Monday, July 26, 2010

Social empowerment and economic growth

More evidence in support of the argument that economic growth is the most sustainable route to social empowerment comes from the example of women working in the growing garment industry in Bangladesh.

This Economix post points to how "by giving women an independent source of livelihood, Bangladesh’s garment industry has changed this conservative Muslim country’s society in immeasurable ways". An yet to be released study finds that "a doubling of garment jobs causes a 6.71% increase in the probability that a 5-year-old girl is in school". It has also been found that girls who live in villages with garment factories tend to marry later and have children later than the girls who grow up in villages.

More than 80% of the three million people who work in the industry are girls, who migrate to cities to work in these factories when they are in the 16-19 age group. Bangladesh with annual garment exports worth $ 7.1 bn, is already the world's second largest garment exporter. With the lowest factory wages in the world, the country is slowly emerging as the preferred outsourcing location for western apparel retailers and brands, who are exiting China due to rising wages there.

In this context, a study of the software industry in India by Emily Oster and M. Bryce Millett has found that the introduction of one ITES center increases school enrollment by 5.7% in its surroundings, an effect driven almost entirely by English language schools.

The results from the software and the garment industry are consistent with the claim that social empowerment impacts are driven by changes (or perception of changes) in returns to schooling. Such inherent incentives-driven forces have to complement (and beyond some level - say, secondary and tertiary education - even dominate) the role of government welfare interventions in achieving social goals like education.

They also underline the fact that the most effective - in terms of sustainability, ease of implementation, and most importantly, magnitude of the impact - means of social empowerment and poverty reduction is through economic growth.

Targeted welfare programs and focused poverty-reduction initiatives like micro-finance and SHGs, while important, have serious limitations in their ability to translate destitution-support led social empowerment into meaningful long-term economic empowerment. If there is any more evidence required, just look northwards to China!


Jayadeep(JDP) said...

Problem with this kind of empowerment is that it is solely based on cheap labor, not because a new industry with a good ecosystem is coming up. So when things are not going very well in the western markets, it impacts these people as well. I am not so sure if it is a sustainable thing. And at a macro-level, this is nothing but exploitation of poor people and resources in this region by the western businesses. All of these needs massive urbanization and creation of slums(housing for migrating population) which has an irreversible impact on the environment. While you may have data to show progress, but I would worry about the sustainability of that progress.

gulzar said...

as i said look northwards to China (and historically too, all of East Asia)...

nothing can take away from the fact that over the last quarter century, the country's poverty rate (defined at number of people living below $1 a day) has dropped from over 60% to just 13% today as the Chinese "economic lift has rocketed upwards". i would call this sustainable, even if the "lift" stays still from today. there have been costs, but when weighed by any utilitarian calculus, the net benefits outweighs the costs.

about labor vulnerability, therein lies the importance of strong social security nets (just a small portion of the revenue increases due to such growth will be enough to fund them).

and jayadeep, i am not in agreement with the moral dimension. i will stick my neck out and argue that twenty years down the line our companies will be vying to do the same with Africa as the the continent becomes the latest generation in the flying geese model.

and yes, urbanization is required and there will be slums. but have in place policies to address them instead of shutting off the growth opportunity. again historically too, I cannot remember one example of massive economic growth, on scale, that has not be urbanization-driven.

gulzar said...


I could not resist posting this quip from the late Joan Robinson about underemployment in South-East Asia, "the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all"!