content of schooling differs according to the social class of the students. Without any attention to this inequality, schools cannot play the central role in poverty reduction that is so often assigned to them.
Health clinics too can have very different impacts depending on how they are organized. The success that has been recorded in India’s state of Kerala with regard to women’s health in particular, but also with regard to life-expectancy and population growth, has been in large part attributed to the role of the poor themselves in the development of health clinics and in the formulation of their programs. Likewise, it would seem that schools would be more effective instruments to improve the position of the poor when the poor are involved in their formation and operation. As with cooperatives, these sorts of social programs are potentially valuable not only for meeting immediate needs with the services they provide, but also as institutions for expanding the power of the poor.45
As the discussion earlier regarding tax incentives for foreign investment indicates, any program to raise income, create jobs, and bring about greater equality is faced with problems because of “globalization.” Whatever other positive or negative effects result from the greater economic integration of the economies of various nations, one consequence is a diminution of the ‘policy space’ of governments.46 The high mobility of capital in the current era reduces the extent to which governments can direct economic activity, in particular encouraging investments that are most likely to have the largest social returns – that is, that are most likely to promote long run development and poverty reduction. Tax concessions have been adopted by many governments – and are advocated in the Sachs Report – as a means to encourage investment, but, as argued above, they are a poor tool.
Still, in the face of competition, governments are forced to be concerned with the problem of attracting and keeping investment. Capital is needed to generate jobs. There are, however, different ways to compete, and the different ways have different implications for both economic development in general and income distribution in particular. Perhaps the most important way to encourage investment is to create a general economic environment where investment opportunities, without special concessions, attract firms. In this regard, the attention given to infrastructure development and training by the Sachs Report is positive. If, however, particular steps are needed to encourage investment, there are actions that are preferable to tax concessions.
45 The experience in Kerala state of India has complex roots and is not simply the product of ‘enlightened’ policy. Also, as has become increasingly evident, the favorable social experience in Kerala is in significant part dependent on remittances from citizens who are working abroad, especially in the oil-rich states of the Middle East. Nonetheless, there are positive lessons to be extracted from the Kerala experience. Yet Kerala gets no mention in Sachs Report.
46 The concept of ‘policy space’ in the context of globalization has been developed, for example, in Gallagher (2007) and Wise (2007).