Focus on the World's Poorest and Hungry People

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If economic growth alone could rapidly reduce poverty and hunger, many parts of the developing world ought to be much freer from these scourges than they are. To be sure, rapid economic growth in many developing countries, and agricultural growth in particular, has advanced global progress in reducing poverty and hunger. But even growth that reduces poverty has its limits in reaching and including extremely poor and hungry people. Especially in environments of high inequality and poor governance, growth often does little to improve the livelihoods of those at the bottom of the income scale. And while growth is key to cutting poverty initially, its power to reduce poverty and the dangers to human well-being—such as childhood malnutrition—diminishes as poverty reduction progresses.

The world has, of course, made a commitment to cut hunger and poverty in half. In 2000, 189 countries adopted the eight Millennium Development Goals that set targets not only for poverty and hunger, but also for primary education, gender equality, child mortality, maternal health, HIV/AIDS and other diseases, environmental sustainability, and global partnership. Yet at the current rate of poverty decline, even if the first goal of halving poverty and hunger by 2015 is achieved, at least 800 million people will still be left in poverty and 600 million will be left hungry. To move from the relative goals of cutting the proportions of poverty and hunger in half toward completely ending hunger and further reducing poverty quickly requires a new set of actions.

This intransigent poverty calls for two main policy responses. On the one hand, there is a need to seek the kind of growth that will bring benefits to the poorest people. On the other hand, there is a need for additional action that will improve living standards for those people who are not in a position to take advantage of the benefits of growth—the youngest, the oldest, the sick, the disabled, and other vulnerable groups. To reach the poorest people in developing countries, it is time to take more action for social protection and to take it earlier in the development process and on a larger scale.

But is it feasible to reach the poorest in the first place? If so, what is the best mix of policies for growth and social protection in different countries? What kinds of strategies, policies, and interventions have been successful in reaching the poorest people?

The world can take some satisfaction in the fact that poverty in general is declining, both as a share of the population and in absolute terms. Globally, the share of the population living on less than US$1 a day has decreased substantially, from 29 percent in 1990 to 18 percent in 2004. The number of poor living on less than US$1 a day has also fallen, from 1.25 billion to 969 million. The greatest progress has been made in East Asia and the Pacific, where the share of the poor fell from 30 percent in 1990 to 9 percent in 2004. In contrast, the share of the poor in Sub-Saharan Africa has decreased by a little more than 5 percentage points and remains above 40 percent (Ravallion et al. 2007 and (Figure 1)).

Economic growth has certainly played an important role in poverty reduction in some countries since 1990, but its results have been mixed between countries and between population groups within countries. Empirical results from 14 countries show that the effects of a 1 percentage point increase in economic growth have ranged from a 0.73 percentage point decrease in poverty to no change in poverty at all (Klasen and Misselhorn 2006). Although high economic growth in the urban and coastal areas of China has decreased poverty in those areas, the rural and inland areas have been left behind in terms of growth and poverty reduction. Whereas in the first half of the 1990s poverty fell by 16 percent in China, it decreased by 8 percent in the first half of this decade. Growth in India has been associated with a decrease in poverty among the scheduled castes but has failed to decrease poverty among the scheduled tribes (Thorat and Mahamallik 2005) and child malnutrition has hardly declined.

On a positive note, however, growth in Sub-Saharan Africa and South Asia has picked up in recent years compared to the 1990s, increasing from about 2 to 6 percent in Sub-Saharan Africa and from about 5 to 8 percent in South Asia. While comprehensive poverty data are not yet available for the recent years, there are indications that poverty and nutrition data are improving in some countries in Africa, such as Ethiopia.

How are the forces of urbanization and globalization affecting the poorest people? Do these forces offer the promise of improved livelihoods? Although poverty has traditionally been concentrated in rural areas, the urban share of the poor increased from 19 percent in 1993 to 25 percent in 2002. But urban areas are not likely to be the main locus of poverty anytime soon. Seventy-five percent of the poor in developing countries continue to live in rural areas. Rural poverty continues to be more prevalent and deeper than urban poverty and is likely to remain so for the next several decades (Ravallion et al. 2007).

