Poverty, Politics and Aid: is a reframing of global poverty approaching?

Abstract

This paper argues that a significant reframing of global poverty is likely to emerge in the next decade as world poverty becomes less about the transfer of aid and more about domestic distribution and thus domestic politics. This proposition is based on a discussion of the shift of much of global poverty towards middle-income countries. There are questions arising related to how countries are classified and to administrative capacities, as well as to domestic political economy, but it is argued that many of the world’s extreme poor already live in countries where the total cost of ending extreme and even moderate poverty is not prohibitively high as a percentage of gdp. By 2020, even on fairly conservative estimates, most of world poverty may be in countries that do have the domestic financial resources to end at least extreme poverty; this could imply a reframing of global poverty.

Notes

1 This paper was previously published as a working paper. Special thanks to Pui Yan Wong and Henrique Conca Bussacos for research assistance. Many thanks to two anonymous peer reviewers of the working paper and to Xavier Cirera, Jeni Klugman, Ben Leo, David Steven and Amy Pollard for feedback on earlier drafts.S Alkire, J Roche, E Santos & S Seth, Multidimensional Poverty, Oxford: ophi, 2011; L Chandy & G Gertz, Poverty in Numbers: The Changing State of Global Poverty from 2005 to 2015, Policy Brief 2011-01, Washington, DC: Brookings Institution, 2011; A Glassman, D Duran & A Sumner, Global Health and the New Bottom Billion: What do Shifts in Global Poverty and the Global Disease Burden Mean for gavi and the Global Fund?, Working Paper, Washington, DC: Center for Global Development (cgd), 2011; R Kanbur & A Sumner, Poor Countries or Poor People? Development Assistance and the New Geography of Global Poverty, Working Paper 2011-08, Ithaca, NY: Charles H Dyson School of Applied Economics and Management, Cornell University, 2011; A Sumner, Global Poverty and the New Bottom Billion, Working Paper, Brighton: Institute of Development Studies (ids), 2010; and A Sumner, ‘Where do the poor live?’, World Development, 40(5), 2012, pp 865–877.

2 Sumner, Global Poverty and the New Bottom Billion; and Sumner, ‘Where do the poor live?’.

3 World Bank, PovcalNet, 2012, at http://iresearch.worldbank.org/PovcalNet/index.htm, accessed 1 April 2012.

4 S Chen & M Ravallion, An Update to the World Bank’s Estimates of Consumption Poverty in the Developing World, Washington, DC: World Bank, 2012.

5 For review, see AM Fischer, ‘Towards genuine universalism within contemporary development policy’, ids Bulletin, 41, 2010, pp 36–44.

6 For the most recent discussion, see A Deaton, ‘Price indexes, inequality, and the measurement of world poverty’, American Economic Review, 100(1), 2010, pp 5–34; Deaton, ‘Measuring development: different data, different conclusions’, paper presented at the 8th afd–eudn Conference, Paris: eudn, 2011; A Deaton & A Heston, ‘Understanding ppps and ppp-based national accounts’, American Economic Journal, 2(4), 2010, pp 1–35; S Klasen, ‘Levels and trends in absolute poverty in the world: what we know and what we don’t’, paper prepared for the International Association for Research in Income and Wealth, St Gallen, Switzerland, 22–28 August 2010.

7 Deaton, ‘Price indexes, inequality, and the measurement of world poverty’, p 31.

8 Alkire et al, Multidimensional Poverty.

9 Glassman et al, Global Health and the New Bottom Billion.

10 Chandy & Gertz, Poverty in Numbers.

11 World Bank, PovcalNet. The only missing countries with populations of more than 10 million people are: Afghanistan (29 million in 2008), North Korea (23 million in 2008), Burma (49 million in 2008), Uzbekistan (27 million in 2008), Zimbabwe (12 million in 2008), and Cuba (10 million in 2008). Argentina (total population 39 million in 2008) is not included here as it has only urban poverty data in PovcalNet.

12 S Chen & M Ravallion, The Developing World is Poorer than Thought but No Less Successful in the Fight against Poverty, Policy Research Working Paper 4703, Washington, DC: World Bank, 2008; and Chen & Ravallion, An Update to the World Bank’s Estimates of Consumption Poverty in the Developing World, Washington, DC: World Bank, 2012.

13 See Table 1 and Sumner, Where will the World’s Poor Live?, Working Paper 305, Washington, DC: cgd, 2012.

14 $1.25/day is the mean of the national poverty lines of the poorest 15 countries in terms of consumption per capita; $2/day is the median poverty line for all developing countries. Chen & Ravallion, The Developing World is Poorer than Thought; and Chen & Ravallion, An Update to the World Bank’s Estimates of Consumption Poverty in the Developing World.

15 D Dollar & A Kraay, ‘Growth is good for the poor’, Journal of Economic Growth, 7, 2002, pp 195–225; J Gallup, S Radelet & A Warner, Economic Growth and the Income of the Poor, Consulting Assistance on Economic Reform II, Discussion Paper 36, Cambridge, MA: Harvard Institute of International Development, 1999; M Roemer & M Gugerty, Does Economic Growth Reduce Poverty?, Consulting Assistance on Economic Reform II, Discussion Paper 4, Cambridge, MA: Harvard Institute of International Development, 1997.

16 M Bruno, M Ravallion & L Squire, ‘Equity and growth in developing countries: old and new perspectives on the policy issues’, in V Tanzi & K Chu (eds), Income Distribution and High Quality Growth, Cambridge, MA: mit Press, 1998; and M Ravallion, ‘Growth, inequality and poverty: looking behind the averages’, World Development, 29(11), 2001, pp 1803–1815.

