Institute for Domestic & International Affairs, Inc.
United Nations Development Programme Reduction of Poverty Director: Jessica Falk
ÂŠ 2009 Institute for Domestic & International Affairs, Inc. (IDIA) This document is solely for use in preparation for Philadelphia Model United Nations 2009. Use for other purposes is not permitted without the express written consent of IDIA. For more information, please write us at firstname.lastname@example.org
Policy Dilemma ______________________________________________________________ 1 Chronology __________________________________________________________________ 3 Alma-Ata Protocol and the Breakdown of the Soviet Union, 21 December 1991 ______________ 3 World Summit for Social Development in Copenhagen, 5-12 March 1995___________________ 3 Resolution 52/194, 18 December 1997_________________________________________________ 4 Economic Crisis in Russia, 17 August 1998 ____________________________________________ 5 Millennium Development Goals, 8 September 2000 _____________________________________ 6 CIS-7 Conference, 21-22 February 2002 ______________________________________________ 7 World Solidarity Fund, 20 December 2002 ____________________________________________ 8
Actors and Interests ___________________________________________________________ 9 State Governments ________________________________________________________________ 9 Businesses ______________________________________________________________________ 11 Non-Governmental Organizations __________________________________________________ 12
Possible Causes _____________________________________________________________ 14 Disintegration of the Soviet Union __________________________________________________ 14 Low Wages _____________________________________________________________________ 15 Lack of Education________________________________________________________________ 16
Projections and Implications___________________________________________________ 17 Conclusion _________________________________________________________________ 19 Discussion Questions _________________________________________________________ 20 For Further Reading _________________________________________________________ 21 Works Cited ________________________________________________________________ 22 Works Consulted ____________________________________________________________ 25
Policy Dilemma At the turn of the twentieth century, the United Nations created the Millennium Development Goals. They consist of eight landmark improvements to be established by the year 2015. The first goal calls for the reduction of poverty. Poverty is defined as “the lack of resources necessary for material well being,” including, food, water, housing, and health care. Using this definition, the World Bank estimates that approximately sixty one million people in Eastern Europe live in extreme poverty, surviving on less than two dollars a day.1 Between the years 1998 and 2003, forty million people living in the region moved out of absolute poverty. Although Eastern Europe has made significant strides, more than 150 million people remain “vulnerable” to poverty. In other words, over half the population is at risk of sliding back into extreme poverty. 2 The situation is also complicated by the varying levels of poverty in each state. Some states such as Croatia and Bulgaria are advancing and decreasing the poverty level with the hopes of joining the European Union, where as other states such as Georgia and Tajikistan remain some of the most impoverished in the world. The World Bank has identified four groups that are at the highest risk for living in poverty. These groups include the unemployed, the less educated, those living in rural areas, and children. A study by the World Bank found a correlation in Eastern Europe between an increase in education and the decline of poverty. Moreover, states where the level of education did not improve saw an increase in (or no effect on) poverty rates.3 People residing in rural areas are more likely to live in poverty because they are least affected by capital growth. Also, these individuals are self employed in the agriculture business and do not have a steady income. In Eastern Europe, this has resulted in an increasing gap between rural and urban residents because the poverty level in urban areas 1
“Dramatic Drop in Poverty Comes with a Warning,” The World Bank, October 15, 2005. <http://www.web.worldbank.org> 2 “Nature and Evolution of Poverty,” The World Bank, <http://siteresources.worldbank.org/INTECA/Resources/ch1poverty.pdf> 3 Ibid. 11
has been steadily declining. Refugees and other ethnic minorities are also at a greater risk for living in impoverished conditions in comparison to the remainder of the population. Poverty in Eastern Europe is different from the rest of Europe, because two thirds of the poor in the region are employed. This is strikingly different from other regions where poverty is usually found amongst the unemployed, not the employed. The low wages that workers are receiving is partly attributed to the uneasy transition from socialism to market capitalism.4 As a result, workers are switching from state owned corporations to private businesses. Because businesses are primarily interested in profit, they often do not pay their workers as much as the state government would. In short, Eastern Europe suffers from a distinct form of poverty that cannot necessarily be solved by increasing employment rates. The high rate of poverty results in a low quality of life for those suffering in Eastern Europe. Individuals living in poverty have a lower life expectancy rate compared to those living above the poverty threshold. Also, illnesses such as tuberculosis and HIV/AIDS are prevalent among the poor population because of a lack of education and inadequate health care.5 People living in poverty also do not have access to clean water, sufficient education, or proper housing. In order for this region to continue to grow and prosper, half of the population can not be living in these poor conditions. For this reason, it is imperative that the United Nations take action to eradicate poverty that is widespread in Eastern Europe. The most effective solutions involve promoting economic growth and raising wages, both of which were the driving forces behind the reduction of poverty in the past decade. In order to make further progress, economic growth and wages must increase at a more rapid pace . Ruslan Yemtsov, an economist for the World Bank has stated that “if 4
Celia Dugger, “Many in Former Soviet States Still Face Poverty”, The New York Times, October 14, 2005, Lexis Nexis. 5 “Poverty in Eastern Europe and CIS,” United Nations Economic Commission for Europe, <http://unece.org/ead/pub/041/041c7.pdf>
current growth rates continue, it will take a very long time to reduce poverty.â€?6 The development of rural areas and the establishment of free trade agreements are both ways to stimulate growth through industrialization and job creation.
