Poverty redefined

  • By Lucy Conger
  • 11 Oct 2008
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By Lucy Conger
Amid all the triumphalism at the UN’s annual summit in September came a dire warning from French Foreign Minister Bernard Kouchner. The global financial crisis, he said, is making many of the U.N.’s goals on cutting poverty unrealistic. 
“To talk about development, or to talk about the millennium goals, in the middle of such a crisis, this is sort of unfair — a difficult-to-accept position,” Kouchner said.
But progress on the Millennium Development goals by 2015 is not only jeopardized by today’s global financial pandemic. Spiralling food and fuel prices and a slowing global economy also threaten to swell the ranks of the poor. 
At the same time, the debate on how to define poverty is itself changing. A recent World Bank study, which uses a new poverty measurement, finds that there are 400 million more poor people than previously estimated in the developing world, raising the total to 1.4 billion.  
The study, based on 2005 estimate of 1.23 million households in 116 countries, raised the poverty line to $1.25 per capita per day from the previous level of $1 a day, and is based on national prices within countries. The new poverty line is an average of the poverty lines of the world’s 15 poorest nations and reflects the fact that the cost of living is higher than previously thought. 
The poverty decline is largely caused by progress in East Asia, especially China, the reports says. But the reality is that in most developing regions the number of poor is rising and in Sub Saharan Africa the depth of poverty  is worse than anywhere else.
How to pull the poor out of poverty is at the heart of the World Bank mission. “There is a strong correlation with rates of economic growth as the proximate cause of poverty reduction,” says Martin Ravallion, co-author of the Bank’s report.
Still, economic growth alone is not enough. Its impact on poverty depending varies depending on levels of income inequality and the country’s priority economic sectors. China – which has achieved the greatest reduction of poverty in human history, changing the fortunes of 475 million between 1990-2005 – was successful partly because income inequality was negligible when economic reforms began in 1980.
“If there is low inequality, the poor have a larger share of the pie and get more as the pie grows,” says Ravallion. 
But getting people out of poverty is only part of the challenge: between 1981 – 2005, the number of people living just above the poverty line has doubled, to 1.2 billion people, who consume between $1.25 and $2 a day, the Bank study says. People in this category are still poor and vulnerable to shocks, and small income changes could push them back into poverty. 
Yet even if against all odds the millennium poverty goal is met, a world with half as many poor people still leaves 1.3 billion people, or about 16% of the global population, living on less than $1.25 a day in 2015. 
  • By Lucy Conger
  • 11 Oct 2008

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