Global Extreme Poverty is on Decline
According to World Bank’s most recent statement, extreme poverty in the world has decreased considerably in the past three decades. In 1981, more than half of the people of the developing world (called “third world” then) lived in extreme poverty. World Bank’s measure of extreme poverty used to be $1-a-day per person until 2008 when it was changed to $1.25-a-day. However, in 2010, only 21% lived in extreme poverty. In terms of numbers, despite a 59 percent increase in the population, only 1.2 billion people lived in extremely poverty in 2010 compared with 1.9 billion three decades ago. It is predicted that by 2015, the headcount of people below $1.25 would fall to about 900 million.
Thus, the UN’s Millennium Development Goal of halving the extreme poverty by 2015 has already been achieved by 2010, although the success level for other 7 MDGs has been quite low. The MDGs aims to tackle several deprivations – poverty, hunger, health, education, and gender inequality – that the poor face and which binds them into poverty.
While the number of poor people has fallen everywhere, the Sub Saharan Africa (SSA) is the only region in the world where the number of extreme poor has actually risen between 1981 (205 million) and 2010 (414 million). In the SSA region, poverty rose from 51% in 1981 to 58% in 1999, but then it declined to 48% by 2010. In 1981, the SSA region accounted for only 11% of world’s extreme poor, in 2010 it accounts for over a third of world’s extreme poverty. India accounts for another third (up from 22% in 1981) and China contributed 13% (down from 43% in 1981).
In the Latin America and the Caribbean (LAC) region, extreme poverty was stable at about 12% during 1981 and 1999, and then it reduced to half by 2010.
The SSA and South Asia are now the biggest pockets of extreme poverty with approximately 400 million and 500 million, respectively; from the total of 1200 million extremely poor people and present a huge challenge. In south Asia, India alone is home to about 400 million extreme poor.
India’s contribution to ending global poverty could be enormous. In the last five years, about 50 million people have been lifted out of extreme poverty and in the next generation an additional 300 million could be helped to rise above the $1.25-a-day benchmark, if its economic growth is sustained.
World Bank’s Two New Goals
The World Bank has now set two targets for itself: to end $1.25-a-day poverty of 1.2 billion people by 2030 and promote shared prosperity. The reason behind this thinking is simple. As economic growth is taking place in the developing countries, it is also causing widening inequality and social exclusion.
In order to achieve the twin goals, the Bank will work towards three things: a sustained economic growth in the poor nations, efforts to enhance inclusiveness of the growth in order to reduce inequality and social exclusion, and some form of protection from climatic disasters and shocks from some unforeseen food, fuel or financial crises.
1. End extreme poverty of 1.2 billion people by 2030.
The Bank aims to decrease the percentage of people living with less than $1.25-a-day to no more than 3 percent by 2030. At this level, the nature of extreme poverty will change; it will remain localized among specific vulnerable groups.
While eradicating extreme poverty is fine, it is not enough. What is also needed is to prevent people falling back in to poverty, for which the Banks wants to promote the idea of the shared prosperity; its second goal.
2. Promoting Shared Prosperity
The bank aims to promote income growth of the bottom 40 percent of the population in each country. One can easily question, why not 35% or 50%, but that is beside the point. This involves achieving economic growth which is inclusive of all sections of the society. Inclusion demands equity so that becomes the focus point.
It wants to track the incomes of the bottom 40 percent of a nation’s population through a new Shared Prosperity Indicator; the GDP growth data alone is not sufficient.
How will a country achieve shared prosperity?
While the countries can continue with their economic growth, the governments will have to ensure that interests of all sections of the society are looked after. In general, the prosperity can be broad-based only if the economic growth generates jobs and opportunities for all segments of the population. While the private businesses are concerned with the financial well-being of their enterprises, the governments have to come up with favorable policies to promote high investment and facilitate skill development among the poor and the poorest. Further, the tax system should also be fine tuned so that it creates incentives both for economic growth and fairness.
The governments will also be needed to ensure, through some legal commitments, investments into facilities that improve and equalize opportunities for all citizens. For children and youth, it would mean providing universal access to facilities leading to good nutrition, health, education and childhood development. For women in many societies, it would mean dismantling barriers to their participation in economic, social, and political life. Some form of government commitment will be also needed for investments in safety nets to protect the poor and vulnerable against deprivation and shocks.
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Detailed Poverty Report