Chronology Alma-Ata Protocol and the Breakdown of the Soviet Union, 21 December 1991 Signed by Armenia, Azerbaijan, the Republic of Belarus, the Republic of Kazakhstan, the Republic of Kyrgyzstan, Moldova, the Russian Federation, the Republic of Tajikistan, the Republic of Turkmenistan, the Republic of Ukraine and the Republic of Uzbekistan on December 21, 1991, the Alma Ata Declaration officially disbanded the Soviet Union.7 With this declaration, the Commonwealth of Independent States was created which resulted in a very different economic relationship between the newly formed states. The changes in currency, trade relations, and form of government in each state drastically affected the economy and the poverty level. The rapid transition towards Western government and Capitalist models served to immediately benefit wealthy business owners. Broken with their government ties, they could take advantage of the working class by paying smaller wages, thus increasing the poverty level. Poverty has always existed in Eastern Europe, but it was not until 1991 where it became a problem that needed to be addressed by the new governments that were formed.
World Summit for Social Development in Copenhagen, 5-12 March 1995 The World Summit held in Copenhagen marked the largest gathering of world leaders in history at that time. The purpose of this assembly was to create solutions to conquer the always present issue of poverty. In the agreement that followed the Summit, all states present pledged to put their efforts towards the elimination of hunger and 6 7
Ibid. Alma Ata Declaration, December 21, 1991, Library of Congress.
malnutrition, improve food security and education, increase employment and access to primary health care facilities, and to ensure safe drinking water and shelter to all people around the world.8 At the Summit it was recognized that women and children are often affected the most by poverty, so they gave special focus to these higher risk groups. The solutions that were created to get individuals to conquer poverty included ensuring access to vital resources such as credit, land, education and training, technology, knowledge and information, as well as improving public services.â€?9 All of these actions were deemed necessary by the Summit to improve the standard of living for those suffering in poverty. The Summit called on the international community and international organizations to help developing countries achieve the goals set out by the Summit. The Summit held in Copenhagen illustrated that the international community was taking a proactive approach in eradicating poverty. This was the first of many international summits held to tackle the problem of international poverty. Even though the gathering of leaders to address the problem was a significant step, and the solutions they produced were theoretically useful, few nations implemented them to the extent that was requested. This fact is especially apparent in the lack of a noticeable decrease in poverty follow the conclusion of the Summit.10
Resolution 52/194, 18 December 1997 The important role of microcredit in poverty reduction was discussed in General Assembly Resolution 52/194. Microcredit programs involve lending individuals who are poor or living in poverty with a few hundreds dollars to create their own small enterprises. The businesses that are created are usually in the field of agriculture, distributions, crafts, and trading.11 These programs have proven to be successful in lifting people out of poverty by enabling them to make money through their own business. It has been proven 8
Agreements of the World Summit for Social Development, Commitment 2, <http://www.un.org/esa/socdev/wssd/agreements/decpartc.htm#Commitment%202> 9 Ibid. 10 Ibid. 11 A.RES/52/194. General Assembly
that women have specifically been helped most by these programs. The recognition of the importance of the use of microcredit programs is significant because it is an active step in helping to reduce poverty. The steps involved in creating microcredit programs can be implemented throughout the world, and can help people on a large scale. This resolution passed by the General Assembly was significant in the fight against poverty because it provided the people with a way to work themselves out of poverty. Microcredit programs do not rely on the state to take action, so it is a more beneficial and practical way to help increase the incomes of impoverished people. Allowing an individual to create their own business also ensures that they won’t be