Global Poverty: updated November 2017


Understanding Poverty

In September 2015 world leaders approved a package of Sustainable Development Goals which include the ambitious task of eradicating global poverty by 2030. Whether such mutual resolve can survive the emergence of nationalist governments, buffeted by global economic and political insecurity, remains open to question.

The scale of the challenge is formidable; by reference to the internationally recognised poverty line, almost 700 million people in developing countries lived in extreme poverty in 2016, excluded from the prevailing economic model of wealth creation.

The symptoms of this model’s inherent dysfunction – boom and bust economies, volatile food and fuel prices, inequality, climate disruption and unsustainable use of resources – impose a disproportionate footprint on both poorer countries and poorer families. This injustice is yet to be adequately acknowledged in the corridors of global governance.

Extreme poverty strikes when household resources prove insufficient to secure the essentials of dignified living. The consequences of persistent poverty include hunger, children out of school and unnecessary risk of poor health. As reserves of household assets diminish, psychological tensions of shame and anxiety undermine resilience to the economic shocks of everyday family life.

Attempts to understand and tackle poverty often fail to do justice to the reality of its experience and too readily subside into ideology and misplaced assumptions.

Take for example the images of poverty published by humanitarian agencies to inspire support for their appeals. These often provoke an emotional cocktail of outrage blended with fascination about the protagonists, especially children.

The label of “poverty porn” sometimes pinned to this otherwise altruistic material provides early warning that poverty is a sensitive subject to be approached with caution.

Very poor people are not passive agents resigned to their fate – indeed, exhaustive ingenuity is required to manage tiny amounts of money through an unpredictable annual cycle of household misfortune. Far from crushing the human spirit, the extreme poverty of the developing world instead draws out many of its finest qualities.

Global Poverty Statistics

The number of people in developing countries living below the international poverty line of $1.90 per day fell from over 1,850 million to 767 million between 1990 and 2013, the most recent year for which sufficient household data is available. These figures are published by the World Bank, fulfilling its responsibility for official global poverty statistics.

India and Nigeria alone accounted for more than a third of this global total. More than half of all global poverty in 2013 was located in sub-Saharan Africa. The East Asia and Pacific region (including China) was responsible for 895 million of the reduction since 1990, implying a fall in poverty of only 188 million for all other developing regions combined.

Expressing poverty as a percentage yields more impressive results due to rising population. Although the number of poor people in sub-Saharan Africa increased by 113 million between 1990 and 2013, the region’s percentage rate of poverty fell from 54% to 41% in that period. For all developing regions, global poverty has reduced significantly in precentage terms, from 35% in 1990 to 10.7% in 2013. Based on broad economic performance since 2013, the World Bank offers a cautious estimate that this figure has fallen further to 9.1% in 2016.

The trend of migration from poor farming regions has raised the incidence of urban poverty, especially in the slum zones of the world’s major cities. Although not all slum-dwellers fall below the $1.90 poverty line, the population of these deprived urban areas increased from 650 million in 1990 to 863 million in 2012.

A weakness of these global poverty statistics is that they say nothing about the dynamics of household misfortune, the extent to which families escape poverty and, all too often, subsequently fall back below the poverty line. Concern about this cyclic pattern is especially acute at present, due to the persistence of economic and climatic shocks.

Estimates suggest that 40% of the world’s population occupy the “fragile middle”, free from the worst extremes of poverty but by such a narrow margin that they remain vulnerable to setbacks. The World Bank estimates that increasing the international poverty line by as little as $0.10 would add 100 million to the global poverty total.

The profile of global poverty is completed by those whose prospects of joining the fragile middle are very low; perhaps as many as 500 million individuals whose social and economic environments fail to offer the lifeline they need.

Described as “chronic poverty”, this most permanent category is typically found amongst very small farmers and landless labourers, tribal and indigenous people experiencing discrimination, and nomadic pastoralists on marginal land.

This distinction between chronic and dynamic poverty is important because a one-dimensional poverty reduction strategy is unlikely to be successful for both categories.

