This is a guest post by Laurence Chandy from the Brookings Institution. The Development Policy Centre is hosting a seminar on ‘Poverty in Numbers and Scaling up Aid’ on 28th March. If you would like to attend, more details can be found here.
How many poor people are there in the world today? The official answer to this question is 1.37 billion, based on the most recent estimate of the World Bank, the agency responsible for measuring global poverty and the established authority on this topic. The problem with this answer is that it is for the year 2005. In a period when developing economies are expanding rapidly and many are undergoing transformational change, enough to cause a clear shift in the global economic balance, 2005 feels like an awfully long time ago.
In a recent paper, my colleague Geoffrey Gertz and I attempt to provide a more satisfactory response to this question. By combining the most recent national survey data with the very latest estimates of private consumption growth, we are able to generate poverty figures that apply to the present.
The number we arrive at is a little less than 900 million. This means that between 2005 and 2010, the total number of poor people around the world fell by nearly half a billion. Poverty reduction of this magnitude is unparalleled in history: never before have so many been lifted out of poverty over such a brief period of time. The prime target of the Millennium Development Goals – to halve the rate of global poverty by 2015 from its 1990 level – was likely achieved around three years ago. Somewhat ironically, the UN MDG Summit that took place last September was spent discussing the risks to progress against this goal, when it was the perfect occasion to celebrate the goal’s early accomplishment.
In contrast to previous periods, poverty rates are falling across all regions. The largest reduction by far is occurring in Asia – no surprises there – but our estimates for Africa are also encouraging, with the number of poor people on the continent falling for the first time since official records began.
Given such good news, it is tempting to ask how close we might be to realizing the ultimate goal in global development, emblazoned at the entrance to the World Bank’s headquarters: a world free of poverty. We aren’t so naïve as to attempt a direct answer to this question. Moreover, our research highlights at least one of the obstacles to achieving this goal given the rising share of the world’s poor that are accounted for by fragile states. These are countries where the prospects for development typically remain bleak and where there is little understanding of what can be done to help by outsiders.
Nevertheless, we do offer an answer of sorts. Building on the growing enthusiasm for cash transfer schemes as a tool for development, we believe that the notion of a global social safety net, one that could guarantee each person in the world a minimum income of $1.25 a day, is rapidly becoming feasible. There are two obvious constraints to this proposal: affordability and logistics. The affordability of a global safety net is improving as poverty diminishes and global aid flows (include private giving) rise. Based on poverty gap calculations, we estimate that the cost of a global social safety net in 2010 would have been $66 billion. That’s around half of global ODA flows, or a third of public and private aid together. Meanwhile, the recent introduction of cash transfer schemes in some of the world’s most difficult environments, making use of advances in identification technology such as fingerprint and iris scanning, demonstrates that logistical challenges may be surmountable too.
In 2005, G8 leaders met in Gleneagles and expressed their deepened resolve to see poverty eliminated. Six years later, that goal has moved a little closer to reality.
Laurence Chandy is a Fellow at the Brookings Institution
Dear Laurence,
Thanks for this post. Unfortunately I cannot attend today’s lecture, which I am sure will be great. I support your call for stronger social safety nets.
However, there is a methodological concern with your paper which is not addressed in the text. The paper presupposes that the International Poverty Line of USD 1.25 2005 PPP is a) morally plausible and b) current data collected to populate this poverty measure are reliable, comparable across context and over time, etc. But the Bank’s methods are deeply suspect. First, the method of setting the IPL simply averages the national poverty lines of a ‘representative’ set of poor countries. There is no underlying conception of basic needs or human capabilities that justifies setting the poverty line at that level. It is therefore theortetically possible and in fact empirically quite likely that one can receive USD 1.25 2005 PPP and not be able to satisfy even her most basic food needs. This can be seen most clearly simply by thinking about what one could purchase with USD 1.25 in the United States–certainly not enough to meet basic needs. Even more problematically, the Bank’s method requires calculation of purchasing power parity between currencies. This requires a PPP conversion between currencies, and CPI conversion within a currency to a given base year. Because both the CPI and the PPP calculations take account of all goods consumed in a society, rather than simply those goods that are most relevant to poor people, the Bank’s figures do not represent the true purchasing power of poor people. If the price of big screen televisions goes down and the price of rice goes up, both affect the Bank’s estimation of poverty levels, even though one piece of information is clearly irrelevant to the consumption of poor people. A useful recent volume, Debates on the Measurement of Global Poverty, covers these issues in depth. See also http://www.socialanalysis.org. Your projections of rapid poverty reduction during the period 2005-2010 will thus inherit the flaws of the Bank’s approach.
One reason to be skeptical of your claims of rapid poverty reduction in the period 2005-2010 is the impact of the food crisis. The rapid rise in the price of cereals and other basic foodstuffs during 2007-2008 certainly weakened the purchasing power of poor people and increased hunger. The FAO estimates between 2005 and 2010 there was an increase in the number of undernourished people worldwide, with no significant change in the proportion of undernourished people. Conceptually, it just cannot be the case that poverty is rapidly reducing at historically unprecedented levels and hunger is unchanged, or even getting worse.
Thanks.
Thank you for this post. A world free of poverty seems so idealistic, and yet, as you say, we are getting closer to the day when it is reality. It will be a grand day, and I hope a day I live to see.
Please continue writing about the global social safety net!