dependent on low paying factory jobs to make a living. The use of these programs has proven very effective in increasing the income of families and decreasing the amount of poverty in a region. According to the Microfinance Centre, the “Eastern European microfinance sector, as a whole, counts itself among the most profitable regions in microfinance”. With a smaller asset base and larger size loans, microfinance centers in Eastern Europe are able to produce higher returns than even mature institutions in Latin America.12 Although poverty remained a pressing issue, the innovation of microfinance successfully reduced poverty in many states, especially the medium and large states.13
Economic Crisis in Russia, 17 August 1998 Facing financial problems during 1998, the Russian central bank was forced to devaluate the Ruble and place a three-month suspension on the payment of external debts by commercial banks.14 Within days of this action, the exchange rate fell drastically which resulted in mass bankruptcies of banks and millions of people losing their jobs and savings. The economic crisis in Russia had extreme effects on other countries in Eastern Europe. This was the first time that it became clear that even though the Soviet Union no 12
“Benchmarking Microfinance in Eastern Europe and Central Asia”, Microfinance Information eXchange, May 2004 < http://www.mfc.org.pl/doc/Publication/ECA_Benchmarking.pdf> 13 Ibid. 14 “The August 17, 1998 Crisis Resulted in a Change of Political and Economic Era in Russia,” August 16, 2001, Russian Economic News, Lexis Nexis.
longer existed, the economic stability of one state greatly influenced the economic status of the others. President Askar Akayev of Kyrgyzstan said that he regards a “crisis in Russia as a crisis of the Commonwealth of Independent States.”15 As a result of the crisis in Russia, investors pulled at least one billion dollars out of Poland.16 Other states also felt the impact because Russia is one of the biggest customers in trade for states such as Hungary and Czech Republic. Even though the detrimental effects of the crisis were not permanent, it revealed just how connected Eastern European still was. Therefore, the crisis slowed economic growth in almost of all of Eastern Europe, thus temporarily slowing down the reduction of poverty.
Millennium Development Goals, 8 September 2000 On September 8, 2000, the General Assembly of the United Nations passed Resolution 55/2, the United Nations Millennium Declaration.
Development Goals consist of eight goals the world hopes to achieve by the year 2015. The first of these eight goals is to eradicate extreme poverty and hunger.17 Putting this goal as number one on a list that consists of important advancements in areas of health, education, and equality, signifies how important the reduction of poverty is for states to succeed. It also shows that if poverty is reduced, the other goals such as universal primary education, reduction of child mortality, and gender equality are more easily obtained. It also brought attention to the fact that people all over the world are suffering due to poverty, not just in Third World states, which is a belief held by most people. The Resolution states that in order to be successful in meeting the objectives, good governance from each state and transparency in the “financial, monetary and trading systems,” are necessary to obtain. Stating these steps that are necessary to eradicate hunger was beneficial because it created a starting point for states to consider when 15
“President Akayev Urges Deeper CIS Integration in Wake of Russian Crisis,” BBC Summary of World Broadcasts, September 3, 1998, Lexis Nexis. 16 “Russia Crisis Leaving It’s Mark on Poland, Hungary, and Czech Republic,” Deutsche Presse-Agentur, September 29, 1998. Lexis Nexis. 17 A/Res/55/2. 8th Plenary Session General Assembly, September 8, 2000.
attempting to achieve the goal of ending poverty within their borders. The creation of the Millennium Development Goals also resulted in the creation of organizations such as ONE campaign to help in reaching the goal of poverty reduction. Placing the reduction of poverty as the first goal the international community is attempting to reach in the new millennium brought light to how serious the problem is, and how many people are still living in extreme poverty.
CIS-7 Conference, 21-22 February 2002 The seven poorest countries in the Commonwealth of Independent States include Armenia, Azerbaijan, Georgia, the Kyrgyz Republic, Moldova, Tajikistan, and Uzbekistan.