National Poverty Line

Most of the world’s poorer countries determine their national poverty line in absolute terms, typically the monetary value of a basket of basic food and essential non-food items. Some governments work with separate urban and rural poverty lines, recognising that costs are higher in cities.

Many of these countries adopt an austere interpretation of “essential”, restricting non-food items to a minimum. Household surveys carried out to assess national poverty rates focus on consumption as much as income, recognising that goods may be exchanged by barter and that many families grow their own food.

Statistics will highlight the incidence of households that fall just above or below the national poverty line. A high incidence forewarns that a small change in national economic fortunes or in redistribution can have a large impact on poverty figures. Understanding how families are drawn into, and escape from, poverty is invaluable in preparing effective poverty reduction strategies.

The vulnerability of households close to the official poverty line accentuates the importance of accurate data collection. Questioning the validity of poverty figures from poorer countries is often justifiable. Since 2011, both the UN and the World Bank have drawn attention to the low quality and excessive time lag in global poverty statistics, especially the component figures from Africa.

Their concern highlights one important symptom of the global divide – the capacity for timely collection and analysis of data relevant to policymaking. The production of statistics in the poorest countries is impeded by the prohibitive cost, skills and logistics involved in conducting household income and expenditure surveys. Many international aid programmes therefore aim to strengthen government departments responsible for national statistics.

Logistical constraints are frequently aggravated by political factors. The advent of elections is often a reason for delaying the publication of a survey that might reflect poorly on government performance. Disputes over the basis of calculating a poverty line are also inevitable where it dictates the cost of social welfare benefits.

Poverty assessment in richer countries is less likely to focus on the value of an arbitrary basket of goods. Instead, measures of poverty relative to the average income of all citizens are adopted. This method can also detect trends in inequality, overcoming a weakness of the absolute poverty line approach.

International Poverty Line

As each national poverty line in poorer countries reflects varying definitions of essential food and goods, an alternative method is needed to aggregate global poverty statistics on a consistent basis. The task of condensing such a mix of currencies, staple food prices and data collection standards into a single international poverty line is immensely challenging and controversial.

The World Bank calculates the international poverty line as the average of national poverty lines in a “reference group” of 15 of the world’s poorest countries. The differing values of local currencies are neutralised by conversion into US dollars, not by standard currency exchange rates, but by a set of purchasing power parity (PPP) rates that were last evaluated with 2011 data.

The international poverty line is reviewed periodically, most recently in 2015 when the World Bank revised the figure to $1.90 per person per day. The spending power of $1.90 in the United States at 2011 prices therefore provides an indication of the daily human experience that lies behind official global poverty statistics.

For 2016, the World Bank has estimated that 9.1% of the total population of developing countries lived below this international poverty line. This figure is in part an estimate; global poverty is assessed by comparing the $1.90 benchmark with the income and consumption data from hundreds of household surveys conducted in developing countries. The timelag in publishing these surveys is such that 2013 is the most recent year for which data is considered adequate. The figure of 10.7% for that year is updated to 9.1% for 2016 by a broad assumption about the beneficial impact of economic growth.

This process inevitably leads to confusion in countries whose choice of national poverty line differs significantly from the international benchmark. A prolonged and controversial review of the national poverty line in India was provoked in part because it had fallen in value so far behind the international figure.

A second tier international poverty line of $3.10 per day is derived from the average of national poverty lines in all lower and middle income countries. The World Bank reports that 1.9 billion people lived below this benchmark in 2013, a figure which has not greatly changed since 1981, when it was 2.5 billion.

A criticism of income-based global poverty assessment is its exclusion of important human development criteria such as education, health, water and housing. A new Multidimensional Poverty Index, launched in 2010 and subsequently updated by the UN Development Programme, is gaining ground as a valued resource to supplement our understanding of poverty through statistics.

Causes of Global Poverty

The causes of global poverty are multi-dimensional and complex, linked only by a universal failure of political will.

