The challenge of world poverty
Before we go anywhere, let’s start with a working definition of poverty. Here’s the definition given by The World Bank, the authority when it comes to data in regards to world poverty.
Poverty encompasses a shortfall in income and consumption, but also low educational achievement, poor health and nutritional outcomes, lack of access to basic services, and a hazardous living environment.
Where we are today
The Good News
East, Pacific and South Asia on the rise
In 2015, approximately one-tenth of the world’s population lived in extreme poverty—the lowest poverty rate in recorded history. This is an impressive achievement, considering that in 1990, more than a third of people on earth lived in extreme poverty.
The progress has been driven by strong global growth and the rising wealth of many developing countries, particularly in the world’s most populous regions of East, Pacific and South Asia.
Half of all countries included in the global poverty counts already have less than 3 percent of their populations living under the international poverty line (IPL), which defines extreme poverty for global monitoring.
Tens of millions of people have escaped poverty every year since 1990, reducing the global poverty rate by an average of 1 percentage point per year between 1990 and 2015.
Much of the progress in the past quarter-century has been in East Asia and Pacific, where China’s economic rise has helped lift millions of people out of poverty. The countries of this region went from an average poverty rate of 62 percent in 1990 to less than 3 percent in 2015.
More recently, South Asia has made impressive inroads against extreme poverty, helping to reduce the global rate further. The number of poor in South Asia dropped to 216 million people in 2015, compared to half a billion in 1990.
The Bad News
The Subsaharan Challenge
The number of poor worldwide remains unacceptably high, and it is increasingly clear that the benefits of economic growth have been shared unevenly across regions and countries. Even as much of the world leaves extreme poverty behind, poverty is becoming more entrenched and harder to root out in certain areas, particularly in countries burdened by violent conflict and weak institutions.
Poverty is on the rise in several countries in Sub-Saharan Africa, as well as in fragile and conflict-affected states. In many countries, the bottom 40 percent of the population is left behind;in some countries, the living standard of the poorest 40 percent is actually declining.
Extreme poverty is becoming more concentrated there because of the region’s slower rates of growth, problems caused by conflict and weak institutions, and a lack of success in channelling growth into poverty reduction. Sub-Saharan Africa now accounts for most of the world’s poor, and—unlike most of the rest of the world—the total number of poor there is increasing.
Poor households are overwhelmingly located in rural areas, have a large number of children, and suffer from a lack of education. They are ill-served in essential elements of well-being such as health care and sanitation and often are exposed to natural hazards and physical insecurity.
The number of people living in poverty in the region has grown from an estimated 278 million in 1990 to 413 million in 2015. Whereas the average poverty rate for other regions was below 13 percent as of 2015, it stood at about 41 percent in Sub-Saharan Africa.
Of the world’s 28 poorest countries, 27 are in Sub-Saharan Africa, all with poverty rates above 30 percent.
The bottom 40 in the dozen Sub-Saharan African countries covered by the indicator saw their incomes rise by an average of 1.8 percent per year in 2010–15 (slightly below the global average of 1.9 percent per year).
More worrying, however, is that the incomes of the bottom 40 shrank in a third of those 12 countries.
In short, extreme poverty is increasingly becoming a Sub-Saharan African problem. African countries have struggled partly because of their high reliance on extractive industries that have weaker ties to the incomes of the poor, the prevalence of conflict, and their vulnerability to natural disasters such as droughts. Despite faster growth in some African economies, such as Burkina Faso and Rwanda, the region has also struggled to improve shared prosperity. Bigger gaps between rich & poor make it even harder to keep up the pace of non-poverty.
The stark contrast between Asia and Africa explains why it is getting harder to reduce poverty globally.
Although overall progress against poverty has been steady, not all regions have shared in global growth and some are being left behind. As poverty becomes rarer, there is less scope for gains to shift to different regions and countries. With poverty in East Asia and Pacific down to 2.3 percent in 2015, for example, the region has little more to give in terms of reducing the global rate. A similar trend is well under way in South Asia.
The result is a slowdown in overall poverty reduction that makes it unlikely the World Bank’s 2030 target will be met. From 2013 to 2015, global poverty declined by 0.6 percentage points per year, well below the 25-year average of a percentage point a year. The World Bank forecasts suggest that the rate of reduction further slowed between 2015 and 2018 to less than half a point per year.
The poorest countries
Ending extreme poverty will require a renewed focus on Sub-Saharan Africa and states suffering from weak institutions and conflict. Estimates for 2015 indicate that India, with 176 million poor people, continued to have the highest number of people in poverty and accounted for nearly a quarter of the global poor.
The extreme poverty rate is significantly lower in India relative to the average rate in Africa, but, because of its large population, India’s total number of poor is still large. In a sign of change, however, forecasts for 2018 suggest that India’s status as the country with the most poor is ending—
Nigeria either already is, or soon will be, the country with the most poor people.
The extreme poverty rate and the number of poor in South Asia have been steadily declining and are expected to continue that trend. The result of this trend is a shift in poverty from South Asia to Sub-Saharan Africa.
In many low-income countries, the bottom 40 live on less than US$1.90 a day and disproportionately live in rural areas, making them vulnerable to disruptions caused by the climate.
