Where do the poor live?
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Where do the poor live?
Wednesday, 02 March 2011 10:23

Only two decades ago, most poor people lived in poor countries.  Today, some three-quarters of the world’s poor people (those who live on less than $1.25 a day) live in middle income countries (those with GDP per capita above $1000 a year).

 

How did this happen? 

 

What’s happened is that countries like China, India and Indonesia have developed rapidly.  They have graduated from low income to middle income status (there are now only 39 low-income countries in the world).  But these middle-income countries are still home to most of the world’s poor.

 

Let's go back to the beginning.  One of the jobs of the World Bank is to calculate world poverty.  While it has several “poverty lines”, its standard one is $1.25 a day.  If you live on less than $1.25 a day, you are living in poverty.  And 1.3 billion of the world’s population are estimated to be in this category.

 

20 years ago, some 93 per cent of the world’s poor people lived in low income countries.  80 per cent lived in low income stable countries, while 13 per cent lived in low income, fragile conflict-affected states.  Only 6 per cent of the world’s poor lived in middle income, stable countries, whereas 1 per cent lived in middle income, fragile conflict-affected states.

 

The situation has now totally changed, according to the latest data (usually 2007/08).  The reason is that many large emerging countries have graduated into middle income status, thanks to their very rapid growth.  At the same time, they are still home to vast numbers of poor people.  In large part, this is because, although their average income has risen dramatically, there is a very big gap between rich and poor.

 

Here are the figures. 

 

Some 61 per cent of the world’s poor now live in middle income, stable countries like India and Indonesia, while 11 per cent live in middle income, fragile conflict-affected states such as Pakistan and Nigeria.  In other words, a full 72 per cent of the world’s poor people, 960 million (the “New Bottom Billion”), live in middle income countries, in particular: India (456 million poor people); China (208 million); Nigeria (89 million), Indonesia (66 million), Pakistan (35 million) and the Philippines (20 million).  The two emerging giants of India and China account for half of the world’s poor!  Chandy and Gertz have estimated that, even with continued rapid development, in the year 2015 middle income countries will still be home to some 55 per cent of the world’s poor. 

 

Only 16 per cent of the world’s poor live in low income, stable countries like Tanzania and Zambia, while 12 per cent live in low income, fragile conflict-affected states such as like the Democratic Republic of Congo and Burundi.   Only four low income countries make it into the ten countries with the world's highest number of poor people, namely: Bangladesh (76 million); Democratic Republic of Congo (36 million); Tanzania (30 million) and Ethiopia (29 million).

 

One interesting point is that most of Asia’s poor live in stable countries, while two-thirds of Africa’s poor live in fragile states. 

 

In the words of Ravi Kanbur and Andy Sumner (in their Institute of Development Studies paper), we have a “new geography of global poverty”.  This has major implications for development policy, which is essentially all about reducing poverty.  In particular, it has major implications for achieving the Millennium Development Goals for poverty reduction.

 

Quite predictably, a development organization like the Institute of Development Studies does not recommend scaling back aid.  They argue that development policy needs to be about poor people, wherever they live, not just poor countries. 

 

They do however suggest that middle income countries should take much greater responsibility for their own poverty reduction efforts.  They argue that poverty may be increasingly turning from an international to a national distribution problem, potentially making governance and domestic taxation and redistribution policies more important than official development assistance.  They recommend a mechanism for sharing financial responsibility between richer and poorer countries such as a commitment to provide a minimum level of income, healthcare, and education for citizens, with the financial responsibility shared between rich and poor countries on a sliding scale depending on the wealth of the country where groups of poor people are living.    

 

This really is a very difficult and complex issue.  In my view, those who wish to focus on poor people rather than poor countries, choose to ignore the nature of society as a group of people living together, with shared values and rights and responsibilities.  As countries climb the development ladder, these societies should take responsibility for tackling poverty at home. 

 

In this context, to some extent, tolerating poverty and social injustice is a societal and political choice.  The US and Japan, the two richest countries in the OECD (basically the Western aid donors’ club), have growing poverty and income inequality themselves – and their governments are not doing too much about it.  Many OECD countries, like the US and in Europe, also have large groups of migrants (essentially developing country citizens) who live in poverty, but who receive very little domestic assistance.

 

It is a similar situation in developing countries where societal elites (often corrupt) often don’t care much at all about poverty in their own country. 

 

This raises many questions.  Why should Western tax payers’ money be given to poor Chinese people when the Chinese government has invested $3 trillion in foreign reserves?  Why should assistance be given to India, when it is one of the world’s fastest growing economies?  Why help the Philippines when the country’s elite has invested much of its savings in the US, rather than their own country?  Above all, why should assistance be given to China and India when they are now emerging aid donors themselves?  The list of questions could go on.

 

There is an old saying that foreign aid is when you take money from the poor people in a rich country and give it to rich people in a poor country.  Western countries should really examine very closely to what extent official development assistance to middle income countries is a sound political, economic and social investment for themselves.  The most powerful argument for giving official development assistance to poor people in middle income countries is to prevent the propagation of global economic “bads” like infectious diseases, cross-border crime, etc.   

 

Official development assistance can also provide political and policy leverage, and thus can be an investment. 

 

But where a donor government, or private foundation or charity, genuinely wishes to provide development assistance to poor people with the goal of poverty reduction, this finance should be given directly to local communities, with which projects should be jointly designed.  Local governments which make little effort to help their own poor people should be deliberately bypassed.

 

 

 

References:

Poor Countries or Poor People? Development Assistance and the New Geography of Global Poverty, by Kanbur, R. and Sumner, A.

Institute of Development Studies

http://www.ids.ac.uk/index.cfm?objectid=38BC8645-EF50-2765-67E11936F9DDE35C  

 

IDS In Focus Policy Briefing 16 - The New Bottom Billion and the MDGs – A Plan of Action

Institute of Development Studies 

http://www.ids.ac.uk/go/bookshop/ids-series-titles/ids-in-focus-policy-briefings/ids-in-focus-policy-briefing-16  

 

Global poverty and the new bottom billion: Three-quarters of the World’s poor live in middle-income countries, Sumner, A.

Institute of Development Studies

http://www.ids.ac.uk  

 

Poverty in Numbers: The Changing State of Global Poverty from 2005 to 2015

Laurence Chandy and Geoffrey Gertz, The Brookings Institution

http://www.brookings.edu/papers/2011/01_global_poverty_chandy.aspx   

 


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