In search of the bottom billion

New research published by the Washington-based Center for Global Development questions whether a core function of the World Bank in supporting poor countries is “heading toward retirement” by 2025.

The report’s inference of a world in which countries grow wealthier whilst poor people remain poor may deepen confusion about the role of foreign aid in ending global poverty.

Founded in 1960, the purpose of the World Bank’s International Development Association is to provide finance for countries whose economic status fails to satisfy the requirements of commercial markets. It has become an integral branch of the global aid industry.

The IDA’s concessionary loans and grants are available to countries whose average per capita income is less than $1,165, at 2009 values.

The Center for Global Development report observes that many of the low income countries now qualifying for IDA support will shortly “graduate” above this threshold.

Projections of economic growth are such that the 79 countries currently eligible will reduce to just 31 by 2025, even after allowing for inflation. Of these remaining poor countries, 25 will be in Africa, many of them at present classified as “fragile or post-conflict.”

The report asserts that “the World Bank has long identified the difficulties of working and staffing in fragile states. To date, it has made little progress in meeting these challenges.” The IDA has tended to focus on the more stable economies.

The prospect of such a drastically altered profile of IDA clients prompts the authors Todd Moss and Benjamin Leo to recommend that “World Bank shareholders and management begin frank discussions on its future sooner rather than later.”

However, in limiting its scope to implications for the IDA, the report paints a potentially confusing picture of global poverty becoming confined to a small nucleus of African states.

The reality is very different. If China’s achievement is set aside, the number of very poor people in the world is currently growing. The prospect of attaining the modest Millennium Development Goal of halving 1990 poverty by 2015 is not viewed with great optimism.

The metrics of the poor, whether living in Texas or Tamil Nadu, are prices of food and fuel and the availability of jobs. These are not mentioned at all in the Center for Global Development paper which juggles instead with estimated rates of economic growth and national income averaged across a population.

Current projections of food and fuel prices suggest that the graduation of poor households to middle class status is unlikely to be as imminent as the countries in which they reside.

A fuller picture of the profile of poverty can be detected in the title of a report published last September by the Institute of Development Studies in the UK – Global poverty and the new bottom billion: Three-quarters of the World’s poor live in middle-income countries.

The paper explains how rising inequality traps households in extreme poverty despite the advance of low income countries in the eyes of international donors such as the IDA.

Author of the IDS paper, Andy Sumner, was invited to participate in a recent podcast produced by the Center for Global Development. “Growth hasn’t been sufficiently poverty reducing,” Sumner explained. His research finds that, between 1990 and 2008, the proportion of the world’s poorest people living in low income countries plummeted from 93% to 25%.

Sumner conceded that his work could be interpreted as an explicit criticism of the best-selling book on global poverty – The Bottom Billion – by Professor Paul Collier of Oxford University.

The premise of Collier’s book is that the bottom billion lives in the world’s 58 poorest countries. In the podcast, Sumner states that Collier’s figures are based on outdated 1990s data.

The cause of global poverty reduction may not be well served by confusion amongst the academic fraternity over the shifting sands of the data. Critics of foreign aid will seize on any evidence that new middle income countries could take fuller responsibility for financing their own poverty reduction programs.

There has been heated debate in the UK over the government’s recent decision to sustain development aid to India, a country with nuclear weapons, battleships and a space program. The British Development Secretary, Andrew Mitchell, has been forced to defend his award of $450 million per annum to India until 2015.

India is a prime example of a country which has achieved significant growth of national average income without commensurate poverty reduction. The inequality of growth is such that one third of the world’s extreme poverty is still located in India.

A further complication is that India and other new middle income countries have publicly stated their aversion to receiving aid. Instead of handouts, they increasingly demand fairer rules in a globalized world.

They seek equal opportunities to trade, the right to emit a fair share of greenhouse gas emissions, and greater freedoms for their citizens to work abroad.

The rich donor governments are not ready for such moves. For example, UN climate change negotiations have witnessed a preference for vague promises of aid over fresh commitments to reduce emissions.

In a blog piece about the Center for Global Development report, Todd Moss said: “unfortunately, western governments haven’t caught up to these emerging trends-and are definitely not set up to deal with these changes.”

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this article was first published in the OneWorld section of Yahoo World News

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