These nations were the sole focus of a conference held in London in
February 2002 to discuss the financial problems and the increasing poverty that is prevalent in these states. The organizations in attendance at the conference were the World Bank, the International Monetary Fund, the Asian Development Bank and the European Bank for Reconstruction and Development.18 All of these organizations came together to find the reasons why these states were not progressing as quickly as the others, and to formulate plans to improve the economy and standard of living in these states. In all of these states, the poverty level had increased significantly from 1989 to 1999. In Armenia, poverty increased from eighteen per cent of the population in 1989 to fifty five per cent in 1999. More shockingly, poverty in Moldova increased from thirteen per cent to eighty per cent in ten short years.19 With these staggering numbers, it was clear that action must be taken to improve these seven states. The organizations at the conference cite various reasons for the dire condition these states are in. Some reasons given for the rise of poverty include inflation, lack of pensions, military conflict, rising energy prices, lack of natural resources, and new trade restrictions.
â€œPoverty Reduction, Growth, and Debt Sustainability in Low Income CIS Countries,â€? World Bank, February 4, 2002, <http://lnweb18.worldbank.org> 19 Ibid. 9.
Many goals for the states to reach were set at the conference. One goal was to increase how much each state spent on health care. Each of the seven states was only spending three per cent of the Gross Domestic Product on health care; developed states spend at least four times that amount. A lack of focus on healthcare translated to millions of people not receiving basic health care needs.20 The implementation of debt reduction strategies was also noted to be of great importance to reduce the level of poverty. Debt relief by creditors was also listed as an important step to transition the states to a productive level. The idea of regional cooperation was also stressed by those at the conference.
Ways to improve the business and investment climate given included,
“reducing high marginal tax rate, simplifying licensing and registration requirement, protecting property rights and providing basic infrastructure.”21 The CIS-7 Conference was a significant event because the global community was recognizing that more attention must be given to this region for it to advance to the stages that the global community thought they were capable of. The outcome of the conference was that the organizations cited donor assistance as the best way to help these seven states in reducing poverty levels.
World Solidarity Fund, 20 December 2002 President Zine El Abidine Ben Ali of Tunisia stated at the United Nations Millennium Summit that, “The tragic living conditions of certain peoples, due to poverty and disease, have prompted us to call for the adoption of solidarity and cooperation among states as an absolute humanitarian and moral necessity.”22 These beliefs lead to the creation of The World Solidarity Fund. The mission of the World Solidarity Fund is to fight against poverty and secure the “development of most destitute regions in various
Ibid. 18 “An International Initiative to Promote Poverty Reduction, Growth and Debt Sustainability in the Low Income Countries of The Commonwealth of Independent States,” World Bank, April 25, 2002, <http://lnweb18.worldbank.org> 22 World Solidarity Fund, <http://www.fonds-solidarite.org/eng/index.html> 21
parts of the planet, and most particularly in the poorest countries.”23 To achieve this goal, the World Solidarity Fund collects donations and voluntary contributions with the purpose of using this money to eradicate poverty. The creation of the World Solidarity Fund is a model of the National Solidarity Fund that existed in Tunisia, and was able to reduce the poverty level there to just four per cent by 2008.24 According to UN Resolution A/57/265, the World Solidarity Fund will “support requests received through Governments of developing countries for financing poverty alleviation projects, including initiatives from community-based organizations and small private sector entities.” By using this strategy, the UN works with the developing nation to create solutions that are best suited for each specific nation. This allows the people to become involved in creating programs to reduce poverty in their own state. The creation of The World Solidarity Fund was an important step in reducing poverty levels because it brought together states and organizations from all over the world for the common purpose of fighting poverty.
