Home .Development What's the score for the world's poor?
What's the score for the world's poor?
Saturday, 21 February 2009 01:22

Of course, we will never know exactly the number of the world's population living in poverty.  For one thing, there are many concepts of poverty, like absolute poverty, relative poverty, etc.  Poverty lines differ from country to country.  And there are many other factors.

The World Bank does however a great job in this mission impossible of estimating the number of the world's poor.  But it can ruffle a few feathers like it did a few months back when it made an upward revision to its count.

They now estimate that some 1.4 billion people in the developing world (one in four) were living in absolute poverty in 2005 -- defined as living on less than $1.25 a day.  This compares with a poverty count of 1.9 billion (one in two) in 1981.  This sounds like great progress, but according to the Bank's previous estimate, some 985 million people were living in absolute poverty.  Thus, thanks to new and more comprehensive data, the Bank has estimated that the developing world is poorer than it previously thought, but no less successful in the fight against poverty.

This new data confirm that the world will likely achieve the first Millennium Development Goal of halving the 1990 level of poverty by 2015.  But at this rate of progress, about one billion people will still be living below $1.25 a day in 2015.  China already achieved this MDG early this millenium.  However, the developing world outside China will not attain the MDG without a higher rate of poverty reduction than we have seen over the 1981-2005 period.

East Asia is the world champion in the fight against poverty.  In this region, absolute poverty has fallen from nearly 80% of the population in 1981 (when it was the poorest region in the world) to 18% in 2005.  In China, the number of people living in poverty has dropped from 835 million to 207 million over this period.

In the developing world outside China the share of poeple living in poverty has fallen from 40% to 29% over the 1981-2005 period.  But the total number remains the same at about 1.2 billion.  In South Asia the share of people living in poverty has fallen from 60% to 40%.  By contrast, the poverty rate in Sub-Saharan Africa (SSA) remains at 50% in 2005, no lower than in 1981 -- having risen to 59% in 1996, before falling back again.  The number of the world's poor in SSA has almost doubled over the period from 214 million to over 390 million.

What is most interesting in the World Bank's analysis is that they calculate poverty lines at four levels, namely, $1, $1.25, $2.00 and $2.50.  These estimates show that while there has been fantastic progress in lifting people out of poverty at the $1.00 and $1.25 levels, there has been much less progress in getting people across the $2.00 and $2.50 hurdles.

While the number living below $1.25 a day has fallen from 1.9 billion to 1.4 billion from 1981 to 2005, the number living below $2 a day remained at 2.5 billion, and the number living below $2.50 a day has actually increased from 2.7 billion to 3.1 billion.  In Asia, the number living below $2.50 a day has fallen from 1.3 billion to 1.0 billion, while in Africa the corresponding scores jump from 322 million to 613 million. 

Since the world's population has been growing, in percentage terms the results are somewhat better.  While the precentage of the developing world population living on less than $1.25 a day fell from 52% in 1981 to 25% in 2005, at the $2.0 level the fall was from 69% to 47%, and at the $2.50 level we see a fall from 75% to 57%. 

All this means that the number of people living between $1.25 and $2 has doubled from about 600 million to 1.2 billion between 1981 and 2005.  And most of the people who escaped absolute poverty are still poor by the standards of middle income countries and certainly by the standards of what poverty means in rich countries.  This highlights the great vulnerability of this 'near poor' group to shocks in the world economy.

These World Bank estimates are based on data recorded before the recent food and energy crises, and especially before the current financial and economic crisis.  With so many people sitting on the precipice, these crises are bound to wind back some of the impressive progress that we have seen in poverty reduction.


Finance and Development, December 2008, IMF -- www.imf.org

"The developing world is poorer than we thought, but no less successful in the fight against poverty", Shaohua Chen and Martin Ravaillion, World Bank -- www.worldbank.org


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