The goal of ending poverty by 2030 is worthy but increasingly out of reach
AN UNWIELDY forum, the United Nations struggles to get nations to agree to firm targets, let alone achieve them. So it is deservedly proud of having already met its goal of halving the share of people living in extreme poverty by the end of this year, compared with the level of 1990. In fact, the milestone was reached five years early. In 1990, 36% of the world’s population lived in abject poverty. By 2010 this was down to 18%. In absolute terms, the number of those in such desperate straits has fallen from 1.9 billion to about 1 billion today.
This conspicuous success has set the stage for a more audacious target: the complete elimination of extreme poverty by 2030. The World Bank has already declared this to be its objective and the UN is expected later this year to make it the cornerstone of its new development agenda. The goal is a good one. But the economic outlook for developing countries has dimmed since 2013, when the World Bank first settled on it. That, unfortunately, will make the deadline much harder to meet. On current trends it is likely to be missed, possibly by a wide margin.
Bottom up
“Ending poverty” has a very specific definition in the World Bank’s book. It does not mean hoisting everyone into the middle class, far less eliminating relative poverty (in the absence of perfect equality, some will always be poorer than others). Rather, it means that no one should be living on less than $1.25 a day, in 2005 dollars, adjusted both for inflation and to take account of the lower cost of living in the countries concerned. That figure, which has become a widely accepted yardstick of abject deprivation, was first derived by taking an average of the poverty lines—the minimum income needed to satisfy basic needs—of 15 of the world’s poorest countries.
It is also important to note that the World Bank has built some slack into its target. Success will be declared so long as no more than 3% of the world’s population subsists on less than $1.25 a day. This reflects the assumption that “frictional poverty” will persist for many years: economic volatility and political trouble will, from time to time, knock citizens of poor countries back below the poverty line. Yet even with this leeway, there is reason to be pessimistic about hitting the target by 2030.
The case that this goal is feasible rests on extrapolations from the economic performance of the past few decades. One approach is to assume that the global poverty rate continues to fall by roughly one percentage point a year, as it has since the 1980s. That would take it below 3% before 2030. If that sounds a little crude, a second method involves simulating the effects of a range of growth rates. The poverty target would be achievable as long as consumption per person in developing countries increases by around 4% a year, roughly the pace it has achieved since 1999.
Yet recent research from the World Bank itself casts doubt on both of these approaches.* The first projection—that poverty can keep declining by one percentage point a year—is the easiest to dismiss. The chart shows the distribution of spending by people in the developing world in 1990 and in 2011. In 1990 there was a big bulge of people spending just less than $1.25 a day. It took a relatively small boost from growth to lift this group over the threshold. But the people in the bulge are now largely out of extreme poverty; it will take ever-increasing amounts of growth to raise those lower down the scale to the same level. Most of the people still in penury live in countries with chronically weak economies or belong to marginalised groups, suggesting that it would be unrealistic to expect steady advances in their welfare.
The second projection (based on sustained 4% growth in consumption per person) does take the existing distribution of global poverty into account. But Nobuo Yoshida, Hiroki Uematsu and Carlos Sobrado of the World Bank have pointed out three other flaws. First, the projection assumes that population growth is even across developing countries, when in fact it is higher in the poorest countries than in more prosperous spots. Second, it assumes uniform growth in consumption, but growth rates in the poorest countries, particularly in sub-Saharan Africa, are slower. Third, it assumes constant levels of inequality, when growth in developing nations often comes with increased inequality.
By making country-specific forecasts for growth, demography and inequality, the researchers calculate that the global poverty rate will be 8.5% in 2030—well short of the dream of ending poverty in the next 15 years. In its new “Global Economic Prospects” report, the World Bank acknowledges the challenge. Its baseline scenario puts the global poverty rate at 5% in 2030.
Better outcomes are, of course, possible. A measure of political and economic stability in the poorest countries would, presumably, work wonders. Moreover, Christoph Lakner, Mario Negre and Espen Beer Prydz, also of the World Bank, note that it has laid out two goals. One is to end poverty. The other is to “share prosperity” by promoting income growth for the poorest 40% in every country in particular. The latter goal supports the former. If developing countries sustain their growth, and the income of the bottom 40% of their populations increases two percentage points faster every year than the overall average, the global poverty rate would fall to 2.7% by 2030.
Such outsized gains for the lower tiers of society would, as they write, be “unprecedented, and most likely unrealistic”. Even so, recognising that this is the best route towards ending poverty is useful. Economic growth is the most powerful weapon in the fight against poverty but, by itself, is insufficient. Governments should also pursue policies that help the poor disproportionately, such as investment in rural infrastructure and health care. The world may not eliminate utter deprivation by 2030, but it can give itself the best chance of so doing.