National governance
Almost every country is a signatory to UN human rights treaties which embrace social and economic rights for all. From a perspective of human rights, extreme poverty and inadequate access to education or health are caused by the failure of national governments to deliver their obligations.

Governments of middle income countries are particularly culpable. Their resources should be sufficient to provide basic social protection and to target the benefits of economic development towards the poor. Yet extreme poverty is increasingly found in the emerging economies of middle income countries.

For example, India is a country boasting nuclear weapons, battleships and a space programme. Such apparent wealth of resources sits uncomfortably with 218 million citizens living below the $1.90 international poverty line, 28% of all global poverty by this measure.

By contrast, the lowest income countries can point to their lack of financial and administrative capacity to tackle extreme poverty without international assistance. Nonetheless, many of these governments fail to prevent leakage of their limited resources through corruption,  irresolute tax collection and misguided subsidies of fuel and energy (which disproportionately benefit the rich). Several of the world’s most unequal countries are in Africa.

In many countries, rich or poor, household poverty is caused by a democratic deficit, in which citizens are unaware of the accountability of their elected representatives. Pre-election promises to remedy insecure land rights, promote equal opportunities for women and increase spending on agriculture and health tend to be overlooked without sustained grassroots pressure.

International Governance
With considerable justification, many of the least developed countries would attribute their shortcomings to structural legacies of history and global governance over which they had no control.

Most of the world’s poorest countries were vassals of the great colonial powers of the 19th and 20th centuries. The exit strategies pursued in granting independence cemented geographical boundaries that were inspired more by the politics of empire than the creation of robust nation states.

Too many countries found themselves lacking a critical mass of natural resources or population, landlocked, or seething with irreconcilable ethnic division. Over 60% of global poverty in 2015 was located in fragile states, worn down by recent or continuing violent conflict.

Newly independent countries struggled to attain fair representation in key international negotiations, either on account of exclusion or lack of capacity. Globalisation has generated great wealth in recent decades but its governance is driven by economic power rather than democratic principles.

This has been most apparent in rules-based regimes for global trade and intellectual property rights which have obstructed developing countries from reproducing proven models of industrialisation. Agricultural development has also been impeded by massive subsidies available to US and European farmers.

National control of domestic development strategies has been hampered by the presumption on the part of donor agencies that western political and economic ideologies should be reproduced. Expectations of democratic and fiscal rectitude are enforced through conditions attached to concessionary loans and grants. The consequences have not always coincided with the interests of the poor.

Population Growth and Climate Change
Population growth and climate change will greatly impede the delivery of poverty reduction programmes. But they are agents of aggravation rather than direct causes of global poverty.

There is nothing new about the interplay of population and poverty. In the UK the industrial revolution of the 19th century triggered both high population growth and appalling experience of urban and rural poverty.

The proceeds of that industrial wealth were eventually allocated to sustainable poverty reduction. The poorer countries of the 21st century remain at the earlier stage of the demographic cycle in which the provision of jobs and social benefits is overtaken by population numbers. Unless these countries can develop modern industrial economies, population growth will continue to impede poverty reduction.

By contrast, the impact of climate change has no precedent. It is however fast becoming part of the poverty agenda because poor people tend to live in the most vulnerable locations with limited means to adapt. For example, the river deltas of Bangladesh and Myanmar are densely populated by poor households exposed to risks of storm and tidal surges.

Research by the UK-based Overseas Development Institute estimates that 720 million people might be added to the global poverty count after 2030 if “business as usual” global warming emissions are allowed to continue. Such a figure would reverse most of the reduction in poverty achieved since 1990.

The inadequacy of government pledges to reduce greenhouse gas emissions is therefore inconsistent with pledges to eradicate global poverty.

Should We Care About Poverty?

There are two separate philosophical responses to the question: “should we care about poverty?” First is the abhorrence of extreme poverty on ethical grounds which, for many, springs from religious teaching. This moral stance is greatly reinforced by awareness of the political injustice that has created and perpetuated the global divide.