The links between globalization and poverty reduction are mixed. Globalization takes place in three key areas—(1) markets and trade, (2) investment and capital flows, and (3) information and innovation— and each has mixed implications for poverty. Evidence shows, for instance, that liberalized trade increases poverty in nonagricultural and wage-dependent households and reduces poverty in agriculture-dependent households. The impact of foreign investment on the poor is also mixed. In the labor-intensive sector, foreign direct investment decreases poverty, whereas in the capital-and-knowledge-intensive sector, foreign direct investment tends to increase poverty. If foreign direct investment increases economic growth and government revenue, the poor can benefit indirectly, but only if growth is pro-poor and government revenue is channeled to pro-poor public investments and social protection. New information and communication technologies can benefit the poor by reducing transaction costs and opening new markets.

Evidence suggests that the poorest people are getting left further and further behind. A recent IFPRI study of extreme poverty categorizes the poor into three groups: (1) the "proximal" poor—people living on between one dollar and three-quarters of a dollar a day; (2) the "medial" poor—people living on between three-quarters and half a dollar a day; and (3) the "ultra" poor—people living on less than half a dollar a day (Ahmed et al. 2007). Of the 969 million living on less than US$1 a day in 2004, half were proximal poor, one-third were medial poor, and 17 percent were ultra poor. Most of the proximal and medial poor live in South Asia, but three-quarters of all ultra poor live in Sub-Saharan Africa.

The number of the poor in all categories is decreasing, but the number of the ultra poor decreased by less than it would have if everyone had benefited from growth equally. And although the welfare of the ultra poor improved in some individual countries between 1990 and 2004, the share of the world's ultra poor living in Sub-Saharan Africa and Latin America overall actually rose (Figure 2).

There are other ways to examine the characteristics of poverty as well. For instance, does poverty persist because the same group of people continues to stay poor or because as some people move out of poverty, others move into it? Research shows that about 300 to 420 million people are chronically poor, of whom the largest number live in Southeast Asia (CPRC 2005). The share of the chronically poor in all poor is the highest, however, in Sub-Saharan Africa (30-40 percent). But there are also considerable flows in and out of poverty. While some households may never become poor, some households may always be poor and others are sometimes poor. Cross-country studies find that the category of "sometimes poor" (transient poverty) is often larger than the category of "always poor" (chronic poverty) (Baulch and Hoddinott 2000). In the medium and long run, many individuals move between these categories, but most of the ultra poor remain in chronic poverty.

The poorest populations continue to live in geographically adverse or remote areas, often in countries with poor governance and civil conflict. Children who inherited poverty, women, orphans, and the elderly are among the most vulnerable groups. Unexpected adverse events, ill health and disability, and weather and economic shocks are linked to severe deprivation. The poor and the hungry also own fewer assets (including land), have limited access to credit markets, and are often excluded from social networks and political power. The social and economic exclusion of certain groups of people such as ethnic minorities or unregistered urban migrants is also a cause of persistent poverty among these groups.

Hunger also remains high. Although the global hunger index (GHI)—which is a combined measure of insufficient availability of food, shortfalls in the nutritional status of children, and child mortality—improved significantly in South and Southeast Asia from 1990 to 2004, progress was limited in the Middle East and North Africa and in Sub-Saharan Africa (Wiesmann 2007). The number of undernourished people in developing countries even increased from 1992 to 2004. Although the number of undernourished people in East Asia fell by 18 percent, largely reflecting declining poverty in China, the number of undernourished in Sub-Saharan Africa rose by 26 percent. The share of undernourished people in the population also rose over that period in the Middle East and North Africa and in Sub-Saharan Africa (Figure 3).

Moreover, a lack of important micronutrients such as vitamin A, iron, and zinc during childhood increases the risk of chronic disease throughout the child's lifetime and increases the risk of diabetes, cardiovascular disease, and cancer during adulthood. This risk remains high in many developing countries: more than 80 percent of children under the age of five in Burkina Faso suffer from iron deficiency, and more than 70 percent of children under the age of six in Benin suffer from vitamin A deficiency. Although the number of preschool children with iron deficiency fell in all regions of the world between 1990 and 2000, more than 70 percent of preschool children in India and Sub-Saharan Africa are iron deficient (Micronutrient Initiative and UNICEF 2005).

Despite progress in alleviating world poverty and hunger, the poorest and the hungriest are being left behind. It is now crucial to pursue a two-pillared strategy to reduce poverty drastically and eliminate hunger. These pillars—promoting growth that brings benefits to the poorest and enhancing social protection measures—are both more necessary and more feasible than ever before.

