IntroductionAmongst the major issues facing the developing countries in their development process is the increasing levels of poverty and income inequality. More recently, attention has focused on the process of economic reforms and whether these reforms lead to reduction in poverty. This paper reviews the debate on economic adjustment and poverty in developing countries and provides an analysis of the extent of poverty and income inequality in Fiji. It also provides possible explanations for the increase in the level of poverty in Fiji. The organisation of the paper is as follows. The first part presents a review of the current issues in relation to poverty and income inequality. It also looks at the structural adjustment policies and their impact on the poor. The second part deals with the situation in Fiji in relation to poverty and income distribution. Part three provides an analysis of the policies of the Fijian government and in particular its policies involving positive discrimination. In addition, institutional constraints to economic development are discussed.
Economic reforms and poverty: what is the real relationship?According to the World Bank, developing countries have generally done well in terms of economic growth (World Bank, 1990). However, it points out that despite better economic performance by developing countries, poverty levels have generally increased. What went wrong and why? These questions are being addressed in the 1990s and could well be debated in the next century. Economic growth in the 1950s and 1960s was seen as a panacea for reducing poverty. In the 1970s, however, attention shifted to public social policy. Policies to provide better education and health were seen as attacking the poverty levels directly. The emphasis in the late 1980s and in the 1990s is on economic reforms or more commonly structural adjustment policies (SAPs). This emphasis is intended to promote economic growth and trade. It is assumed that the benefits of this will ultimately provide countries with more resources to tackle poverty. These policies invariably imply the creation of efficient market structures and SAPs include reduction in government expenditure, a shift from direct to indirect taxation, deregulation of the product and factor markets and a concerted effort to promote the manufacturing sector.