The End of Poverty

Jun 07, 2013

Or perhaps we should call it the end of extreme poverty. Because, by 2030, we may achieve a rate of poverty, i.e., percentage of population earning less than $1.25 a day, below 5%, compared to the rate of 43% in 1990. Its mind boggling, isn’t it? The end of poverty. Even though we are talking about extreme poverty that refers to less than just Rs 71 a day – its eradication will still be an astonishing achievement – for the first time in history – almost nobody dies because they can’t afford food. We can keep highlighting cases and stories of horrific poverty, but the improvement, the progress is miraculous.

It began in 2000, when, at a global conference, it was proposed that poverty should be halved by 2015, using 1990 as a base point. By 2010, poverty had fallen from 43% in 1990 to 21% – unbelievably. The number of people earning less than $1.25 fell from 1.9 billion to 1.2 billion – in just 20 years. So, Mr Jim Yong Kim, President of the World Bank, in a meeting of top financial institutions this year announced 2030 as a target for ending poverty, and economists and experts have predicted a fall of 1 billion (people earning less than $1.25 a day) in the next 20 years – reducing poverty to just 3%. But its not all sunshine and daisies – it is going to be much harder to reduce the second half than it was the first. The scope of possibilities is wide – while in a perfect outcome poverty may fall to around 1%, a worst case could reduce it only to 15% – a great disappointment.

Also inequality is a massive problem, although it has also decreased along with poverty, it is still at large. 1% of the world’s population own 39% of its wealth (as per BCG’s Global Wealth Report 2013). 1%. It’s scary. And for the second poverty decrease, it is extremely important for inequality to decrease, because economic growth, the driver of the first poverty fall, will not be enough this time. Also, China was a massive contributor last time – between 1980 and 2010, it has lifted a whopping 680 million Chinese people out of poverty. So this time, most of the work will have to be done in India and Africa. Together, these 3 constitute half the world’s population, and are the concentrations of the poverty. While the situation looks pretty good in India, with most of the population just behind the extreme poverty line, however, Africa looks much more worrying, since a large portion is still quite behind the poverty line, and the progress in the last 20 years has been little compared to the rest of the world.

The problem is that growth is little and aid will not help in countries like Somalia and Congo. On the positive side, experts believe that progress in Africa will be much larger in the next 20 years and that the target will be reached. One brilliant thing is that the social problem of poverty has transformed, largely due to technology – the poor are no longer different from others. Identification schemes, like the Aadhar Card in India, are allowing us to know our poor by name – unheard of before – and this makes social programmes and aid to be more effective and targeted. Schemes like Mexico’s Oportunidades and Brazil’s Bolsa Família have nearly eradicated poverty in those countries. Though the 3% (or 200m people) left after 2030 will be hard to reach and bring over the line, the cost will be very low, and soon enough we may achieve 0%. But, as The Economist puts it, something fundamental has changed. Before, poverty was a reflection of scarcity. Now, it is a problem of identification, targeting and distribution. And that can be solved.

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