Cutting poverty

Spotlight on Development

Goal: Reduce the proportion of people living in extreme poverty by half between 1990 and 2015

Despite the economic boom in the western world, notably the United States, global poverty remains a serious problem. Across the globe 1 person in 5 lives on less than $1 a day – and 1 in 7 suffers from chronic hunger.

True, the worldwide number and proportion of people living in extreme poverty or on less than $1 per day declined slightly through the mid-1990s. But most of that decline was in east Asia, notably China. Overall progress slowed temporarily in some Asian countries in the late 1990s, and ground to a halt or reversed in others. In the rest of the world, while the proportion of people in poverty declined, population growth meant that the number of poor people increased. And in the countries of the former Soviet Union, undergoing economic and social transition, the proportion of poor more than trebled.

The numbers of poor are greatest in South Asia, but the proportions are highest in sub-Saharan Africa. Most of the poor live in rural areas, but urban poverty is growing faster. Women are more likely than men to lack rights to land and other assets. They also have difficulty getting access to credit. And they lack adequate employment and economic security in old age.

In many developing countries, the poor struggle at the margin of the formal economy. They lack political influence, education, healthcare, shelter, personal safety, regular income and food. An important symptom of poverty is malnutrition. People who are ill-fed and under-nourished are less productive and spend a greater proportion of their meagre budgets on medication and healthcare, thus reinforcing the effects of poverty and making it harder to escape it.

Malnutrition 

Today there are 150 million underweight children in the developing world. The proportion is falling everywhere except Africa. Being underweight, even mildly, increases the risk of death and inhibits mental and physical development. The problem extends itself from one generation to the next, simply because malnourished women are more likely to have underweight babies. Malnutrition and income poverty can be reduced, by providing all citizens with income-earning opportunities, access to basic resources, security and political empowerment. Providing economic opportunity is a precondition for achieving growth that is both sustainable and equitable. Governments should introduce reforms that spur growth: a sound pro-poor macroeconomic framework; policies that promote low inflation and fiscal discipline.

Opportunity and access 

Governments should also promote integration into the global economy to stimulate trade and investment and spur private sector activity. However they may need some assistance to determine the pace and order of integration so that the benefits can spread as widely as possible. Reforms that improve the access of poor people to markets should also be pursued. Regulations that pose a heavy burden on small firms could be changed, such as the recent simplification of the tax system for small firms in Bolivia. Access to credit should be improved, following the example set by Grameen Bank and other micro-finance institutions in Bangladesh and elsewhere. Investments in basic assets have also to be carried out – in schooling and skill development, food security, preventive healthcare, rural infrastructure and credit systems. Of course, governments have not only to ensure that these investments reach the poor, but that the poor have the capacity to take advantage of them.

The policy can work. Take China for instance: by building upon its prior investment in people, by empowering them through training and education, not only was China able to reinforce its rapid growth, but also to reduce the gap between the average income of its people and that of the rest of the world to half of what it was 40 years ago. Vietnam is another country to have reduced the share of its poverty rate from 58% to 37% between 1993 and 1998, thanks primarily to land reform that created opportunities for people to improve agricultural yields and incomes.

Empowerment 

Empowerment gives people dignity, a sense of inclusion and the moral strength to help themselves economically. Providing a voice in decision-making means pursuing the involvement of poor people and society at large in policy and programme design and implementation. Indeed, responsive and accountable institutions of governance have often been found to be the missing link between anti-poverty efforts and poverty reduction.

Security 

Poverty reduction clearly cannot happen without peace. The trouble is all too many countries are suffering from (often local) conflicts, which are reversing gains in social development in many countries, notably in sub-Saharan Africa. Moreover, poor people are more exposed to such risks than richer ones.

Conflict is only one dimension of the security issue, since the poor also tend to be exposed to natural disasters, like flooding. They face economic risks too, like crop collapse and sudden falls in commodity prices. Reducing poverty demands providing poor people with greater security, which requires mechanisms to help manage risks (even before a crisis strikes) and mitigate the impact of local and national crises. These include cushioning the impact of sudden price shocks on the most vulnerable and mechanisms to keep children in school; public works and “food for work” programmes that provide work at slack times; and sustainable, well-designed pension, unemployment and social assistance programmes.

Thailand, which is redirecting its development strategy to reduce inequality, has provided safety nets of this kind in the aftermath of its crisis; similar programmes were set up in Indonesia and Korea. In Brazil, the Bolsa Escola programme helps parents keep children in school by providing assistance to families whose children attend class regularly.

While poverty reduction begins at home, the rich countries also have their role to play. As aid donors, the rich countries should focus more strongly on questions of governance, and should be more generous in funding cohesive programmes drawn up by governments to address all aspects of human poverty and deprivation and in measuring progress. The rich countries can also continue easing the debt burden on the poorer countries.

Globalisation of markets, the volatility of commodity prices, the availability of knowledge, and flows of private and official capital have a powerful impact on poor countries and their ability to reduce poverty. As the experience of the 1990s has shown, financial crises can wipe out a decade of progress. Rich countries can do more to open up their markets to trade with developing countries, so that heavily indebted countries in particular can generate more export earnings. They should also support the provision of global public goods, such as vaccines against malaria and AIDS, and research into agricultural advances, particularly in those areas that enjoy wide public support.

Local and global action in these areas will help address not just income poverty, but other dimensions of deprivation as well, such as malnutrition and exclusion, as there are powerful linkages between them. However, there is no simple relationship between rising income levels and improved nutrition levels or life

expectancy, access to formal education, and so on. Improvements in the quality of life depend not only on the resources available, but also on public priorities. Investments in primary education and in rural infrastructure have helped countries like Costa Rica, Cuba, Sri Lanka and Vietnam to attain higher standards of health, larger reductions in mortality rates and higher literacy rates than other countries with similar or greater economic resources. These improvements have helped to alleviate many of the worst manifestations of poverty, even without increases in income levels. Conversely, improvements in social standards, combined with other policies, often form the basis of an increase in incomes.

Poverty reduction is an attainable objective, but it should be borne in mind that meeting the goal of halving income poverty by 2015 is only part of the battle. As the world’s population is projected to increase to 7.1 billion by 2015, the number of poor stands to rise. So even if the goal of halving the proportion is reached, almost 900 million people will still be left living on less than $1 per day. Nonetheless, the price of doing nothing would be very great indeed.

By acting now we stand a chance of being able to sustain poverty reduction efforts over the long run.

References 

• UNDP, 1997 and 1999 Human Development Reports, New York, Oxford University Press.

• UNDP, Overcoming Human Poverty: UNDP Poverty Report 2000, United Nations Publications, New York, 2000.

• Ferreira, Francisco, Giovanna Prennushi, and Martin Ravallion, “Protecting the Poor from Macroeconomic Shocks”, World Bank, Policy Research Paper No. 2160, 1999.

• Narayan, Deepa with Raj Patel, Kai Schafft, Anne Rademacher and Sarah Koch-Schulte, Voices of the Poor: Can Anyone Hear Us?, New York, Published for the World Bank, Oxford University Press, 2000.

©OECD Observer No 223, October 2000




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