In June 2008, President Ben Ali proposed that the
“international community allocate one dollar for every oil barrel, in order to increase resources of this Fund and use them to combat hunger in the world.”25 The Solidarity Fund has shown to be a success today, garnering support from international figures such as Ban Ki-moon. Although multiple effective techniques have been created since the fall of the Soviet Union, poverty still looms as a threat to over one hundred million people. Therefore, the international community must continue to seek new solutions
Actors and Interests State Governments The fall of communism left the global community believing that the newly formed states of the former Soviet Union were going to see bright futures as new democracies. 23
Ibid. “UN General Assembly Adopts Draft on World Solidarity Fund,” Africa News, December 21, 2002, Lexis Nexis. 25 “UN Secretary General Pays Tribute to World Solidarity Fund,” World Solidarity Fund, June 19, 2008 < http://www.fonds-solidarite.org/eng/030608.html> 24
However, this goal has not been reached by most states. While under communist rule, necessities such as education, health care, and work were provided by the government. After communism ended, these newly formed governments had to make decisions to ensure that the lives of the citizens would begin to prosper. Different states had varying ways of making these decisions and received different outcomes. Also, it was the first time that social policy makers had to acknowledge that there are many ethnic groups in the region, each requiring different plans. In Russia, just one year after the state started its transition, the Law on Fundamentals of Housing Policy was created. This policy provided a, “broad legislative basis to cover increases in rental payments, a requirement for housing allowances to be paid for low income families, competitive tendering of maintenance contracts, the formation of condominium organizations and eviction for non payment on rent.”26 These actions were taken to make sure that the level of homelessness did not drastically increase while the state was in transition. While these actions were effective in preventing a drastic rise in homelessness, it did not stop rising unemployment and plummeting wages. Albania is one of the most disadvantaged states in Eastern Europe. The social assistance program that was set up in Albania is not sufficient enough to help all of the people in need, and leaves thousands in poverty.
Unemployment benefits are only
provided to people who lost their jobs as a result of the “restructuring of economy and state enterprises.”27 To rectify this problem, Albania is working to provide ndihma ekonomike which are cash benefits for poor families with the hope to alleviate poverty.28 These efforts signify that the state governments are attempting to improve life and reduce poverty, but it is difficult for them to achieve this goal because of a limited number of resources. Ukrainian Minister of Labor and Social Policy, Ivan Sakhan created social policy plans to bring the estimated twenty three per cent of Ukrainian families out of poverty. 26
Ibid . 248 Ibid. 130 28 Ibid. 130 27
His policy includes, targeting the group of people who are socially vulnerable, and creating social support and employment for disabled citizens.29 These policies all have a specific target and goal and have proven to be effective in poverty reduction. Although there have been many positive decisions made in Eastern Europe to advance the living standards other areas are still lacking. Many states in Eastern Europe are home to multi ethnic populations, which can result in rivalry and hatred. Therefore, it is not uncommon for the ethnic group who dominates the policy making decisions, to make choices that benefits their own people, and hurt other ethnic groups.30 These negative decisions hurt the whole state, because if a large number of people are living in poor conditions it impacts the rest of the population. The main concern of these policy makers is not for their state to progress and develop, but for their ethnic background to remain dominant and continue to be in power.
Businesses Businesses played an instrumental part in the cause of extreme poverty, but they are now playing a key part in reducing poverty in Eastern Europe. Spurring economic growth, increasing productivity, and widening the labor market are main ways of reducing the level of poverty and these factors involve the cooperation of businesses in the region. Newer companies in Eastern Europe are increasing their productivity by using resources efficiently and effectively.
This helps in reducing the level of poverty
because it increases the amount of manufactured goods that can be sold to help grow the economy. The newly formed businesses are also hiring individuals and paying them higher salaries. Since the new businesses did not suffer through the same transition that older businesses went through in the late 1980s and early 1990s, they run their corporations in different manners. The main interests of these businesses are to be
“Fewer Ukrainians Live Below the Poverty Line,” BBC Worldwide, August 28, 2002, Lexis Nexis. Michael Dauderstadt, “Social Policy in South Eastern Europe,” South East Europe Review for Labor and Social Affairs, March 2003. 30
productive and make a profit, but these two factors help the population of the whole region. Many of the poor are still working in “old, un-restructured, low productivity firms.”31 These older businesses are paying low salaries in addition to being not very productive; therefore, they are not improving the state of the economy as much as they should be. Businesses of this type are a main reason why the level of poverty increased so drastically after people left government owned enterprises and went to work for private companies.
Non-Governmental Organizations Oxfam works with some of the poorest nations in the world to improve their quality of living. Since Eastern Europe is home to many impoverished states, Oxfam has been active in the region.