The faith response to poverty finds secular expression in the 1948 Universal Declaration of Human Rights: “everyone has the right to a standard of living adequate for the health and well-being of himself and of his family.” The pursuit of poverty reduction as an obligation under human rights law is reflected in the mission statements of many UN agencies.

The second reason why we should care lies in self-interest. In a globalised world, countries large and small are interdependent. There are many examples of why this matters.

Extreme poverty is the key driver of international labour migration, a demographic which the richer countries are notoriously reluctant to accommodate. The unrelenting zeal of these countries to resist migration might enjoy greater success by addressing its root cause, rather than deploying blunt instruments such as border fences.

The 2014 outbreak of ebola in West Africa compelled a major international response to prevent its spread because health services in the affected countries were primitive. Global health management would greatly benefit from universal national capacity for participation.

Whilst the risk of terrorism is often complex in origin, extreme poverty is the ideal recruiting ground for its foot soldiers. And the poorest countries are more likely to be regarded as safe havens by terrorists.

From a more positive perspective, neo-liberal capitalism thirsts for a larger world economy. A prosperous Africa would increase the slice of the cake for others. If India could eradicate its mass rural and urban poverty, the country would achieve the economic superpower status it craves.

Sustainable Development Goal for Poverty

The failure of macro-economic policies of the 1980s and 1990s created pressure on world leaders to share accountability for global poverty reduction. The outcome was the Millennium Declaration, a promise signed by all world governments to achieve eight quantifiable Millennium Development Goals (MDGs) with targets to be met by 2015.

The MDG for global poverty was achieved as early as 2010 but its target to halve the 1990 rate fell far short of a rights-based vision of an end to all poverty. This shortcoming has been rectified in the replacement set of goals known as the Sustainable Development Goals (SDGs) approved by world leaders in September 2015. “By 2030, eradicate extreme poverty for all people everywhere,” is the unequivocal text of Target 1.1 supporting the Sustainable Development Goal for Poverty. The indicator will be the international poverty line, currently $1.90 per person per day.

The mood at the UN meetings arranged to approve the SDGs was generally positive regarding the goal to end poverty. The global rate was down to 10.7% in 2013 (the most recent year for complete data) and its downward trajectory in recent years has been impressive. The MDG programme created pressure on developing countries to focus more on poverty reduction in their national economic strategies. The World Bank and IMF have also realigned their priorities.

However, optimism that the world may be in sight of eradicating poverty should be tempered by three awkward realities. First, few households that have escaped poverty in recent years are protected by a national social safety net. They remain vulnerable to economic shocks, in a global economy seemingly unable to dampen its volatility.

Second, the impacts of climate change and other global environmental disruption introduce an unquantifiable threat to poverty reduction programmes.

Third, the core of up to 500 million people whose extreme and persistent poverty is classified as “chronic” has not been reduced to any meaningful extent by the MDG programme. Those countries with recent or current experience of conflict, where much of this chronic poverty is located, are not responding well to humanitarian and peacekeeping endeavours.

These concerns are all the more acute given the current inadequacy of international political will to address them. Action on climate change seems likely to fall far short of scientists’ recommendations, whilst new sources of financial assistance necessary to address climate, poverty and peacekeeping goals are notoriously hard to locate.

Eradicating poverty is far more ambitious than halving it; radical new policies will be required. Zero global poverty may prove to be the most challenging of all the SDGs.

Global Poverty Solutions

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 nonetheless 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.” Progressive tax reform, prioritising universal access to education and health services, therefore needs to run in parallel with strengthened economic performance.

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 resources lack the necessary scale, further undermined by broken promises and ever-changing conditionality, as political and development fashions come and go.

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 that is the reality 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 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.

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 the potency of global inequality as a major driver of migration.

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, over a quarter of Liberia’s GDP is sourced from remittances. The World Bank predicts that remittances to developing countries in 2017 will reach $450 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.

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.