Exco Antarabangsa MYCorps Alumni
19 Disember 2017
In signing Agenda 2030 (SDGs) in 2015, governments around the world committed to “end poverty in all its forms everywhere”. The aspiration is to create noble human societies in which “no one is left behind”. Can we achieve it?
There are reasons to be optimistic in “eradicating extreme poverty by 2030”. The progress within the last two decades has been tremendous. The world attained the first Millennium Development Goal target – to cut the 1990 poverty rate in half by 2015 – five years ahead of schedule, in 2010. In 2013, the World Bank estimated that 10.7% of the world’s population live on less than the newly revised global extreme poverty line of $1.90 a day, compared to 12.4% in 2012 (Figure 1). In 1990, it was 35%, a remarkable decline by 24.3 percentage points. In absolute terms, nearly 1.1 billion people have moved out of extreme poverty since 1990s.1.85 billion people lived on less than $1.90 a day in 1990. In 2013, that figure fell to 767 million people, an outstanding achievement although it is still a huge number. On current trends with the most remarkable historical decline in poverty rates from 60% in 1990 to 3.5% in 2013, the fastest-growing East Asian region could witness the end of poverty within a generation.
However, while poverty rates have declined in all regions, progress has been uneven. The success story of global extreme poverty reduction between 2012 and 2013 for instance, was mainly driven by East Asia and Pacific (decline by 71 million) – notably China and Indonesia – and South Asia (decline by 37 million) – notably India. Sub-Saharan Africa (SSA) constitutes half of the global extreme poor population with a decline of only 4 million in the same period. In 2013, 389 million people in Sub-Saharan Africa living on less than $1.90 a day, more than all other regions combined (World Bank, 2016). From stylized historical perspectives, SSA as a continent was ahead of Asia in 1950s. SSA later recorded strong growth from 1960 to 1973 only to see growth collapse with stagnation thereafter. Ghana’s and Sierra Leone’s per capita income for instance, declined annually at 0.9% and 1.4% respectively (Collier, 2007). In late 1990s, 32 countries were poorer than before and SSA remained poorest region in the world.
Indeed in growth perspectives, one cannot deny that national prosperity strongly predicts prevalence of extreme poverty at the individual level. In 2014, there is no country with a GDP per capita higher than $15,000 in which more than 5% of the population lives in extreme poverty. And in most countries with GDP per capita below $4,000, between one quarter and three quarters of the population lives in extreme poverty. (Roser and Ortiz-Ospina, 2017) As countries like India, Brazil, Indonesia, and China got richer on “good growth fundamentals” in education, innovation, infrastructure etc. in the past few decades (that are necessary for high savings rate which lead to productivity gains and rising national incomes), the share of their population living in extreme poverty has fallen. (Figure 2) Moreover, in long historical perspectives, it is clear that countries have to be extraordinarily rich to have the possibility to end extreme poverty for the majority of their population. (Roser & Ortiz-Ospina, 2017) However, the disturbing fact is that African countries; Mozambique, Nigeria and Zambia are still on the upper LHS quadrant of Figure 2 – high share of extreme poverty and extremely low GDP per capita (1990s to 2000s). And in 2013, about 41% of population in SSA lived in extreme poverty, 4 times higher than world population (11%). (Figure 3) However, SSA did make progress. In 1990, the figure was 54% but because Africa’s population grows so quickly – by about 2.5% a year, compared with 1% for Asia – and because the poverty rate declines only slowly, the number of poor Africans is higher than it was in 1990s. SSA now drives the global poverty rate (The Economist, 2017). To some extent, Malthusian Population Trap hypothesis (1788) is right; high population growth leads to diminishing returns to “fixed resources” such as food per capita production from land – and in SSA, the effect of technological progress and innovation to income seems negligible and high fertility is highly associated with poverty. But, contrary to Malthusian belief on population “checks”, better policy prescriptions (women empowerment and education-induced family planning) are the way forward for SSA or else “zero extreme poverty by 2030” seems impossible.
