Have the poor fallen into a structural poverty trap?

In a broad sense, poverty alleviation mainly refers to two aspects: the reduction of absolute poverty and the narrowing of inequality. Over the past 30-plus years, China's alleviation of absolute poverty has been very obvious. Nowadays in many places, whether a household in a poor village owns a bicycle, motorcycle, TV set, etc. can no longer serve as a standard for judging whether it is poor. But why do we still feel that they remain in a state of poverty? This is mainly because, relative to the urban population and the rural population in developed areas, the rural population in many backward areas is at the bottom of society as a whole; it is not only income, but more importantly the gap in overall living standards that highlights the sense of relative poverty among the bottom groups.

When I visited a poor county in Yunnan, I found that many villages in the county had received support from many projects to varying degrees, including poverty alleviation and development projects. My overall observation of one of the villages found that although food and clothing were no longer a problem, the poor group of 10 years ago is basically still the poor group now; even within a single county, the gap between rich and poor shows strong regional and class characteristics. Villages with good geographical conditions are generally better off than villages on the mountains; within a village, those with social connections, those with more land, and those who serve as officials are basically all wealthy households.

Over the past 10-plus years, the welfare gap between rich and poor has not converged, but has shown a trend of parallel movement and widening. This means that under conditions of slowing economic development, groups below the average income may remain poor for a long time; and if one assumes the existence of relative deprivation of the poor, even when the economy is growing, it is very slow for the poor to escape poverty.

First, this parallel movement or widening of the welfare gap suggests that poor groups seem to have fallen into a poverty trap that is very hard to leap out of. Today's poor population seems to have fallen into a “structural poverty trap,” and the factors constraining escape from poverty have shown rigid characteristics. That is to say, in the field of opportunities, capital, and profit, there exist groups that gain priority benefits by virtue of advantages in resources, capital, technology, connections, information, and power; opportunities are no longer equal, and starting conditions are no longer equal. Different groups use market rules to compete with one another by relying on their own particular resources. It looks fair, but in the “strong-weak” structural relationship, the strong monopolize opportunities and benefits.

Second, because the economic threshold for crossing the poverty trap is getting higher and higher, a household with an annual income of a few thousand yuan was a wealthy household in the past, but is now a poor household. For the poor who are in the poverty trap, it is very difficult to escape poverty by relying on their own strength. The current development-oriented poverty alleviation, first, has a very small scale of support and very low intensity, making it hard to generate economic benefits that can cross the poverty trap; second, even with high-intensity support, the poverty reduction effect will shift. For example, the drawbacks of scattered household production gave rise to the company-plus-farmers model, but what increases more is still the bosses, and the poverty reduction benefits are seriously lost.

Third, the existence of various types of direct or indirect “capture“ of poverty alleviation resources and the benefits generated by those resources makes it even harder for the poor to escape their predicament. For example, in many places, in projects of poverty alleviation infrastructure invested with public funds, some companies sign company-plus-farmers contracts with farmers on the grounds of centralized management of seedlings and technology. Through this form, the poverty reduction benefits of poverty alleviation projects flow out in a legalized manner.

The above discussion means that under new conditions, the system of poverty alleviation and development needs reform. At the current stage, implementing direct, large-scale welfare transfers is not feasible, and in the long run is also unsustainable. This is because direct welfare transfers are generally more feasible when the number of poor groups is relatively small and public funds are ample; even so, the social and political costs of direct welfare transfers are very high.

Under the conditions of “structural poverty” at the current stage, it is necessary to consider adjusting the development-oriented “blood-making mechanism” from two dimensions. First, under the condition that poor groups are still very large, relying on development-oriented poverty alleviation remains the main line of poverty alleviation work, but it is necessary to raise the poor's multidimensional starting level of wealth through certain “blood-transfusion” inputs, so that the gap in starting levels between poor groups and non-poor groups is narrowed, and the degree to which non-income poverty dissolves economic income is reduced. Social security and investment in education and infrastructure are playing a very large role, but on the whole they have not yet reached the critical point where they can effectively play their role. Therefore, public investment in medical care, education, and rural infrastructure, which has a dissolving effect on income, has very obvious significance for poverty reduction and needs to be strengthened. Investment in this area can ensure that the stock and increment of the poor groups' financial wealth are more fully put into economic income-generating activities.

Second, through direct economic “blood transfusion” to farming households, raise the asset stock of the poor population. Converting household-level poverty alleviation funds into shares through the company-plus-farmers model is a good approach, but because the company side controls financial management and information, many companies can make profits low or show losses through false accounting. For this type of poverty alleviation, consideration can be given to the method of having the poverty alleviation office hire independent accountants to be stationed in enterprises.