Why Poor People Stay Poor: Urban Bias in World Development
Why have growth and development in poor countries failed to improve the welfare of the poorest people? This question was raised by Michael Lipton in 1977. He then argued that poverty persists mainly because development was designed by and for people in urban areas. Most poor people lived in rural areas, but the towns and cities got a far larger share of national resources. This, he argued, was not only unjust but also inefficient. In this book, Lipton presents the theory of ‘urban bias’ arguing that the development of urban areas and industrialisation in poor countries has been at the expense of rural areas. During this time usual theory and practice saw development as a process of transformation from the rural and agricultural towards the urban and industrial, through fast and artificially stimulated resource transfers from village to city. Rural areas were not normally seen as a potential source of economic progress. The book shows that public spending in poor countries has been concentrated on the development of urban areas and on industrial growth. Governments tend to favour allocating resources to towns and cities as opposed to villages. This is mainly because people in urban areas have more political power to convince governments to make taxation and spending choices that favour their interests. Key findings include: The 60 to 80 percent of people in poor countries who depend on agriculture for their livelihoods are typically allocated less than 20 percent of development spending. Urban areas get a disproportionately and inefficiently high share of public spending, particularly in health and education. Poor people in rural areas are disadvantaged in terms of nutrition, education, health, technology and access to financial services. Government policies keep goods and services from rural areas (for example, food) under-priced and those from urban areas over-priced. Urban bias has resulted in a rural skills drain as educated younger workers leave to work in towns and cities. Urban bias has prevented the formation of valuable rural-urban links. Lipton argues that comparisons being made with the economic history of the industrialised countries were misleading: the gap between urban and rural wealth and power was much bigger in poor countries than it had been in rich countries during the early stages of their development. Successful pro-poor development would require a much larger share of resources for rural areas and farming. Key recommendations include: Development normally requires industrialisation but both are impeded when countries seek to industrialise too early, too quickly or by artificial resource extraction from rural areas. Resources should be initially directed towards developing the agricultural sector: growing farm productivity has almost invariably been a pre-condition of successful development in other sectors. Investment in small-scale agriculture would be the best way to raise incomes quickly in poor countries, with high ratios of labour to capital, because it is labour-intensive farming, especially on a small scale, and rural activity in general, uses less capital (directly and for infrastructure) per unit of labour than does urban industry. Rural and agricultural enterprises need better – but not normally subsidised – access to loans and investment. Incentives are needed to encourage public sector workers, particularly in education and healthcare, to work in rural areas. Governments should set and monitor targets for the share of public spending on farming and rural areas.