And moving the African narrative forward, Paul Collier’s thesis on the “Bottom Billion” (2007) suggests that it is even impossible for SSA to be poverty-free sooner. He claimed that most of SSA is caught in one more of the following “traps”; i) Landlocked with bad neighbors. 38% of the bottom billion live in landlocked countries and 30% of SSA’s population lives in landlocked countries. Poverty-stricken Rwanda (63% Rwandans live under the old World Bank’s $1.25 extreme poverty line in 2013) for example, shares borders with Kenya, Sudan, Somalia, Rwanda, The Congo and Tanzania, making up a “poverty stricken region”. ii) Natural resources. Africa is endowed massively with oil, diamond (50% of world supply) and gold (21% of world supply). Natural resources curse implies that their long run terms of trade will deteriorate which negatively affects balance of payment. iii) Bad-governance. 75% of the bottom billion live in countries that are either falling, or were failed states such as Somalia, Haiti, Sudan and Zimbabwe. iv) Conflict. 73% of the poorest billion are involved or recovering from civil war. Civil war creates a vicious circle – war causes poverty, and low income contributes to tension. After all, “African growth disaster” after mid-1970s is a geo-political phenomenon with domestic social conflicts, as Rodrik (1999) claimed. Indeed, SSA had to confront external shocks and have divided, unequal and ethnically fragmented societies, made worst by poor institutions of conflict-management with violations of democratic rights, rule of law and inadequate quality of governmental institutions. The OECD counts 56 places in the world as “fragile”- mostly countries, but including the West Bank and Gaza Strip. Fully 36 are in Africa. (The Economist, 2017) So in reality, eradicating extreme poverty goes beyond economic domains of strategizing anti-poverty programs in “the provision of social protection benefit to the poor, unemployed youth and most vulnerable groups in low-income countries and also adequate support to people harmed by conflict and natural hazards” (UN, 2017) Those programs are extremely important but themselves insufficient. Unless there is political stability and “strong leadership and a capable public administration at all levels of government” in SSA, as Ravallion (2009) proposed as one of the two lessons Africa can learn from China’s success against poverty, SSA is surely destined to extreme poverty even beyond 2030. African leaders must wake up. With Hall & Jones (1999) arguing that “a country’s long-run economic performance is determined primarily by the institutions and government policies that make up the economic environment within which individuals and firms make investments, create and transfer ideas and produce goods and services”, things really need to improve quickly or else “poverty will become ever more African” (The Economist, 2017). Bill Gates’ optimistic prediction that “poor countries are not doomed to stay poor” (2014) is sadly “a myth in making”.
In equity perspectives, poverty changes is “not only a consequence of economic growth but also on the distribution of incomes and how this inequality changes during the growth process”. Indeed, “ending extreme poverty by 2030 is likely to require growth with declining inequality” (Roser & Ortiz-Ospina, 2017). Essentially, inclusive growth that “lifts all boats” enables the economy to reduce absolute poverty over time. One method to measure “inequality in poverty context” is the “Poverty Gap Index”. The extreme poverty gap is the mean shortfall in income or consumption from the poverty line and it tells us the fraction of the poverty line that people are missing, on average, to escape poverty (Indicator of severity of poverty). While the world’s poor population, on average, have coped well with the $1.90 per day poverty line, from 17.79% gap in 1981 to 3.23% in 2013 (China incredibly reduced the gap from 43.91% in 1981 to 0.35% in 2013, well below world average), Madagascar had been the worst off. Its poverty gap increases by a shocking 8.88 percentage points, from 30.35% in 1993 to 39.23% in 2012 (Figure 4). Most worryingly, there is positive correlation between poverty gap and poverty head count across the world. In Figure 5, Madagascar, with its huge depth in poverty gap also has the highest poverty head count rate (77.84% in 2012). The rest of the world (Asia, Europe, America) only ranged 0-5% for poverty gap and 0-20% for poverty headcount ratio.
To put the above paragraph in context, perhaps Bill Gates’ claim that “by 2035, almost no country will be as poor as any of the 35 countries low-income countries ‘today’ (in 2014), inflation-adjusted”, is entirely unreachable. Why? In Figure 5, “low-income countries” in 2014, on average had 18.4% poverty gap and 46.17% poverty headcount rate. Unfortunately, 15 countries (Congo and Madagascar the worst off) currently have either or both indicators alarmingly exceeding the “low-income countries” rate. 15 years is not enough to eradicate extreme poverty in these 15 low-income countries. And what makes us convinced that those “35 low-income countries” would graduate to higher income status by 2035 where “almost all countries will be what we now call lower-middle income or richer” (Bill Gates, 2014)? In reality, about 75% of all countries are still in “low-income trap”, “middle-income trap” and “becoming poor” categories (World Bank, 2009) (Figure 6). For the whole period 1960 to 1999, the poorest did significantly worse than the rich countries, with the poorest two-fifths barely mastering positive growth (Easterly, 2002). They were falling behind, not catching up. In 2017, 5 countries; Angola, Croatia, Georgia, Jordan and Nauru are downgraded in terms of country income status (either “upper-middle” to “lower-middle” or “high-income” to “upper-middle”) (World Bank, 2017).
