The number of people living in extreme poverty continues to decline, notes a report released yesterday by the World Bank.
In 2013, the year of the latest comprehensive data on global poverty, an estimated 767 million people were living below the international poverty line of $1.90 per person per day. This is a decrease of about 100 million compared with 2012. The decline is primarily attributed to the reductions in the number of the extreme poor in South Asia (37 million fewer poor) and East Asia and the Pacific (71 million fewer poor). Those areas show a change in the extreme poverty headcount ratio of 2.4 and 3.6 points, respectively
The one region where poverty remains doggedly persistent is Sub-Saharan Africa. This area has the world’s largest headcount ratio (41.0 percent) and is home to the largest number of the poor (389 million)—more than all other regions of the globe combined. The report points out that this is a “notable shift with respect to 1990, when half of the poor were living in East Asia and Pacific, which, today, is home to only 9.3 percent of the global poor.”
The key difference between East Asia and the Pacific and Sub-Saharan Africa? Economic growth. Unfortunately, while noting this fact, the researchers who wrote the World Bank’s report claim the real problem is inequality. While inequality may be symptomatic of extreme poverty, it is not the primary cause—as the World Bank’s own report reveals.
For example, the report tut-tuts the increase in income of the top 1 percent (which is a key driver of income inequality):
In many economies in which information on the top 1 percent of the income distribution is available, such as Argentina; India; the Republic of Korea; South Africa; Taiwan, China; and the United States, the share of the top 1 percent in total income has been increasing. In South Africa, the top income share roughly doubled over 20 years to levels comparable with those observed in the United States.
But notice that the areas where income of the top 1 percent has increased are also the areas where extreme poverty has either been eliminated or reduced. The report also admits that policies that reduce inequality tend not to affect other areas and do not even have long-term effects on inequality:
Overall, these country cases also highlight that success in reducing inequality and boosting shared prosperity in a given period does not necessarily translate into similar success on other economic, social, or political fronts, nor into sustainable reductions in inequality over time.
This perverse obsession with income inequality has to stop. If we truly want to help the global poor we need to stop worrying about whether the rich (or middle class) are getting richer and focus more on how to raise the poor out of poverty. Historically, the only way that has ever been accomplished is by increasing economic growth. It’s the reason why about 1.1 billion fewer people are in poverty today—and the reason why the next billion will be lifted out of poverty tomorrow.
