Working toward economic equity – toward a more equal distribution of economic benefits within a nation – is a powerful means to fight poverty. It is a necessary complement to strategies that expand the national economy, so that some of the benefits of growth make their way to those in the lowest income bracket. Even when economic growth is slow, policies that more equally distribute economic gains can help reduce poverty, as shown by the success of Jordan in lowering its poverty rate from 1992-1997.
In 1989, following a currency devaluation, Jordan suffered an economic crisis that increased the poverty rate sixfold. At the same time, the nation’s level of economic inequality – the difference between the incomes of the rich and the poor – increased dramatically as well, prompting a significant rethinking of economic strategy among government policymakers (Shaban et al. 2001:iv).
Beginning in 1991, Jordan changed its spending policies to increase the proportion of economic benefits flowing to the lowest income sector. One of the most effective changes was the gradual replacement of general food subsides, from which richer families benefited most, with direct cash payments to poor families only (Shaban et al. 2001:iv, 15-20). This reprogramming reduced the nation’s economic inequality, with the gap between the wealthiest segment of Jordanian society and the poorest narrowing over the next six years (Shaban et al. 2001:viii, 10-13). Subsequent analysis showed that it was this reduction of inequality that helped Jordan reduce its poverty rate from 14.4 percent in 1992 to 11.7 percent in 1997, even though the nation experienced little or no economic growth during this period (Shaban et al. 2001:viii, 7). In addition, those who remained poor were not as far below the poverty line, and extreme poverty had declined (Shaban et al. 2001:8). The reduction in inequality was driven by a greater percentage of government expenditures being captured by the poor. Had this trend toward reduced inequality been accompanied by genuine economic growth, Jordan’s poverty rate would likely have dropped even more.
| Jordan: Less inequality, less poverty | ||
| 1992 | 1997 | |
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| Percent of Population in Poverty[1]: | 14.4 | 11.7 |
| Level of Inequality (Gini Index[2]) | 0.40 | 0.36 |
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| [1] Annual per capita consumption is below 314 JD or US $443 at 1997 prices. [2] The Gini index is scaled between 0.0 and 1.0; 0.0 indicates perfect equality and 1.0 indicates perfect inequality. | ||
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| Source: Shaban et al. 2001:10,12 | ||
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