Why is there a special need for such policies now? Poor people are facing multiple new risks, including climate change, rising food prices and costs of access to safe water, threats to health, and the loss of traditional social protection based on family and community in the context of rural-urban change. These risks lead to enormous stresses on poor populations and more fluctuations in and out of poverty. At the same time, the poor's perception of relative deprivation—the feeling of being left behind—increases due to knowledge about the lifestyles of the emerging middle class and the rich.

Why should these policies be any easier to implement today than they have been in the past? Many developing countries have achieved impressive levels of wealth and rates of economic growth. Many have improved their capacity to implement policies through decentralization and other reforms. New information technologies and new institutions (like microfinance institutions), and new partners (like the private sector and nongovernmental organizations) are becoming increasingly interested in and involved with developing countries and the development community. The role of the private sector in assisting the poorest of the poor can also expand—by creating forms of catastrophic health, life, or weather insurance programs, for example, which could be partially financed by governments or donors, but contracted out to private firms for implementation. In addition, advancements in science and technology can now offer a great deal in terms of addressing micronutrient malnutrition through crop technology and other fortification interventions.

As never before, policymakers are being confronted by increasingly complex challenges arising simultaneously—globalization, climate change, and changes in energy prices, for example—in addition to persistent poverty and hunger. Although there is increasing information on who and where poor people are, what challenges they face, and how they move in and out of poverty (see Box 1), more research and knowledge would help policymakers identify the most appropriate policies in complex and changing circumstances. The development research communities must also change and build new bridges; in particular, the more growth-focused and the more social-protection-focused branches must come together more than they have done thus far. A great deal of institutional and policy research is needed to determine optimal solutions that build on institutional capital and social capital in various countries.

Many counties that experienced significant economic growth in recent years have found that the opportunities and benefits were unevenly distributed. In addition, many other countries, such as agrarian economies in Sub-Saharan Africa, have not achieved the levels of growth that can pull large proportions of their citizens out of poverty. Now growth must be directed in ways that include the poor in its rewards via the two-pillared approach mentioned above.

First, agricultural growth that benefits the poor more than growth in other sectors should be accelerated. Science and technology and rural infrastructure can play key roles. But poor, small-scale farmers cannot jump start agricultural growth on their own. To help farmers emerge from poverty, governments need to improve infrastructure and education, distribute technologies and inputs, and promote producer and marketing organizations that link small farmers to new market chains. Pro-poor public investment research at IFPRI shows that to achieve higher growth and poverty reduction, governments should invest more in research and development, education, health, and infrastructure.

Second, social protection must be improved and introduced earlier via public action to confront unacceptably high levels of deprivation and risk. Social and cultural values have traditionally placed the primary responsibility of social protection on family and on community ties. While public policies should complement rather than substitute informal social protection arrangements, the magnitude and severity of new types of shocks (such as the financial crisis of the late 1990s; health and economic risks arising from avian influenza, SARS, and HIV/AIDS; global climate change; and armed conflicts resulting in an influx of refugees into neighboring countries) have revealed the limitations of informal interventions and the need for strengthening public and market-based social protection mechanisms.

Social protection policies may include social safety nets such as conditional transfer and public works programs, health insurance, and social security. This call for rapid expansion of such policies in developing countries is based not only on a moral imperative, but also on economic efficiency. Improving the lives and livelihoods of the poorest people is an investment that will allow them to become productive participants in the economic life of their countries (see Box 2).

To be sure, implementing social protection policies presents a complex challenge to government fiscal and administrative capacities. Reaching people living in remote areas, informal sector workers, socially excluded individuals, and those affected by civil conflict is particularly difficult. Since these characteristics often overlap for the poorest of the poor, they are often excluded from the coverage of public protection mechanisms. There is, however, the issue of the 'reach' or capacity of the state to provide services to the poor; where capacity is limited, the ability to deliver resources to the poorest will be constrained. In failed states and countries with internal military conflict, the capacity for social protection policies also fails. It will be really difficult in many places to address conditions of dire poverty. However, making progress in the broader peace and security arenas remains critical for sustained poverty reduction in these contexts.

Only a few developing countries have implemented universal, non-contributory (or quasi-contributory) pension systems for the elderly. Brazil's rural pension system, for example, is heavily subsidized by the government and creates substantial fiscal pressures, but has achieved impressive results in terms of coverage. The scheme covers 90 percent of the elderly in rural areas. A universal pension system for the elderly might halve poverty in Latin America, but its fiscal costs would be substantial.