Technically, the World Bank estimates of extreme poverty relies on income and consumption data, which include the International Poverty Line (currently $1.90 a day) based on national lines in the poorest countries for which such lines are available (Figure 7). This essay focuses on Poverty Line but measurement using Poverty Line raised few concerns (See Figure 8; household unit neglects the individual intra-household inequality and the measurement issues of overall expenditure versus item-by-item consumption, relative poverty and the issue of temporary versus chronic poverty – Food insecurity, economic shocks, climate change-induced natural disasters make societies poverty-vulnerable). Moreover, if poverty is perceived as “traps” such as nutrition-based poverty trap in the case of Pak Solhin’s non-linear relation between work capacity and income which creates vicious and virtuous cycles (Banerjee & Duflo, 2012), it is even more crucial to achieve higher growth because “traps” implies systematic perpetuation of poverty due to the existence of critical threshold under which individuals/countries can easily slip but from which it is hard to escape. Most intuitively, poverty line methodology leaves out many important aspects of welfare. Fundamentally, since development is concerned with the achievement of a better life, the focus of development analysis has to include the evaluation of well-being of a person in terms of functioning as “doings” and “beings” achieved by that person and in the space of capabilities, “the substantive freedoms to live the kind of life they have reason to value”. Therefore, poverty must also be seen as “the deprivation of basic capabilities rather than merely as lowness of incomes” (Sen, 1988; 1998). Within this spirit, OPHI Multidimensional Poverty Index (MPI) (Alkire and Robles, 2016 cited in Roser and Ortiz-Ospina, 2017) assesses deprivation at the individual level and is constructed from ten indicators across three core non-income dimensions: health, education and living standards. Unsurprisingly, the future of extreme poverty eradication in SSA and South Asia seems hopeless (Figure 9). More than half of countries in SSA had 30% or more of its population living in “multidimensional poverty” (deprived in at least one third of the weighted indicators). Chad was at mind-blowing 87.1% in 2015. Moving forward, Ranis et al. (2000) insist that “a focus on Human Development (HD) must be included from the beginning of any reform programme” and “economic growth itself will not be sustained unless preceded or accompanied by improvements in HD.”
The future seems really bleak. What does this lead us to? Is there really any hope to “eradicate global extreme poverty by 2030”?
After all, “eradicating poverty by 2030” is the overarching objective of the sustainable development agenda (UN, 2014) and is a political promise by leaders to world communities. That framework of 17 SDGs and their 169 targets as predecessors of MDGs help overcoming “coordination failure” at an international level, thus, collectively prioritize development problems and solutions. The good news is that in July 2017, a High-level Political Forum on Sustainable Development (HLPF) was held to review “SGD Goal 1: No Poverty”. All 43 countries that presented the Voluntary National Reviews (VNR) seriously addressed SDG 1 on eradicating poverty while many countries viewing poverty from a multidimensional perspective including social inequalities, exclusion of some groups and marginalization. The countries have also identified challenges including the underfunding of social programmes, single-parent households, tackling child poverty and youth unemployment. All countries are also committed to “leave no one behind’, a key principle of the 2030 Sustainability Agenda, in their development strategies or in the reporting of specific goals. For effective follow-up and review of the 2030 Agenda, considerable progress has been made at the global level, including the adoption of the global indicator framework, the Cape Town Global Action Plan for Sustainable Development Data, and the launch of the Global SDG Indicator Database. (UN, 2017) Countries have taken measures to strengthen their statistical systems to establish clear governance structure and higher competency for data and monitoring. Besides, the implementation of the 2030 Agenda recognizes that countries have different national realities, capacities and levels of development, and there is a need to respect national policies and priorities. All countries are also committed to establish and/or strengthen existing multi-faceted institutional frameworks to ensure coherence, coordination, integration and multi-sectoral execution of SDGs at the back of oversight and legislative functions of parliaments at the highest level of government. Countries also reported that they had pursued pro-poor policies and mainstreamed global frameworks such as the Addis Ababa Action Agenda, the Istanbul Programme of Action for LDCs and the Sendai Framework (UN, 2017).
So, can we achieve it? The evidence and current progress suggest that we cannot. But as the above paragraph hints, a united world against extreme poverty provides some optimism towards eradicating extreme poverty by 2030. Yes, we can if we rethink the way we think about poverty!
Banerjee and Duflo (2012) Poor Economics
Collier (2007) The Bottom Billions
Easterly (2002) The Elusive Quest for Growth
Gustav Ranis, Frances Stewart and Alejandro Ramirez (2000) “Economic Growth and Human Development”, World Development, vol. 28, issue 2, pages 197-219
Hall & Jones, 1999. “Why Do Some Countries Produce So Much More Output Per Worker Than Others?,” QJE, vol. 114(1), 83-116.
Max Roser and Esteban Ortiz-Ospina (2017) – ‘Global Extreme Poverty’. Published online at OurWorldInData.org. Retrieved from: https://ourworldindata.org/extreme-poverty/ [Online Resource]
Ravallion, M, 2009. “Are There Lessons for Africa from China’s Success Against Poverty?,” World Development, 37(2), 303-313.
Sen, Amartya (1999). Development as freedom. Oxford University Press
Sen, A.K. (1988) The Concept of Development
The Economist (2017).The world has made great progress in eradicating extreme poverty https://www.economist.com/news/international/21719790-going-will-be-much-harder-now-world-has-made-great-progress
World Bank (2016) Poverty site http://www.worldbank.org/en/topic/poverty/overview