The state of Tajikistan has faced hard times since the
separation of the Soviet Union, and Oxfam has played a crucial role in rebuilding the state. Many families make their living through selling crops, so Oxfam provides training in how to properly grow crops, and also suppl[ies] farmers with seeds and tools needed to be successful.32 In 2006, Tajikistan was victim to an earthquake that left fifteen thousand people homeless. To help this devastated state, Oxfam created a design for a house that is earthquake resistant and provided the people with the assistance and knowledge necessary for this to materialize. In 2007, Oxfam also installed wells, and equipped school and health clinics with toilets. Oxfam has also been active in Georgia to improve the lifestyle of those living in the state. Acknowledging how important having a job is, Oxfam has provided loans to approximately three thousand farmers and urban workers to allow them to create their own small businesses.33 They also provide farmers with direct contact with local markets, allowing them to avoid middlemen and increase their profit. Oxfam has also created healthcare centers in twenty seven communities throughout 31
“Prospects for Poverty Reduction,” The World Bank, < http://siteresources.worldbank.org/INTECA/Resources/ch5-poverty.pdf> 32 “Oxfam’s Work in Tajikistan,” <http://www.oxfam.org.uk/resources/countries/tajikistan.html> 33 “ Oxfam’s Work in Georgia,” <http://www.oxfam.org.uk/resources/countries/georgia.html>
Georgia. In Russia, Oxfam offers small business owners loans ranging from USD $500 to USD $5,000 to build up their own business. Training in business techniques and legal advice is also given to the business owners. All of the efforts by Oxfam are done to improve the lives of the people living in these states and decrease the level of poverty that is present. By helping individuals start their own business, or furthering businesses that already exist, Oxfam is ensuring that people will get out of poverty and not be vulnerable to be thrown back in. Providing healthcare, food, clean water and other necessities is also important in reducing the poverty level in these destitute states. Oxfam protects citizens by working with local government municipalities in each state to ensure that the poor are receiving all of the benefits they are entitled to. Oxfam works tirelessly to improve living conditions in impoverished states and reduce the level of poverty present in the state. Doctors Without Borders focus on the growing problem of tuberculosis and HIV/AIDS that are quickly spreading throughout Eastern Europe.
In the Ukraine,
Doctors Without Borders supplied three hundred fifty pregnant women with medication to prevent the transmission of the disease to their baby and anti-retroviral drugs for over one hundred fifty patients.34 To ensure that the proper treatment of patients continued after they left, Doctors Without Borders trained over 1,500 health care staff to continue in helping the population. They also went to the government and fought for wider access to anti-retroviral drugs and did national campaigns to reduce the stigma for those living with the disease.35 In Turkmenistan, Doctors Without Borders staff worked in the Magdanly Town Hospital where in 2006 they cared for forty thousand outpatients, three thousand inpatients and performed over one thousand deliveries.36 The organization also provided hospitals with required medical equipment and drugs. Access to sufficient health care is an extremely important factor in ending poverty and improving and prolonging a person’s 34
“Ukraine: Improving Health Care for People Living With HIV/AIDS,” <http://www.doctorswithoutborders.org/news/country.cfm?id=2375> 35 Ibid. 36 Turkmenistan http://www.doctorswithoutborders.org/news/country.cfm?id=2373
life. Doctor’s Without Borders goal is to increase the access and quality of health care that people receive. By going to the government to push for better health care, the organization is attempting to achieve this goal.
Also, by training members of the
community in health services, they are ensuring the care will continue and are also creating possible jobs for people in the community.
Possible Causes Disintegration of the Soviet Union The collapse of the Soviet Union resulted in sudden changes in all of the states that were former members. These changes greatly impacted the economy of the region and caused an increase in poverty and a decrease in living conditions for all those living in the area. The dissolution of the Soviet Union resulted in alterations in the economic, political, and social spheres, all which resulted in an increase in poverty. First, the state owned enterprises collapsed when they were cut off from their traditional market.37 When these state owned enterprises fell apart, all of the workers lost their jobs and there was no state organization to support them because official unemployment did not exist in the Soviet Union. The lack of a welfare system made it difficult for people to survive while they were unemployed. Pension plans were no longer in place so all of those living on pensions were left with no money. This caused most of the senior population in the states to slip in to poverty. Further on the social scale, access to healthcare was limited which caused an increase in diseases such as tuberculosis.38 Poor diets and inadequate housing resulted in an underprivileged life for the population. 39
All of the
transformations that occurred on a social level caused a significant deterioration in the lives of the people living in Eastern Europe, and they have been difficult to overcome.