It is also expensive to extend coverage of health insurance schemes to the poor since they cannot afford to insure themselves at a rate corresponding to the cost of risk involved. In the absence of health insurance, large out-of-pocket health expenditures can push households into poverty, so developing countries also need to adopt public health insurance systems despite the fiscal costs involved.

In terms of public works programs, India and China have set successful examples that many countries can follow. Based on income-generating activities, these programs provide employment, absorb unskilled labor, and provide services to the community. The Employment Guarantee Scheme, initiated in 1973 in the Indian state of Maharashtra, has been quite successful in employing the poor, especially poor women, as well as providing public goods like irrigation infrastructure and rural roads. India's National Rural Employment Guarantee Act (NREGA), which was adopted in February 2006, provided employment amounting to about 1 billion person-days per year in 2006-2007, a year that was primarily a learning phase (Drèze and Oldiges 2007). Once the Act is fully implemented, it is expected that it could easily generate more than double that amount of employment.

Conditional cash transfers are becoming increasingly popular and are linked to the development of human capital. Mexico's Oportunidades (formerly known as PROGRESA—Programa de Educación, Salud, y Alimentación) has provided cash transfers to mothers among extremely poor populations in rural Mexico since 1990. Because the transfers are conditional on children's school attendance and visits to health centers, they have simultaneously improved poor households' nutrition, health, and education (Skoufias 2005). By the end of 1999, the program had provided assistance to one-ninth of all families in Mexico. In 2006, its budget reached about US$3 billion. From the late 1990s onward, conditional cash transfer programs were widely adopted in Latin America and the Caribbean, as well as to some extent in Africa and Central and South Asia. To make these programs as effective as possible, low-income countries may need to overcome political, administrative, and fiscal constraints. And it is essential to examine new ways in which interventions can be integrated or coordinated rather than existing as a series of stand-alone activities as they currently do. For example, the introduction of a new agricultural technology in a shock-prone environment may not be very successful (since households won't adopt it because they can't afford the failure) and social transfers may have limited effects on sustainable poverty reduction. But an integrated approach providing some form of social assistance in the context of introducing new agricultural technologies might overcome both these problems.

Can developing countries learn from the industrial countries' decades of experience with social insurance programs? The first comprehensive coverage social insurance program was established by Chancellor von Bismarck in Germany in the 1880s, and was later followed by similar programs in some other European countries. Today, the GDP per capita in China and Latin America is higher than it was in Germany when it implemented its social security system. Currently, spending on social security in developed countries ranges from 31 percent of GDP in Sweden to 16 percent of GDP in the United States (Dethier 2007). The available—though scarce—data for developing countries shows that they spend much less than that. In Sub-Saharan Africa, governments spend less than 10 percent of GDP on social assistance. Although a universal system of health assistance and a minimum pension for the elderly may be difficult to replicate immediately in developing countries, social protection should probably be phased in much earlier than is currently the case in many countries.

But it is not sufficient to provide safety nets to ensure pro-poor growth. A dual approach that is adjusted to country circumstances is needed, where poor people are supported by development strategies such as investing in agricultural research, providing quality education, enhancing health care facilities, and improving transportation infrastructure. Government interventions should be integrated, coordinated, and supported by good governance practices. They should also be tailored to meet the different needs of poor people in different situations. The chronically poor may need accessible labor markets; the newly poor may need health services and housing; and those who have recently escaped poverty may need assistance with irrigation and education, for example.

Ultimately, expanding social protection and generating pro-poor inclusive growth must not be seen as two separate and exclusive approaches, but as synergistic strategies that work hand in hand. Currently, the social-protection component of this dual strategy is undervalued in many countries and is phased in too late. But people who live healthy and productive lives can contribute to national economic growth and welfare. Research has shown that interventions to improve childhood nutrition pay off in increased lifetime earnings. At the same time, pro-poor growth can directly and indirectly improve the lives and livelihoods of poor people.

As they consider their policy options, policymakers must remember that poverty and hunger represent human misery on an enormous scale. In the end, action aimed at alleviating poverty and hunger among the most destitute is a humanitarian and moral obligation that they must meet.

Joachim von Braun is director general of IFPRI.

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