Understanding Poverty, Inequality and Justice

“The world has the material and natural resources, the know-how and the people to make a poverty-free world a reality in less than a generation”

James Speth, UNDP Administrator, in the UNDP Human Development Report 1997, (quoted by Todaro and Smith; 2006, p.240).

In their development economics textbook, Todaro and Smith (2006, pp17-20), states that no one has identified the human dimension of economic development as well as Amartya Sen.

Since ‘On Economic Inequality’ was published in 1973 his thinking has enlightened development economics, and his contribution to the establishment of the UNDP’s Human Development Index (HDI) for measuring poverty has influenced development theories universally (Ibid). The following analyses how Sen’s multidimensional understanding of poverty challenges the paramount role of economic growth and how a concern for human well-being beyond mere survival requires the analysis of poverty to relate to inequality and social and global justice.

In brief, Sen’s definition of poverty as ‘capability deprivation’ reflects how a person’s ability to control her own life depends on how she uses the resources she has influence over.

Identifying freedom of choice as a central aspect of most understandings of well-being, Sen

Page 23 labels these resources as ‘functionings’ and the freedom in the choices of the functionings as

‘capability’ (Ibid), thus poverty deprives a person’s ‘capability to function’ because it limits not only her functionings but also her freedom of choice. Sen’s understanding of capability to function encompasses Adam Smith’s consideration of being able to ‘appear in public without shame’ to include the ability of “taking part in the life of the community” (Sen, 1997, p199).

This understanding of poverty breaks the limitations of poverty understood merely as lowness of income. It implies that poverty cannot be adequately measured by mono-indicators such as poverty lines (Ibid, pp165-170). Nor can economic growth be perceived as an end in itself, but as a mean to alleviate human misery and advance human well-being (Sen, 1999, p14). As the pursuit of social welfare goes beyond economic growth “attention must be paid to the extensive evidence that democracy and political and civil rights tend to enhance freedoms of other kinds (such as human security) through giving a voice… to the deprived and the vulnerable” (Sen, 2010, p348).

The underlying rationale for Sen’s definition of poverty as ‘capability deprivation’ is freedom of choice. Though the question of whether liberty and equality are opposite or identical values has been part of political philosophy discussions for centuries, with liberalists insisting that equality kills liberty (Kolm, 1998, p476), Sen’s prominence among contemporary liberalists does not prevent him from emphasising the close connection between poverty and inequality.

In fact, his definition of poverty as capability deprivation derives from his scrutinising critique of welfare economics, which is directed both at its basis on Pareto optimality: “If the lot of the poor cannot be made any better without cutting into the affluence of the rich, the situation would be Pareto optimal despite the disparity between the rich and the poor” (Sen, 1997, pp6-7), and at its utilitarian ethos which he identifies as “profoundly unconcerned with inequalities” and “capable of producing strongly anti-egalitarian results” (Ibid, p110). In other words; not only does welfare economics – the area of economic thought to which social concerns at that time were confined – not deal adequately with inequality, it even produces it.

Sen shares this critique with several contemporary economist thinkers, among them Joseph Stiglitz (2013) who proposes a new macroeconomic policy framework to correct an economic system that is failing because it is based on economic theories that fail to address inequality (Ibid, pp336-355). While Stiglitz focuses on improving the rules, Sen seeks to rectify the ideological foundations of economics by insisting on bringing economics closer to ethics (Sen, 1995, p89).

Page 24 Tracing the roots back to Aristotle, Sen points out that economics relates ultimately to ethics and politics (Ibid, p3). However, in its evolution, economics has taken on an ‘engineering’

aspect whose growing domination has reduced the importance of ethical considerations (Ibid, pp49-50). It is difficult to interpret Sen’s use of the ‘general equilibrium theory’ to elaborate on this engineering aspect, as coincidental. As discussed in point 2.4, it is the constituting element of neoclassical economics and the point of reference for many critics of modern economics (Etzioni, 1988 pp1-50, pp160-163; Reinert, 2004, pp168-171). So when Sen argues that “the nature of modern economics has been substantially impoverished by the distance that has grown between economics and ethics” (Sen, 1995, p7) he joins those who invite economics to revisit its foundations as a social science.

More recently Sen’s contributions to reconnect economics and ethics have led him to propose a practical approach to justice theory (Sen, 2010). Already in his arguments for understanding poverty as capability deprivation there is a critique of Rawls’s justice theory. Rawls’s

‘difference principle’ which means giving priority to the least advantaged even at the cost of the most advantaged is also based on individual liberty and a critique of Pareto optimality and utilitarianism (Østerberg, 2011, pp225-236). Sen’s problem is that Rawls identify the least advantaged by their access to ’primary goods’, and though primary goods form part of Sen’s

‘functionings’, they do not cover more complex functionings like ‘the ability to take part in the life of the community’; thus not taking into account all aspects of what makes a life worth living (Sen,1997, pp197-199). Also, by using primary goods as an indicator of quality of life there is a risk of perceiving these primary goods as ends in themselves instead the means they are (Sen, 2010, pp65, 253).

When addressing poverty as a matter of global justice, Sen points out the limitations of Rawls’s and other modern justice theories as their ‘transcendental institutionalism’-basis means seeking global justice through perfectly just institutions in a world where no one has the sovereignty to control or correct these institutions (Ibid, pp24-25). Instead Sen proposes to concentrate on advancing global justice by removing the “manifest injustices that so severely plague the world” (Ibid, p263). Inspired both by Rawls’s foundational idea of ‘justice as fairness’ and by Habermas’s ‘interactive public reasoning’ Sen insists the process of removing injustice be based on democratic participation and attention given to include the voices of the poor and neglected (Ibid, pp53, 325-336). Furthermore, he suggests the so-called second-generation human rights – the economic, social and cultural rights – as a point of

Page 25 departure to advance human capabilities as they integrate democratic freedom and ethical consideration (Ibid, pp366-387).

In other words; as a matter of fairness poverty reduction understood as reducing human misery and enhancing human well-being requires addressing the underlying inequalities that produce human misery. In the absence of adequate global governance structures, the best way of doing this is to promote economic, social, cultural and political rights through participatory democratic processes as they both advance social and global justice and in themselves

contribute to the construction of justice.