Home .Development Beating global poverty?
Beating global poverty?
Friday, 06 April 2012 20:38

In 2005, when ageing rock stars Bob Geldof and Bono organized the "Live 8" rock festival, their message (and that of the 3 billion people who watched it), to the G8 leaders meeting in Gleneagles (Scotland) was the following - "make poverty history".

The World Bank's latest poverty estimates for the developing world suggest that we are well on the road to beating extreme poverty.  But a decent and comfortable life is still much further in the distance for many, and rich countries are now experiencing growing poverty themselves.

This impressive performance in beating extreme poverty is in large part thanks to extraordinary reductions in poverty in China and its neighbors.  These past three decades, East Asia has gone from having a much higher rate of poverty than sub-Saharan Africa or South Asia to having a much lower rate today.

The World Bank's global poverty count is based on "poverty lines" of daily consumption of $1.25 and $2.00 in 2005 prices -- these are measures of "absolute poverty".  $1.25 a day is the average of the national poverty lines found in the poorest 10-20 countries.  $2 a day is the median of the national poverty lines of all developing countries.

It is now estimated that both the percentage and number of people living in poverty at the $1.25 a day level has fallen between 2005 and 2008 in all the world's developing regions, namely, East Asia, South Asia, Latin America and the Caribbean, Eastern Europe and Central Asia, Middle East and North Africa, and Sub-Saharan Africa.

In 2008, 22% of the population of the developing world was living below $1.25 a day, about half that in 1990, while 52% lived below $1.25 in 1981.  This means that 1.29 billion people in 2008 lived below $1.25 a day, as compared to 1.94 billion in 1981 (the modest decrease reflects the effect of the world's growing population).  43% lived below $2 a day in 2008 compared with 65% in 1990 and 70% in 1981.

Even though progress has been uneven across regions, based on the $1.25 a day poverty line, the developing world as a whole had already attained by 2010 the first Millennium Development Goal of halving the 1990 incidence of extreme poverty by 2015.

Let's take a look at the results by region:

-- In 1981, East Asia was the region with the highest incidence of poverty in the world, with 77% living below $1.25 a day.  By 2008 this had fallen to 14%.  Based on the $2.00 a day measure, the fall is from 92% to 33%.

-- In China, the reduction in those living below $1.25 a day is even more dramatic, from 84% in 1981 to 13% in 2008.  While China has 662 million fewer people living in poverty by the $1.25 standard, there are still 173 million people living below this poverty line.  Based on the $2.00 a day measure, the fall is from 98% to 30%.

-- In the developing world outside China, the $1.25 poverty rate has fallen from 41% to 25% over 1981-2008, though not enough to bring down the total number of poor, which was around 1.1 billion in both 1981 and 2008.

-- While South Asia has seen poverty fall, based on the $1.25 measure, from 61% to 36% between 1981 and 2008, the reduction in poverty is much less using the $2.00 poverty line, a fall from 87% to 71%.  Obviously, there are many people caught between $1.25 and $2.00 a day poverty lines.

-- Sub-saharan Africa, the other centre for global poverty, has not performed very well.  Based on the $1.25 measure, poverty has only fallen from 52% to 48% over the period, while against the $2.00 poverty line, the decline is very modest, from 72% to 69%.

-- Latin America and the Caribbean has always had a much lower poverty rate, but has also made good progress over the three decade period, with a fall from 12% to 7%, based on the $1.25 poverty line, and 24% to 12% on the $2.00 line.

-- The Middle East and North Africa has also seen its low poverty figures fall even more over the period, from 10% to 3% based on $1.25, and 30% to 14% based on $2.00.

-- Eastern Europe and Central Asia has poverty rates below 5% based on $1.25 and below 10% based on $2.00.

Overall, these trends are very good news.  But we still have a lot of work to really solve the global poverty problem.  For example:

-- at the current rate of progress, there will still be around 1 billion people in the developing world living below $1.25 per day in 2015.

-- most of the 649 million people who have escaped poverty at the $1.25 per day standard are still poor by the standards of middle-income developing countries, and certainly by the standards of what poverty means in rich countries.

-- there has been less long-run progress in getting over the $2 per day hurdle.  The number of people living between $1.25 and $2 has almost doubled from 648 million to 1.18 billion between 1981 and 2008.

-- the marked bunching up just above the $1.25 line points to the fact that a great many people remain vulnerable to the effects of food, energy, financial and other crises, or natural disasters.

While emerging Asia is leading the developing world in terms of poverty reduction, Japan is sharing the unfortunate trend of other rich countries, that of a rising poverty rate.  When we talk about poverty in developed countries, we usually mean "relative poverty", not an "absolute poverty" measure of $1.25 a day.  Relative poverty is usually defined as as those living on less than half the median income of all income earners.

According to statistics released by the Japanese government in 2011, Japan’s poverty rate hit a record high of 16.0 percent in 2009 (or some 20 million people), twice the rate of two decades ago.  An OECD study of 2008 reports that Japan's relative poverty rate was the fourth highest of the 30 OECD member countries, just after Mexico, Turkey and the US.  

The OECD also reports that household incomes have declined in the past 10 years, with lower income groups feeling the pain most in the late 1990s.  The average annual income of the poorest 10% of Japanese people is around US$ 6,000 in purchasing power parities – below the OECD average of $ 7,000. 

Who are the Japanese poor?  The elderly, older workers, single parents and recently unemployed are the main groups of poor people.  With Japan's impressive unemployment rate of 5 per cent, it is difficult to imagine that poverty could be so high.  But most of Japan's poor are in fact "working poor", holding low-wage and temporary jobs, with no security.

What has caused the rise in Japanese poverty?  It is usually blamed on the deregulation of the labor market under Prime Minister Koizumi and competition with low-wage China.  The past two lost decades have resulted in fewer and fewer entry positions which enjoy life-time employment practices in large Japanese companies.  These factors have contributed to the rise of non-regular jobs, which today account for one-third of Japanese employment.

An associated factor has been the lack of social safety nets, which means that there is insufficient government assistance for the nation's poor.  A big difference with the US is that Japan has a weaker tradition of charitable and civil society organizations that might help the poor.

Most foreign visitors to Japan would not notice the nation's poor.  As they wander the streets of Roppongi or Ginza, poverty is not visible. They don't visit Ueno Park or Ikebukero Station where many homeless sleep, or the regional cities or the countryside where many of the poor live.

Poverty is considered shameful for a Japanese person who would thus hide his poverty, rather than beg or ask for help.  Begging basically does not exist.  Shame also has perverse aspects as families can disown their poor members, and wives leave newly unemployed husbands. Japan's high suicide rate (which is most probably higher than the official statistics) is partly a response to poverty.

The phenomenon of poverty in Japan and other developed countries is a harsh reminder that even in the most advanced countries, development is fractured.



Live 8.


World Bank.  PovcalNet: An Online Poverty Analysis Tool.


OECD.  Growing Unequal


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