Mihaly Simai, “Poverty and Inequality in Eastern Europe and the CIS Transition Economies,” Department of Economic and Social Affairs, February 2006, < http://www.un.org/esa/desa/papers/2006/wp17_2006.pdf> 38 Ibid. 9 39 Tom Hundley, “Death of Communism Fatal for Thousands Russia and Ukraine Hit by Economic Dislocation Poverty and Stress,” The Toronto Star, February 12, 1995, Lexis Nexis.
Changes in the trading systems between the states also have lead to severe economic declines. The relationship the newly formed states had with Russia were not on good terms which meant that they were no longer supplying Russia with the raw materials and other products from their state. Since Russia was the largest supporter of these states problems arose. Trade between the states of the former Soviet Union became foreign trade which brought with it new obstacles in trade process. This made it more expensive for the newly created states to trade with each other and was detrimental to the economy.40 The currency change also caused problems. States changed their currency from the ruble to individual currency for each state. Since all of the new currencies were weak the state economies suffered. The governments also decided to borrow large sums of money to prevent public services and public enterprises from failing. While this was done to save the state at the time, external debt plagued the countries for years to come.
Low Wages Poverty in Eastern Europe is different from poverty in other regions of the world because the majority of the poor population is employed. This means low wages and low status jobs result in the large number of people in poverty. The spread of low wages began in the early 1990s with the fall in output and the growth of debts within the state sector.41 Real wages is the income of an individual taking into account the effects of inflation and purchasing power; it is the amount of money that a person has to support themselves. In most countries, the decline in real wages surpassed the fall in output, illustrating that “labor was the least well protected factor of production during the transition.”42 Like many of the other problems in Eastern Europe is started with the change to market capitalism. Since the majority of people who live in poverty are employed it makes it difficult for them to lift themselves out of poverty because they are already employed. In order 40
Mihaly Simai. 6 “Poverty in Eastern Europe and the CIS,” Human Development Report for Central and Eastern European and the CIS UNDP, 1999, <http://www.unece.org/ead/pub/041/041c7.pdf> 42 Ibid. 5 41
for them to increase their earnings it is necessary for their employers to increase their wages. This has proven to be difficult because many of the new private businesses in which these individuals work are still in the process of transition. Also, a large number of these people are self - employed or work in agriculture. For them to increase their wages it is important for the market to expand to make room for their products. Since many of the people who are working these low paying jobs do not have adequate education it makes it almost impossible for them to move up in their career. A large income gap is present in Eastern Europe because of the vast earning differences that exist between the educated and the uneducated. A small number of individuals are in control of the majority of the money and the rest of the population works for them for meager wages.
Lack of Education In Eastern Europe, inadequate education is a major cause of the high rate of poverty. A main reason that people live in poverty is because they are working in jobs that do not provide them with a sufficient amount of money. As a result of the poor access to education, people do not have the opportunity to advance their careers. Education has become very expensive to obtain with requirements such as textbooks and uniforms out of the price range for many families. Since parents are unable to afford these things they are forced to withdraw their children from school.43 Another reason that it is difficult to receive an education is because many children are forced to work instead of attending school. Parentâ€™s low income results in their children being unable to go to school. Even if the child does attend school they might not be given a quality education because according to a Human Development Report by the United Nations Development Programme, it is common for teachers to be absent because they work a second job, for students not to have textbooks, and for the building to be so cold that the children are sent home. 43
All of the causes of poverty are interconnected, which makes poverty difficult to overcome. The majority of people only have access to low paying jobs because they have not received a sufficient education or because they work for new privately owned corporations that do not pay adequate wages. Healthcare is also inaccessible because the people are not earning enough money to pay for it. Social inequalities exist because most of the population is working low paying jobs in the city or working as farmers in rural areas, and the other small percentage of the population is in control of the majority of the states wealth. Many of these things are also connected to the breakdown of Soviet Union and the changes that occurred as a result. While under communist rule, inequality in society was “theoretically” not an issue and everyone had equal access to housing, education, healthcare, and work. However, once the USSR fell, all of the issues of inequality became problems that could not longer be ignored. The outcome of Eastern Europe’s transition was an immediate overall decline in the quality of life, which remains a problem to this day.