Uganda, for example, has suffered significant setbacks in poverty reduction and shared prosperity largely due to droughts and pests that affected harvests starting in 2016. Uganda’s poverty rate rose from 35.9 percent in 2012 to 41.6 percent in 2016. Real consumption for its bottom 40 shrank by 2.2 percent a year.
The Challenge of Evolving Poverty
These contrasting regional poverty trends have two important implications.
First, the primary focus of the international community’s efforts to eliminate the worst forms of deprivation must remain firmly in Africa and those few other countries elsewhere with very high poverty rates.
At the same time, we must not forget the plight of billions of people living above US$1.90, who are still very poor by the standards of their own societies. Most of the world’s poor now live in middle-income countries, and the World Bank research indicates that those countries tend to have a more demanding view of poverty.
Broadening our view of poverty
Drawing on national poverty lines, the World Bank now also reports poverty comparisons at two higher thresholds—$3.20 per day and $5.50 per day—which are typical of standards in lower- and upper-middle-income countries.
These thresholds are a recognition that the concept of poverty itself is dependent on one’s social circumstances. What is a luxury in one society could be a necessity in another. Even if minimum physical needs are met, people cannot be said to lead flourishing lives if they are not able to conduct themselves with dignity in the society in which they live. The societal poverty rate presented in this report gauges people’s well-being by the standard of their surroundings.
As may be expected, these two standards for measuring poverty portray a less encouraging picture of the level of well-being in the world relative to the measure of extreme poverty, which is forecast now to be in single digits.
Nearly half the world (46 percent) lives on less than US$5.50 per day, a standard that defines poverty in a typical upper-middle- income country. A quarter of the world lives on less than US$3.20 per day.
The new measures recognize that people can be defined as poor relative to their societies even at consumption levels well above the US$1.90 level. They also broaden our view of poverty to include elements of basic well-being such as access to sanitation and core health services. Finally, they go beyond the household level in a first attempt to measure poverty as it affects individuals
Understanding what “the basics” really means
Even in those countries where extreme deprivation rates are very low, there continue to be significant concerns about poverty more broadly defined. Having enough money is critical to living a life free of poverty, but it is not all that matters. To truly end poverty, we need to better monitor people’s progress in achieving nonmonetary aspects of well-being, such as proper drinking water and access to education.
At the global level, the share of poor according to a multidimensional definition that includes consumption, education, and access to basic infrastructure is approximately 50 percent higher than when relying solely on monetary poverty.
In Sub-Saharan Africa, more than in any other region, shortfalls in one dimension go hand in hand with other deficiencies. Low levels of consumption are often accompanied by challenges in non-monetary dimensions.
South Asia is another case in point. Despite having made progress in poverty reduction, the region’s shortfalls in education remain high for both adults and children and are not strongly associated with monetary poverty. In addition, the number of people in the region living in households without access to an acceptable standard of drinking water, adequate sanitation, or electricity is far greater than those living in monetary poverty. This means that the challenge in securing higher living standards for the population of South Asia is far more daunting when poverty in all its forms is considered.
Crystalizing a multidimensional view of poverty
Including additional dimensions of deprivation in our measures of poverty can provide valuable insight into how policies can be directed to have the most effect on poverty. The profile of the poor can change as we take a multidimensional view of poverty.
For example, a five-dimension picture of Indonesia shows that the country may need a stronger focus on combatting health care deprivations, whereas efforts in Ecuador may be better directed toward education and security, particularly in urban areas.
The Challenge of Poverty of the individual
The multidimensional approach, when combined with data at the individual level, can also provide new insights into who is poor.
Applying this approach to five of the six countries reveals that poverty is greater among women than men, especially in Iraq. Women are revealed as multidimensionally poorer than men in all five countries, and the gender gap may be even wider for specific vulnerable groups. Widows, for example, are found to be significantly poorer than widowers in all countries except Ecuador.
To build a true picture of poverty as experienced by individuals, we also need to go beyond the traditional household level to consider how resources are shared among families.
Women and children tend to have disproportionately less access to resources and basic services, especially in the poorest countries. Women in poorer countries often withdraw from the labor force and lose their earning potential when they reach reproductive age.
Another way to go beyond the household to the individual level is to look at how food is shared within families. In Bangladesh, for example, household survey data reveal that household heads—mostly men—have much smaller calorie shortfalls than individuals who are not household heads. Such differences are invisible in standard measures of poverty. In Malawi women have a significantly higher poverty rate (73 percent) than men (49 percent). Children in both countries suffer from significantly higher poverty rates.
The World Banks says they need more comprehensive data to deepen their understanding of how poverty affects individuals and to assess how social programs can be better tailored to meet their needs. The initial findings of this approach suggest that current assistance programs risk missing many poor people who are hidden in nonpoor households.
The challenges in numbers
To reach the World Bank’s goal of bringing extreme poverty below 3 percent by 2030, the world’s poorest countries must grow at a rate that far surpasses their historical experience. There is no room for complacency. Efforts must be intensified to promote economic growth in the lagging countries and ensure that the poorest 40 percent of the population benefits more from economic progress. Looking ahead to 2030, forecasts indicate that the world would need to grow at an unusually strong pace in order to meet the 3 percent target.
