bamidele (1998) in the examining the measurement problems of poverty in Nigeria
recommended the need to move beyond the income or consumption measures of
poverty to social, economic and environmental ramifications of poverty to
operate greater insights. The P-index income inequality (Ginicoeffeicient)
should be used so as to eliminate some of the limitations, which are inherited
in the use of one of them, and to provide more fruitful insights in formulating
policies for poverty alleviation.
Strategy for
growth-led poverty alleviation attracted the attention of Atoloye (1997: 313).
He explains that the partial barter arrangements and the production for
consumption in rural areas complicate the realistic assessment of the level of
poverty in Nigeria. While deficiencies of various measures of poverty such as
the poverty line based on minimum necessities of life, the absolute income
received by the poorest 40 percent of the population cannot be ignored. He
therefore suggests the revolutionalization of the production system in Nigeria
through labour intensive and rural based production activities for the purpose
of achieving the desired objectives of growth-led strategy for poverty
alleviation.
Furthermore, a
re-orientation of production system based on local technology that is
proficient and less dependent on modern infrastructure will achieve the desired
impact of poverty alleviation. Thus, employment generation constitutes one of
the critical elements in a poverty alleviation programme.
An appraisal of
the World Bank report that poverty is overwhelmingly a rural problem, the study
also shows that the main determinants of poverty includes location (rural and
urban), education levels, age of the head of household, family size, extent of
income inequality, inflation rate among others.
The study
identified a number of poverty reducing strategies including promotion of high
and broad-based access to social services and infrastructure by generality of
the people, the targeting expenditure programmed towards the primary education,
health and services infrastructure improvement. He emphasizes the need to
establish a viable and macroeconomics environment and to streamline an incentive
regime to promote broad based economic growth with equality.
A comparison of
the policy suggestion in the World Bank report, Okunmade (1999) and Atoloye
(1997) indicate contradictions and difference in emphasis. While the former
recommends labour intensive technology, the latter recommend labour incentive
technology.
Further analysis
on the World Bank (1996) indicated that poverty improves during period of
Structural Adjustment Programme (SAP) (1986-1992). Additional findings show
that the percentage of population under poverty line declined from 43
percentage in 1985 to 34 percentage in 1992. The study also shows that
calamities decline in poverty in the past 1992 period.
Foluso (1999) in
examining the contributions of international agencies towards poverty
alleviation argues that although the international agencies have committed more
than 20 percent of their total assistance package to poverty reducing
activities in Nigeria, more and more Nigerians are still entering into the cold
hands of poverty. He further explained, although there is an attempt to fashion
out a Poverty Alleviation Programme by UN agencies in Nigeria, the absence of a
policy document to set goals and objectives as well as providing frameworks for
the proper articulation of the programme is likely the major constraints.
Foluso therefore
suggested that a national framework for poverty alleviation in Nigeria is
comparative and recommended that a strategy document called Community Action
Programme for UN Agencies and other donors’ bodies need to be encouraged
towards their supportive roles in alleviating poverty in Nigeria.
Unlike Foluso
(1999), Ogundipe (1999) in examining the role of the non-governmental
organization on poverty alleviation explains that the major objective of
micro-credit of the NGO’s involved in poverty alleviation can be summarized as
that of expanding the productive capacities and improving the social-economic
status of the low-income people through effective provision of financial and
institutional building services. It also include the use of flexible approaches
towards new product development and the influences on the rural poor through
the process of capacity building by training specialist researchers,
professionals etc. in developmental activities.
Ogundipe in appraising
the activities of some eight NGOs in Nigeria based on their sources of funds,
savings, mobilization, credit delivery mechanism, loan recovery and their
socio-economic impact with particular emphasis on the essence of micro credit
as a useful tool for poverty alleviation in Nigeria shows that although much of
the NGOs as still to achieve their main objectives. However, the poor are the
best judges of their own situation since they know best to use credit when
available.
