Pathways from Poverty

Background

Reducing poverty is now widely acknowledged as the main goal of international development. For instance, the Millennium Declaration of the United Nations, signed by 189 countries, commits the global community to reduce by half the proportion of the world’s poor and hungry by 2015.

Although renewed emphasis on poverty reduction springs from many sources, poverty trends during the 1990s are a particular concern. While the proportion of the people in developing countries living in poverty slightly declined, the reduction has been uneven across regions. The Middle East, North Africa and Latin America experienced only modest improvement. East Asia saw a dramatic reduction in both the number and proportion of people living in poverty, but this progress was driven largely by very rapid growth of per capita GDP in China. In South Asia, the proportion of poor people fell-but the number actually rose. In sub-Saharan Africa, both the incidence of poverty and the number of poor rose dramatically through the decade.

Currently, an estimated 1.2 billion poor people subsist in poverty, with 70 per cent of the world’s poor living in South Asia or sub-Saharan Africa.

Given such slow progress in the recent past, can we meet the ambitious Millennium goal of halving poverty? Optimists say Yes: Globalization, governance and good policy together create growth, and growth is good for the poor. Many studies find that a one percent increase in GDP per capita is associated with a two percent reduction in headcount poverty. As to globalization: Increased movement of capital and labor across national boundaries and greater integration of world markets for goods and services, together with new technologies creates opportunities for the world’s poor to work more productively, to sell goods of higher value for higher prices and to purchase goods at lower prices. A “good policy” environment-characterized by openness to trade, balanced budgets and low inflation as well as good governance-helps as well.

Pessimists” read the trends differently and argue that globalization, which creates growth, is not good for the poor. They contend that globalization policies have led to increases in poverty, hunger, and inequality within and between nations. Moreover, countries are quite different in the degree to which poverty responds to growth. Other issues exacerbated by globalization include the HIV/AIDS pandemic and environmental stresses.