The price of poverty - Lessons from Lin and Lula

Claude Clarke, Contributor

Gray's 'Elegy in a Country Churchyard' says it best: "Many a flower is born to blush unseen and waste its sweetness on the desert air."

Jeremy Lin, having been dropped by his first two major league clubs, sat inconspicuously warming the bench of yet another, unnoticed and unseen. The hapless New York Knicks, finding themselves without any visible options to end their miserable run of eight losses from 15 games, turned to Lin to stand in for their injured star.

What was revealed was a flower, more brilliant than anyone imagined. After all, being small-bodied (by US professional basketball height and weight averages), Chinese and a Harvard graduate are not the attributes we have come to associate with NBA stardom. But since Lin was finally given a run on the court, the Knicks have won nine of their last 11 contests, their games are sold out and their television ratings are through the roof.

The story of Jeremy Lin demonstrates the lesson that value sometimes resides in the most unexpected places.

Jamaican leadership, however, seems unwilling to look beyond the ranks of the entrenched experts, with whom they have become familiar, despite the absence of successful outcomes from their presence.

The simple logic that intractable problems cannot be solved by repeating doses of the same old prescription does not impress them. And so failure stalks them like a clinging lover. It is little wonder that after decades of reliance on the same old experts, the only evidence of the new administration's professed love for the poor is a catchy acronym, as yet without a plan.

economic success

Across the globe, economic success has been marked by the willingness to let go of past failed strategies and the experts that promoted them and turning to fresh minds with new solutions. The miracle in progress that is Luiz Inácio Lula da Silva's Brazil is an apt example.

Lula realised that Brazil's earlier approaches to economic governance had not worked, that there was no point in persisting with them or those who had managed them, and that he needed fresh thinking and new strategies if he was going to solve the problems that had plagued his country.

At the very outset of his administration, the fresh minds around him recognised the success for the country would not be possible without removing the scar of poverty. With a quartet of revolutionary programmes, he transformed Brazil's vast poverty landscape, including the crime-ridden favelas (slums) that hovered over Sao Paulo, Brasilia and Rio de Janeiro like great palls of misery, into areas of hope and cooperation.

The poor and destitute that once represented a threat to safety have now become a productive force on which the thriving Brazilian economy is able to draw. So successful has been Lula's anti-poverty initiative that Brazil has been entrusted with the responsibility of hosting the 2014 World Cup, a tournament that puts at the top of its priorities the safety and economic vibrancy of the host environment.

First, he introduced the Bolsa Família, a monthly cash transfer to mothers in the lowest income strata. It is paid to the mothers only on proof that they are sending their children to school and getting their health checked. And so while it might appear to be a handout, because it sees to the education of children who might otherwise become illiterate and unproductive burdens on society, it is really an investment in the country's human and social capital, breaking the self-perpetuating chain of poverty.

Second, recognising the stimulative effect it would have on Brazil's productive engine, because consumption by the poor is directed almost entirely at domestic goods and services, Lula gradually increased the real value of the minimum wage by 50 per cent over a five-year period.

Growth Acceleration Programme

Third, a Growth Acceleration Programme (PAC) was directed at improving the infrastructure within the favelas to lift the living conditions of their downtrodden residents to acceptable levels. The construction involved had the added economic benefit of creating jobs in these communities, increasing the consumption and demand for Brazilian production.

Fourth, Lula cemented the beneficial effects of the other initiatives with a revolutionary credit system called crédito consignado: affordable bank loans for household purchases, to people who hitherto would not have received the banks' attention.

This four-pronged stimulus at the socio-economic bottom - conditional cash transfers, higher minimum wage, improved living conditions, and access to affordable credit - triggered a rise in popular consumption, leading to an expansion of demand for domestic production that, after decades of decline, created a job boom in Brazil. Although poverty is still far from eradicated in Brazil, the number of the poor declined by 40 per cent in the space of six years, and the number of destitute people has been halved.

But the attention to the economic needs of the poor was not at the expense of prudent economic management. Lula managed the Brazilian economy to achieve average growth of more than five per cent per annum under his leadership, while "balancing the books and the people's lives". The jobs he created were both sustainable and expandable, and the horizon of people's economic and social hopes was lifted and was real.

In Jamaica, the tendency has been to address poverty through a multitude of social programmes with little, if any, economic content or outcome. But Lula saw poverty eradication as essential to the success of his economic development objectives and weaved it into economic policy to achieve the desired outcomes.

Prime Minister Portia Simpson Miller should learn from his example and transition her expressed love for the poor to an economic strategy that will provide them with a ladder of opportunity that will take them into the economic mainstream. This will move the poor from being a hindrance to development and transform them into the potential productive assets that they really are.

Poverty is expensive. The 1960s PNP leadership contender, Vivian Blake, is reported to have illustrated the corrosive nature of poverty with the double entendre, "Poverty breeds." And it does. Poverty breeds frustration, it breeds ignorance, it breeds crime, it breeds more poverty. Poverty is poison to an economy. Like a cancer, it can destroy the viability of all organs of a society. And a society, to protect itself and advance its health, must reverse and excise it.

Mrs Simpson Miller's sentiments are sound: the problems of the poor must be addressed. But does the prime minister really believe that embracing the same old expertise and the same old make-work programmes and handout strategies will lead to anything but greater poverty? Like Lula, she must find the means to integrate strategies for poverty amelioration with policies for economic expansion.

manifestations of poverty

To be sure, there are many who recognise the destructive effects of poverty. The problem is that they view it only as a result of our non-performing economy and not as a significant cause of its non-performance. Yet the culture of criminality and disorder that has developed among people without economic options is substantially blamed for the failure of the economy to attract investments and generate growth. This is illogical. If the manifestations of poverty can retard economic expansion, it follows that the eradication of poverty is a necessary companion to economic improvement. Lula's success owes much to his recognition of this truth and his success in marrying his efforts to eradicate poverty in his country with his plans to transform the economy.

By contrast, our experts were content to espouse that poverty was reduced by more than 50 per cent during the 15 years after 1991, even while the real per capita income of the country declined by almost four per cent. They either were not aware or did not want to tell us that hidden in that contradiction were money laundering, pyramid rackets and extortion that financed consumption while creating an environment of crime.

The euphemistically described informal economy which crime fostered helped rip up the productive foundations of the economy, leaving it unable to defend itself from the international economic crisis from which most of our neighbours have substantially recovered while we are yet to seriously respond.

It is incomprehensible that any government with the objective of reversing years of stagnation, spiralling debt and increasing poverty would employ the very persons that helped create them.

If the new administration is to be successful in meaningfully addressing the problem of poverty, it must, like the Lula administration, ensure that there are economic returns for the cost of its poverty-reduction programmes and that the strategies employed lead to economic expansion.

Addressing poverty is essential for the economy to grow, but the use of unproductive strategies will only prolong and increase it, and make it worse. Old, failed approaches must not be repeated, and new strategies that lessen poverty while increasing the capacity of the economy to produce so that the increased demand generated by the newly empowered poor can be met with domestic production. In this way, poverty reduction can become an important stimulus for the economy to develop and grow.

However, even if we have been blessed with a Lula to lead us, we must bring new talent and fresh ideas to the task if Lula's results are to be achieved.

Claude Clarke is a businessman and former minister of trade. Email feedback to columns@gleanerjm.com.