Ogundipe observes
that the activities of the Nigerian based NGOs like others elsewhere in Latin
America and South East Asia are adaptive and he therefore challenge the NGOs to
make greater impact in Nigeria to the extent that the problem of inadequate
loanable funds, limited sustainability, inadequate broad-based programmes must
be addressed. Ogundipe then concluded that the major challenge to NGOs, in
their ability to expand the size of the programme, building with numerous
financial institutions encourages the integration of rural financial
institution, provision of a special credit window where viable NGOs dirt-could
access funds at the market rate. Looking at the place of any government in
economic development Ogundipe explains that the government ought to provide a
conducive environment for the growth and sustainability of NGO through the
provision of infrastructures (roads, water, electricity etc.) to rural
communities. This will help in reducing the cost of operations by NGO, increase
outreach and visibility by the poor who are bound to feel the increased impact
of the NGO’s activities.
Boye-Ilori (1999)
in his paper on the topic “politics and measures of poverty alleviation in
Nigeria” argues that some school equates national development efforts to
poverty alleviation. According to Boye, the level of poverty is the
manifestation of the state under development and as such national development
effort cannot be equated to poverty reducing effects. In comparison of national
development forces on all aspect of the society to move forward in terms of
development, poverty alleviation efforts relate only to policies, programmes
and other measures emplaced specifically to address poverty as a problem. Boye
saw development programmes as highly anti-poor in design and implementation as
he sited the case of dam, which supplies power to the urban dwellers but causes
flooding and diseases to the rural dwellers. This increases poverty instead of
alleviating it for rural inhabitants.
Boye therefore
argues that poverty alleviation efforts must be focused and targeted to the
poor and possess desired features that would enable them address the needs of
the poor. He then further explained that such poverty desired features is that
they must be demand driven and formulated bottom-up with the poor as active
stakeholders in the decision making process.
Eloho (1999)
acknowledges that in line with the wrong notion of equating development with
poverty alleviation, many analysis and policy makers in Nigeria have cited
development programmes to poverty reducing efforts of the government. Eloho
cited such programmes to include; Electrification scheme, Rural Banking Scheme,
Agricultural Development, River Basin Development Authorities, Urban Water
Supply Scheme, Credit Scheme, Health Scheme, Immunization Scheme, Transport
Scheme, Operation Feed the Nation / Green Revolution, Universal Primary
Education Scheme, Adult Education and Low Cost Housing Scheme.
Eloho pointed out
that although these programmes provided very crucial services to the populaces
and some were quite successful in achieving their objectives, they were in
conception design and their execution did not serve as poverty alleviation
programme and as such their benefit did not “trickle down” to the poor.
Eloho concluded
that although recently the Federal government have designed a poverty
alleviation package which outline the term goal for poverty alleviation as well
as broad base strategies such suffer the same effects as their predecessors due
to what he called the Nigerian’s factors although he could not point out what
these Nigerian’s factors are.
Obandan (1997),
unlike Sam (1997), Ak (1997), Ibrahim and Bulus (1997), Echebiri (1997) in the
annual conference of the Nigerian Economic Society, presented papers on the
Nigerian economic growth versus other strategies. Obadan (1997) reports the
World Bank to have argued that a high rate of economic growth is the most
effective strategy for reducing poverty in Sub- Sahara Africa.
Obadan however,
pointed out that in the early 1980’s that some Banks initiated some market
based strategies to reverse the economic decline, however, he affirmed that the
majority of the poor in Sub-Sahara Africa especially Nigeria did not benefit
from these strategies and in fact their economic situation worsened. Obadan
therefore argues that economic growth may help to reduce poverty in the long
run, but it is not sufficient in it self to assist the chronically poor. He
therefore lamented that investments in human capital are necessary to equip the
poor with education/training they require to enable them share in the benefit
of development. To him, educated citizens can take advantage of technologies,
which will improve their health and nutritional status and enhances their
earning power.
Obadan concluded
that for poverty reduction, economic growth is necessary but not a sufficient
condition. For growth to be effective, he noted that it has to be accompanied by
a deliberate policy of reduction, the pattern of growth need to be changed so
that the poor in rural and urban areas can participate in the process. In
Nigeria, where the incidence of poverty has remained high in spite of growth
and the existence of number of poverty-related programmes, targeted efforts are
required to induce broad-based growth and provide social service and
infrastructures aimed at reducing the depth and severity of poverty across the
country. He therefore recommended that a labour intensive growth strategy needs
to be complemented with a sustainable growth of living standard along with
other features. A desirable poverty alleviation strategy includes; targeted
poverty programmes and projects, support of income and employment generating opportunities
provision.
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