Global Poverty Solutions

updated April 2016

Just as the causes of poverty are complex and multi-layered, so potential global poverty solutions defy concise prescription.

Necessary but Insufficient Solutions

Investment in greater economic growth is an example. Impossible to challenge as a theoretical benefit to the poor, growth in developing countries is widening inequality rather than reducing poverty. In the Africa Progress Report 2014, former UN Secretary-General, Kofi Annan, warns: “Africa may be showing impressive headline growth, but too many of our people remain stuck in poverty.”

International finance for development, including foreign aid, is another example of a necessary but insufficient solution to global poverty. Aid fulfils an invaluable role in lifting millions of people out of poverty, in building government institutions and in pioneering new ideas. But such sources tend to be short term, undermined by broken promises and ever-changing conditionality, as development fashions come and go.

A prominent example is the 2009 commitment to mobilise climate finance of $100 billion per annum by 2020. Six years on, delivery to the Green Climate Fund amounts to less than 10% of that figure. Any advance towards the original promise remains conditional on vague references to “leveraging private sector resources.”

International Governance
International regulations that obstruct development – such as those for corporate tax and labour migration – illustrate the core dynamics of the global divide. If the international rules for conduct of a globalised economy are created by the dominant participants, the outcome is likely to prejudice those yet to gain a foothold.

It may be relevant to note that, apart from Brazil, the two countries with the greatest success in poverty reduction are China and Vietnam. Their governments have overcome the structural barriers to development by methods which have largely sidestepped western regulations and prescriptions.

They have retained strong state control over key sectors of their economies, permitting only gradual liberalisation. Furthermore, they show little inclination to relax tough restrictions on human rights and democratic freedom.

As China becomes increasingly influential in African economic development, the richer countries may be persuaded to take bolder steps to find global poverty solutions. The removal of agricultural subsidies that protect American and European farmers is the most familiar cry for global justice. But principles of equity and fairness are also desirable in regulations for trade, investment, intellectual property rights, technology transfer, climate change and energy.

Social Safety Nets
Greater justice in international economic governance may improve the fortunes of developing countries but the outlook for global poverty depends ultimately on their internal social policies.

In terms of sectoral priority, it is generally accepted that investment in the rural economy is the most cost effective means of reducing poverty. Many governments in Africa have renewed their commitments to raise spending on agriculture. The bastions of land reform and equality for women in farming must also be overcome if this strategy is to succeed.

At household level, developing countries are being encouraged to remedy the absence of social safety nets for about 75% of people living in low income countries. A World Bank report, The State of the Social Safety Nets 2014, asserts that “there is a strong and growing body of evidence that social safety nets are one of the most cost-effective ways for the countries to end extreme poverty.”

The main categories of social safety nets in poor countries are transfers of cash or food, with or without conditions, and public works schemes. The best known example of the latter is India’s National Rural Employment Guarantee Act (NREGA) which guarantees 100 days of paid employment to one person from every household.

There is a surge in interest in cash transfers, often conditional on children’s attendance at school and for immunisation. Inspiration comes from Brazil and Mexico, countries once renowned for extremes of inequality. Poverty reduction and stronger economic performance in these countries have been attributed in part to the success of their respective family-based income-support programmes, known as Bolsa Família and Oportunidades.

Cash transfers represent overdue recognition of the rights of the poor, as opposed to their needs. Such fundamental reordering of priorities offers hope to those trapped in the most chronic forms of poverty, as well as reassurance for those now above the poverty line but vulnerable to economic setbacks..

Migration
Many economists believe that totally free movement of labour would be the most effective means of reducing global poverty and stimulating the moribund world economy. Strategic labour migration can fill gaps opening up in the demographics of ageing industrial countries. It would also acknowledge that the root migration catalyst of global inequality is gaining in potency.

Migrant workers can act as agents for the transfer of skills, technologies and knowledge from richer to poorer countries. And their remittances sent home often add up to a significant proportion of a receiving country’s GDP; for example, a quarter of Nepal’s GDP is sourced from remittances. In 2014, remittances to developing countries are estimated to have reached $436 billion, almost three times the value of foreign aid.

As an important source of finance for sustainable development, remittances have the advantage over foreign aid of reaching households directly, cutting out any losses through corruption or unnecessary layers of bureaucracy.

These potential benefits of migration are countered by the loss of skilled workers from poor countries, often described as the “brain drain”. As many as 20,000 African professionals may be departing from the continent each year. This is of especial concern for the health sector and prompted the World Health Organization to introduce a voluntary Global Code of Practice on the International Recruitment of Health Personnel which discourages richer countries from indiscriminate policies.

Nevertheless, studies by many institutions – including the African Development Bank – demonstrate a correlation between poverty reduction and the volume of remittances. The multilateral development agencies increasingly advocate that international movement of labour is a positive feature of globalisation, subject to proactive policies to optimise its benefits and protect rights.

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Rwanda: A Model for Building Strong Safety Nets – Rwanda’s commitment to social protection is part of a broader effort that has led to substantial reductions in both poverty and inequality
from World Bank

Michael Clemens, research fellow at the Center for Global Development explains why more research is needed to understand how migration contributes to global poverty reduction

more Global Poverty briefings
Perceptions of Global Poverty
Global Poverty Statistics
National Poverty Line
International Poverty Line
Causes of Global Poverty
Should We Care About Poverty?
Sustainable Development Goal for Poverty
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