For example, the target would be met if all countries grow at an average annual rate of 6 percent and the income of the bottom 40 grows 2 percentage points faster than the average.
Alternatively, the landmark could be reached if all countries grow at an average pace of 8 percent. But, in either of these scenarios, extreme poverty would still be in double digits in Sub-Saharan Africa by 2030.
In an alternate scenario where all countries grow in line with the average in their region over the last 10 years, our forecasts indicate that the global poverty rate would be above 5 percent in 2030.
This “business as usual” scenario leads to a bifurcated world where more than a quarter of the people in Sub-Saharan Africa live in extreme poverty whereas poverty is less than 2 percent in most of the rest of the world.
Measuring the right things, measuring things right
Now that extreme poverty continues to be high in some regions while heading down to single digits in most of the rest of the world, we need to build a more complete picture of what is meant by a world free of poverty. Certainly, the world could not be said to be free of poverty if most countries achieve the 3 percent rate while large pockets of extreme poverty linger.
By 2030, the portion of the poor living in Sub-Saharan Africa could be as large as 87 percent on the basis of historical growth rates. Even if every other country in the world had zero extreme poverty by 2030, the average rate in Sub-Saharan Africa would have to decrease from the 2015 rate of 41 percent to about 17 percent for the global average to be 3 percent. That would require an unprecedented annual growth rate for the region.
To have a better understanding of what it means to end poverty, we need more ways of measuring and conceptualizing the problem. We need more pieces of the puzzle to better understand what a world free of poverty means.
One thing is clear: business-as-usual won’t work
Stronger economic growth and renewed efforts to resolve violent conflicts will be crucial to speed up the rate of poverty reduction in Africa and elsewhere. But business-as-usual will not be enough. More needs to be done to ensure that growth is inclusive, with a stronger focus on raising the productive capacity of the poor.
A 2-fold numbers challenge
You’re only as strong as your weakest link
If Sub-Saharan African and other fragile countries are to have a chance of reaching the 3 percent goal, not only will their growth rates have to be high but incomes among the bottom 40 in their societies will also have to rise at a higher rate.
Yet, in two-thirds of the 13 extremely poor countries (with poverty rates above 10 percent) covered by the World Bank’s shared prosperity indicator, average incomes of the bottom 40 are growing at a slower rate than the global average of 1.9 percent per year. That is a worrying trend for the poorest economies and conflict-affected states, precisely the countries least likely to reach the 2030 target.
A second and crucial worry is that data needed to assess shared prosperity are weakest in the very countries that most need them to improve.
Only 1 in 4 low-income countries and 4 of the 35 recognized fragile and conflict-affected states have data that allow us to monitor shared prosperity over time. Because a lack of reliable data is associated with slow income growth for the poorest, the situation could even be worse than currently observed.
The Sub-saharan Challenge
Transformational change is needed in Africa and conflict-affected areas.
The battle against extreme poverty will be won or lost in Sub-Saharan Africa and fragile and conflict-affected areas. Global extreme poverty is increasingly becoming a Sub-Saharan phenomenon, and the share of the poor in fragile and conflict-affected areas is growing. Of all regions, Sub-Saharan Africa has one of the worst performances in shared prosperity and the poor there suffer from multiple deprivations more than in any other region. Reaching the 3 percent target by 2030 will require more than business as usual: the region will need strong and sustained economic growth, significant improvements in the living standards of the bottom 40 throughout Sub-Saharan Africa at a scale not seen in recent history, and substantial investments in people.
The Challenge of Evolving Poverty
The new measures can enhance policy dialogue.
Welfare monitoring and policy dialogue at the country level will continue to be based on national poverty measures. Grounded in tools that countries already use to monitor progress, the lines and measures introduced here open new possibilities for countries to benchmark their performance against relevant comparators using a richer set of instruments. This is particularly the case in middle-income countries, where extreme poverty is less prevalent, but where the higher poverty lines and the new multidimensional poverty measure reveal there is still much work to be done.
The Challenge of Poverty of the Individual
Empowerment of vulnerable individuals, even within households, can not be overlooked.
While poverty has historically been measured at the household level, new data shows that there are poor people in non-poor households. The gender gap is even wider for specific vulnerable groups, as women in poorer countries often withdraw from the labor force and lose their earning potential when they reach reproductive age. Crucial here is understanding that poverty goes beyond the monetary and ways to help these vulnerable groups of individuals get empowered should be sought after.
The Challenge of the Numbers
Data investments are critical.
World Bank investments in data have helped provide a more comprehensive picture of poverty, but there is a need for continued and deeper investment in data. More and better welfare data are needed to compare poverty across time, for multiple dimensions, for all individuals, and particularly among low-income and conflict-affected countries. Very few of these countries have shared prosperity estimates, and few countries have data for estimating all dimensions of poverty. Ensuring that no one is left behind in the fight against extreme poverty requires that we expand investments in country systems and capacity to measure and monitor welfare in a timely, comparable manner using both traditional and newer types of data and methodså