Can We End Poverty by 2030?

Article
  • 2015•09•09

    Richard Bluhm

    The Global Goals

    This article is part of UNU’s “17 Days, 17 Goals” series, featuring research and commentary in support of the United Nations Sustainable Development Summit, 25-27 September 2015 in New York City.

    Goal #1: End poverty in all its forms everywhere

    On 25 September, 15 years after the Millennium Summit, world leaders will reconvene to decide on a new set of global development targets: the Sustainable Development Goals (SDGs).

    The primary objective, or Goal 1, will be to “end poverty in all its forms everywhere” by 2030. The previous Millennium Development Goal of halving the 1990 extreme poverty rate by 2015 was reached five years early, in 2010, so policymakers will likely feel a historical momentum. We believe that while the old goal may have been set too low, the new goal may turn out to be too ambitious.

    To end extreme poverty by 2030, we will need higher economic growth than in the past and more growth that disproportionally benefits the poor (in Sub-Saharan Africa, in particular). Let’s first take a step back to ask: “What do we mean by extreme poverty?”

    According to the World Bank, an extremely poor person lives on less than $1.25 a day (or about $38 per month) in 2005 purchasing power parity (PPP) adjusted international dollars. The last part of that sentence is very important in order to understand how low this threshold actually is. PPP adjusts for real cost-of-living differences across countries. One international dollar buys roughly the same standard of living everywhere, and can be loosely compared to the buying power of a US dollar in the United States.

    Can you imagine living on $38 per month? How about $60 per month (about $2 a day)? Clearly, we are talking about a very basic existence. Both the United Nations and the World Bank (which is in charge of tracking global poverty) have been criticised for drawing the line so low. The response has typically been that this form of extreme poverty needs to be addressed first. Clearly though, proclaiming the “end of poverty” depends on where you draw the line.

    Poverty reduction at the $1.25-per- day line has been rapid over the last two decades, at least in relative terms. Extreme poverty rates in the developing world fell by about one percentage point per year. While about 43% of the people in the developing world were “poor” in 1990, this rate had fallen to around 20% by 2010. Yet there are two important caveats to these numbers.

    First, China and India are responsible for a majority of the global reduction in extreme poverty rates. Second, due to rapid population growth, the number of poor people has fallen much less. There are still about 1 billion extremely poor people in the world today.

    If we ignore progress in China and India, then the rest of the developing world lifted only about 150 million people out of poverty between 1990 and 2010. In fact, there are 120 million more poor people in Sub-Saharan Africa today than in 1990.

    So, is the end of poverty nigh? If we simply extrapolate past trends to 2030, then we end up in what can be called the “zero zone”. Similarly, if per capita consumption in the entire developing world would grow at about 4.5% per year, the new target could be reached.

    But this is unlikely to happen for a number of reasons. Much of world poverty is now concentrated in Sub-Saharan Africa and South Asia. While consumption growth in Sub-Saharan Africa has been faster since 2000 than in the 1980s and 1990s, it still lags behind growth in other developing countries. And though per capita consumption in the developing world rose by about 4.5% per year from 2000 to 2010, it grew by only about 2.4% per year in Sub-Saharan Africa (with poverty increasingly concentrated in fragile states). Maintaining the current pace of poverty reduction requires ever-faster growth in countries that have yet to show that they can grow quickly for a sustained period of time and not lose those gains in the next crisis.

    So what can we expect regarding SDG #1? A recent UNU-MERIT working paper suggests that about 8–9% of the developing world’s population will still be poor in 2030, even under very optimistic growth assumptions.

    Chart 1 shows three simulated growth scenarios. The black line is the central growth scenario, the grey lines are the optimistic and pessimistic growth scenarios, and the dotted lines represent the extent of distributional change. Clearly, the pace of poverty reduction slows down in every scenario.

    Chart 1. Growth and redistribution scenarios

    Chart 1. Growth and redistribution scenarios

    There is more to SDG #1 than can be discussed here. In the context of reducing poverty, the UN and international community want to expand access to social protection, ensure equal access to economic resources, and much more.

    There is nothing wrong with setting very ambitious goals, but we can only hope policymakers realise that achieving these goals requires a large concentration of development efforts on Sub-Saharan Africa – and a good dose of luck. Without strong growth that benefits the poor more than the rest, many people on the African subcontinent will be left behind.

    The upside is that extreme poverty will be much less pronounced in the rest of the developing world. But in 15 years, more than 1 billion people will still be living on less than $2 a day. So while 2030 will not mark the end of poverty on any sensible measure, we have the potential to make great strides until then.

    •••

    Adapted from a slightly longer version of this article that was published on the UNU-MERIT website.

    Creative Commons License

    Can We End Poverty by 2030? by Richard Bluhm is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.