The Persistence of Poverty

The persistence of global poverty is both disturbing and humbling. Policymakers have long recognized the moral and practical need to address the substantial number of people who lack basic amenities such as adequate nutrition, housing, education, or opportunity. But decades of piecemeal efforts have brought only limited success.
(See Box 1.1.)

Ending world poverty first become a stated goal of politicians from industrialized countries in the 1940s, when U.S. President Franklin Roosevelt stated his desire to extend “freedom from want” not only to the people of the United States, but to people in every nation (Roosevelt 1941). The United Nations Charter, crafted in the same era, explicitly acknowledged the need to promote “social progress and better standards of life” across the globe (UN 1945). Almost 60 years later, at the United Nations Millennium Summit in 2000, more than 100 heads of state committed to reach the eight Millennium Development Goals (UN General Assembly 2001:55).

These commitments confirm the simple fact that poverty remains an obstacle to the development aspirations of most nations. It goes without saying that poverty levies heavy personal costs on the poor themselves. It robs families of security, opportunity, and health. In so doing, it also robs nations of the potential contributions these families could make to economic growth, social well-being, and political stability. Poverty thus squanders a nation’s human capital. It acts as a drag on economic development, requiring substantial state expenditures to address (UNDP 1996:5). Poverty also undermines national security by promoting disaffection and magnifying class and political divisions within society, increasing migration, and potentially contributing to international terrorism (Sachs 2003:27). When combined with other driving forces, it also can exacerbate local and global environmental problems, contributing to unsustainable land and resource use (ASB 2003:2; Duraiappah 1998:2177). Given this list of ills, it is clearly in the self-interest of every nation to confront poverty.

And, indeed, nations have made some progress in combating poverty. The percentage of people suffering severe poverty—those who live on incomes of roughly $1 per day (1993 prices)—has fallen from 40 percent of the world’s population in 1981 to 21 percent in 2001. This means that the number of impoverished people has dropped by an estimated 400 million— from roughly 1.5 to 1.1 billion—over 20 years, in spite of a 1.6 billion rise in world population during that period, most of which took place in poor nations (Chen and Ravallion 2004:31).
(See Box 1.1.)

This positive development is, however, largely the result of rising incomes in China and India. The populations in these nations are so large that improvements in their poverty rates can easily influence world poverty totals. For example, China’s robust economic growth, coupled with de-collectivization of agriculture, stronger property rights, and other policy changes, resulted in a substantial drop in the number of people in profound poverty, particularly in the early 1980s and mid-1990s. In fact, China’s accomplishments alone accounted for much of the global progress against poverty in the last 20 years (Dollar 2004:31; Chen and Ravallion 2004:18).

There are other success stories as well. The poverty rate in Vietnam dropped sharply over five years—from 58 percent in 1992 to 37 percent in 1998—on the strength of its economic growth and pro-poor policies (Glewwe et al. 2000:39; Kakwani 2004:6). In just eleven years—from 1987 to 1998—Chile succeeded in cutting its poverty rate in half (World Bank 2001a:5). The rate of primary-school completion in the developing world rose from 73 percent to 81 percent during the 1990s (Bruns et al. 2003:3). Over the past 40 years, life expectancy in developing countries has increased by 20 years— about as much as was achieved in all of human history prior to the middle of the twentieth century, although this is being sharply eroded by the AIDS epidemic today (Goldin et al 2002:iii; WHO 2004:5).

These successes notwithstanding, poverty is very much present in the world today. In fact, in many countries poverty continues to worsen. Between 1981 and 2001, the number of people living on less than $1 per day in Sub-Saharan Africa doubled from 164 million to 313 million people. In Latin America and the Caribbean it climbed from 36 million to 50 million (Chen and Ravallion 2004:31). The percentage of people living on less than $2 per day in Eastern Europe and Central Asia rose from 2 percent in 1981 to 20 percent in 2001, largely as a result of the collapse of communism in those regions (Chen and Ravallion 2004:19). The scourge of AIDS adds to the problem, particularly in Africa, where the disease is wiping out many of the gains against poverty made over the last few decades (Wines and LaFraniere 2004:1; WHO 2004). Even in China, the incidence of poverty increased during the late 1990s as the nation’s torrid pace of economic growth slowed for a few years (Kakwani 2004:6).

To be sure, progress against poverty has been held back in many poor nations by a lack of economic growth. Experience shows that such growth is an important component of largescale poverty alleviation. Over the last two decades, however, economic growth has often not kept pace with population growth in the poorest countries. From 1981 to 2001, per capita GDP dropped in 43 percent of developing nations (Hufbauer 2003:31, 33, 35). This lack of economic growth is particularly acute in rural areas, compounded by the political weakness of these areas and consequent underinvestment in rural development. For example, from 1999-2002, the World Bank directed just 25 percent of its total lending toward rural areas, in spite of the predominance of poverty there (World Bank 2003:10-11).