Sometimes the most efficient way to help the poor does not involve the equal distribution of money.
This was among the key messages of Nobel Peace Prize Awardee for Economics James Mirrlees during the Asian Development Bank (ADB) Distinguished Speakers Forum on Tuesday.
“[It is] not best to distribute entirely on the basis of income, or in the form of money,” Mirrlees said in his presentation titled “Poverty and redistribution in emerging economies.”
A better way, Mirrlees said, would be the distribution of free or cheap commodities that are needed by the poor to survive. This includes but is not limited to low-quality housing, lower quality food grains, simple mobile phones, and water stand-pipes on the street.
“These are the commodities that they will accept if they are poor. If there is a commodity that people will only accept if they are poor, that can be provided free or cheaply,” Mirrlees said.
He added that the governments can also turn to agricultural subsidies like what China did.
Mirrlees said China’s subsidized seeds and fertilizers played a key role in rapidly reducing poverty in the country. These subsidies allowed the agriculture sector to grow and lift people out of poverty.
Mirrlees said turning to subsidies will enhance the poverty-reduction aspect of economic growth. As a general rule, economic growth will impact on poverty reduction but subsidies will speed up the process.
“It is slow and inefficient to leave poverty relief to growth, particularly since agricultural incomes seldom grow nearly as fast as urban incomes,” Mirrlees said.
Meanwhile, he said that Asia as a whole is far more vulnerable to global warming, particularly rising sea levels, than any other threat or development challenge now faced by all countries and regions in the world. He believes rising sea levels constitute a major threat to the region because there are many low-lying places in Asia.
He added that one of the reasons this challenge becomes difficult is that China is now considered the biggest producer of carbon gas or global warming gases in the world. China, Mirrlees said, stands to lose the most when it comes to reducing gases because it may slow the economy and increase poverty.
“[The greatest challenge for the region is rising sea level] mainly because of global warming because there’s an awful lot of low-lying land in Asia, it is highly compromised. I think that is quite a challenge for Asia. I also think its a challenge that Asia could go quite a long way to meeting,” Mirrlees said.
Professor Mirrlees was awarded the Nobel Memorial Prize in Economic Science in 1996 for his contributions to the theory of incentives under asymmetric information. He served as professor of political economy at Cambridge University as well as a visiting professor at the Massachusetts Institute of Technology, the University of California, Yale University, the University of Melbourne, and Peking University.