Projections and Implications In 2008, the United Nations General Assembly came together to discuss the progress that had been made on the Millennium Development Goals at the half way mark. The findings of the research show that much adversity still stands in the way of halving poverty by 2015. It was noted that factors such as “income growth, climate change, high food and energy prices, [and] globalization and urbanization” all influence the lives of the poor.44 All of these factors led to the projection that by the year 2015, the global poverty will be 721 million, not nearly half the amount of the current 1.2 billion. 45 Also, according to the 2008 United Nations World Economic Situation and Prospects, economic growth rates are extremely important in reaching its goals; also, poorer 44
“Recognizing the Achievements, addressing the challenges and getting back on track to achieve the MDGs by 2015,” General Assembly Thematic Debate on the Millennium Development Goals, April 1, 2008. <http://www.un.org/ga/president/62/letters/bckgpoverty.pdf> 45
countries remain vulnerable to a decline in the global economy.46 The report cites the unusually high price of food as a result of low food stocks as an obstacle to reduce the amount of hunger around the world. Continuing climate change is also seen as a reason for an increase in poverty as a result of the high number of people who farm for subsistence. The International Food Policy Research Institute has said that the climate change may lead to another fifty million people at risk of extreme hunger. The mortality rate in these states will continue to increase if citizens are not able to obtain clean water, food, and shelter. If the life expectancy decreases, it will result in more orphaned and homeless children. This is a problem because children are already the most vulnerable to poverty. If a child is parentless it will be very difficult for them to receive an education and get a job that will be able to pay them enough to lift them out of poverty. The cycle of poverty will continue without a drastic intervention.
â€œWorld Economic Situation and Prospects 2008,â€? United Nations, January 2008, <http://www.un.org/esa/policy/wess/wesp2008files/wesp2008.pdf>
Conclusion Poverty reduction has been recognized by the international community as a necessity in order to improve the living conditions of people are the world to improve. There are forty million people living in poverty in Eastern Europe, and another hundred fifty million are vulnerable to poverty.
All of these people live with poor shelter,
insufficient education, little food and clean water, and restricted access to healthcare. There are specific groups that are most susceptible to these conditions including children, women, and the elderly. Most of the poverty in the region was originally caused by the many transitions the region went through during the late 1980s and early 1990s. Poverty reduction strategies have been imposed throughout the world, and many of them can be applied in Eastern Europe. One successful program is providing micro credit loans to those living in poverty to allow them to create their own businesses. Increasing the wages of workers will also be helpful because the majority of people in poverty do work. Even though much of the region remains in poor conditions the fact that some states have advanced should give hope to the rest of the region.
Discussion Questions • What anti-poverty strategies have proven successful in other regions? Can they be applied to Eastern Europe? • What makes poverty in Eastern Europe different from poverty in other regions of the world? How does this change how the UN goes about poverty reduction? • What is the level of poverty in your state? • What anti-poverty plans does your state implement? • What is the root of the problem? • How can you stop the cycle of poverty? • Who needs to be involved in poverty reduction actions? • How and why does economic growth reduce poverty? What can you do to achieve economic growth? • How do you expand the labor market?
For Further Reading Sandra Hutton and Gerry Redmond, “Poverty in Transition Economies,” New York: Routledge, 2000. Hutton’s and Redmond’s book examines why poverty resulted in these states during transition. The book fully explains what happened to the economy and the changes that occurred in society that led to an increase in poverty. It details circumstances in specific states helps in seeing how poverty is different throughout the region. It also explains ways that Eastern Europe can manage poverty and provides reduction strategies. Adam, Jan. “Planning and Marketing in Soviet and East European Thought, 1960s1992,” New York: St. Martin’s Press, 1993. Jan Adam’s book looks at individual states market system throughout the decades between 1960 and 1992. By examining the countries market economy it is possible to see how the economy changed and what influence it had on the level of poverty in the population. This book is successful for gaining more information about the economic part of the problem. Atkinson, Anthony and John Micklewright. “Economic Transformation in Eastern Europe and the Distribution of Income,” New York: Cambridge University Press, 1992. Anthony Atkinson and John Micklewright book inspects economic transformation that Eastern Europe went through from the 1980s to 1990s. It looks at how the distribution of earnings has changed throughout the decades and how household incomes have changed. The book also looks at how the international community measures poverty what sort or safety nets need to be set up in society to prevent people living in extreme poverty.
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