When the new head of the World Bank, Dr. Jim Yong Kim, engages the wider public, he asks, “What Will It Take to End Poverty?” When the prime minister of the United Kingdom touts his accomplishments in the development field, he writes about “Combating Poverty at Its Roots.” And when NGOs fundraise, they stir your heart by telling you, “Sponsoring a child is the most powerful way you can fight poverty.”
But given great reductions in absolute poverty (from 55 to 22 percent of the developing world’s population over the past three decades) and great improvements in the lives of the poor, is this focus on poverty reduction detracting from more important issues?
Some things to consider:
First, there are a lot more poor people in the world than the number in poverty. Even while the number of people earning less than $1.25 a day (the international poverty line) has been declining, the number earning between $1.25 and $2.00 has been rising sharply. There were almost twice as many middling poor in 2008 than in 1981. Over 40 percent of the world’s population—some 3 billion people—earn less than $2.50 a day. Over 70 percent—some 5 billion—earn less than $10.00 a day.
The needs of the extreme poor are substantially different from the needs of the poor. Whereas the former gain tremendously from programs that alleviate their immediate needs, the latter can meet many of their immediate needs now and have higher aspirations. They need better functioning governments and more inclusive societies such that they can access good schools, reliable healthcare centers, and well-paying jobs. And whereas aid agencies have contributed a lot to alleviating poverty, they have a much less successful record when it comes to helping countries.
Second, the great majority of all poor people live either in lower middle-developed countries (MDCs) or fragile states, both of which must overcome pressing institutional challenges that go beyond the typical development agenda if they are to improve the lives of the poor.
Lower MDCs are different than lower middle-income countries (MICs), which can gain their higher ratings simply because they have a lot of oil (such as Nigeria and Angola) or have taken on a lot of debt (many countries reached MIC in the 1970s this way only to fall back). They are more developed than low developed countries because of a variety of social, economic, and political factors, such as the average level of human development, the quality of public services, macroeconomic conditions, the degree of export diversification, and the extent of social conflict.
Lower MDCs such as Indonesia, Bolivia, and Ghana have generally already reduced poverty substantially but are struggling to strengthen institutions, improve public services, and diversify their economies—all of which are essential to improving the lives of the poor. Better education systems, judicial systems, and employment opportunities all depend on better and more inclusive government.
Fragile states, in contrast, have more fundamental political problems (no matter what their income levels). Riven by competing rule systems, lacking the capacity to control their territories and keep violence down, they lack the horizontal social cohesion and elite political settlement necessary to even jumpstart development. It is terribly hard to help the poor when a country remains unstable, divided, and lacking the kind of consistent public authority necessary to attract investment. Indeed, no fragile state has achieved a single Millennium Development Goal.
What this means is that international efforts to substantially reduce extreme poverty have more or less succeeded (even if a lot of the credit ought to go to China). There is more work to be done, but the numbers are encouraging everywhere but in fragile states, especially if growth can be maintained and broadened in Africa and South Asia, where a great majority of the extreme poor are concentrated.
The poor would benefit the most if countries across the developing world could undertake the kind of economic transformation that has already taken place across most of East Asia (which has seen by far the largest drops in poverty and greatest rises in incomes). As the Economic Report on Africa 2011 explains,
Despite progress in some countries, African economies are still characterized by heavy reliance on the primary commodity sector, high vulnerability to external shocks, jobless growth and slow progress towards social development goals. It is essential for African countries to promote economic diversification and structural transformation as a means to accelerate and sustain broad-based and shared high employment-generating growth.
This requires more united elites, more capable governments, and more commitment to inclusive development. It is more a question of politics than economics, institutional change than implementing particular projects, and indigenous states playing a more positive role than anything outsiders can accomplish on their own. As a recent Africa Research Institute paper noted:
Economic growth during the 2000s has not been shared by governments and elites. Even in countries which benefited substantially from high prices for their natural resources, investment in public goods, agricultural transformation and infrastructure has remained derisory.
Similarly, as a recent book on poverty in South Asia points out,
South Asia is a development paradox. It has attracted global attention for rapid economic growth. . . . But this progress doesn’t mask the fact that South Asia is home to the largest concentration of people living in debilitating poverty and social deprivation on planet Earth.
Redirecting the energies of the development community from its longstanding focus on poverty to broader efforts to improve how countries work may stir less passion, bring in less money, and attract less attention—but it would benefit the poor more.