17 T Besley & L Cord (eds), Delivering on the Promise of Pro-Poor Growth: Insights and Lessons from Country Experiences, Basingstoke: Palgrave Macmillan, 2007; and M Grimm, S Klasen & A McKay, Determinants of Pro-poor Growth: Analytical Issues and Findings from Country Cases, Basingstoke: Palgrave Macmillan, 2007.

18 K Deininger & L Squire, ‘New ways of looking at old issues: inequality and growth’, Journal of Development Economics, 57(2), 1998, pp 259–287; A Kraay, When is Growth Pro-Poor? Cross-Country Evidence, Working Paper 3225, Washington, DC: World Bank, 2004; Ravallion, ‘Growth, inequality and poverty’; and H Son & N Kakwani, ‘Poverty reduction: do initial conditions matter?’, mimeo, World Bank, 2003.

19 G Fields, Distribution and Development: A New Look at the Developing World, Cambridge, MA: mit Press, 2001; Kraay, When is Growth Pro-Poor?; P Mosley, Severe Poverty and Growth: A Macro-Micro Analysis, Working Paper 51, Manchester: Chronic Poverty Research Centre (cprc), 2004; and P Mosley, J Hudson & A Verschoor, ‘Aid, poverty reduction and the new conditionality’, Economic Journal, 114, 2004, pp 214–243.

20 D Seers, ‘The limitations of the special case’, Bulletin of the Oxford Institute of Economics and Statistics, 25(2), 1963, pp 77–98.

21 Ibid, p 80.

22 Ibid, pp 81–83.

23 oecd, ‘Ensuring Fragile States are not Left Behind: 2011 Factsheet on Resource Flows in Fragile States’, Paris: oecd, 2012b.

24 See Sumner, Where Will the World’s Poor Live?, for population coverage by indicator and group.

25 See the discussion in R Kanbur & D Mukherjee, Poverty, Relative to the Ability to eradicate it: An Index of Poverty Reduction Failure, Working Paper 2007-02, Ithaca, NY: Charles H Dyson School of Applied Economics and Management, Cornell University, 2007.

26 Population-weighted group estimates from data in World Bank, World Development Indicators, Washington, DC: World Bank, 2011.

27 The 17 mics are as follows: Zambia, Nigeria, Lesotho, Timor-Leste, Papua New Guinea, Republic of Congo, Ghana, Angola, Côte d’Ivoire, Lao PDR, Senegal, Swaziland, India, Honduras, Mauritania, Sao Tome and Principe, and Sudan.

28 See Sumner, Where will the World’s Poor Live?, for country level data.

29 S Kuznets, ‘Economic growth and income inequality’, American Economic Review, 45(1), 1955, pp 1–28; and Kuznets, ‘Quantitative aspects of the economic growth of nations: VIII, distribution and income by size, economic development and cultural change’, 11(2), 1963, pp 1–80.

30 Lewis, however, did not assume a rise in inequality to be inevitable.

31 For review, see A Sumner & M Tiwari, After 2015: International Development Policy at a Crossroads, Basingstoke, Palgrave Macmillan, 2009.

32 Deininger and Squire note that the failure to find the Kuznets curve relationship overall does not mean it does not exist for individual countries: in four countries of their 49-country sample the Kuznets hypothesis was supported. Deininger & Squire, ‘New ways of looking at old issues’, p 279.

33 JG Palma, ‘Homogeneous middles vs heterogeneous tails, and the end of the “inverted-U”: it’s all about the share of the rich’, Development and Change, 42(1), 2011, 87–153.

34 See country level data in Sumner, Where will the World’s Poor Live?

35 Palma, ‘Homogeneous middles vs heterogeneous tails’.

36 Ibid.

37 Ibid, p 102.

38 M Ravallion, ‘Do poorer countries have less capacity for redistribution?’, Journal of Globalization and Development, 1(2), 2010, pp 1–8.

39 Soares et al find that conditional cash transfers in Brazil, Mexico and Chile have cost less than 1% of gdp. S Soares, R Osorio Guerreiro, F Veras Soares, M Medeiros & E Zepeda, Conditional Cash Transfers in Brazil, Chile and Mexico: Impacts upon Inequality, Washington, DC: Carnegie Endowment for International Peace, 2011.

40 See a review of recent ‘middle class’ literature in A Sumner, The Buoyant Billions, cgd Working Paper 309, Washington DC: cgd.

41 M Cardenas, H Kharas & C Heneo, Latin America’s Global Middle Class, Washington, DC: Brookings Institution, 2011, p 19.

42 oecd, Latin American Economic Outlook: How Middle Class is Latin America?, Paris: oecd, 2011.

43 In particular, the oecd addresses what role the middle classes in Latin America play in shaping fiscal policy and redistribution, and the impact of fiscal policies on the middle classes. Other factors that determine preferences to redistribution are noted from the literature; references within oecd are: personal experiences of social mobility, national and regional cultural and social values, the extent of impacts of (higher) taxation on leisure consumption, levels of university education, and attitudes to prevailing levels of meritocracy, institutional capacity in tax administration, and the quality of state services. Ibid.

44 imf estimates average sales taxes at end 2010 as 16% in lics, 13% in lmics and 15% in umics. imf, Revenue Mobilization in Developing Countries, Washington, DC: imf, 2011, p 25.

45 S Devarajan, H Ehrhart, T Minh Le & G Raballand, Direct Redistribution, Taxation, and Accountability in Oil-rich Economies: A Proposal, Working Paper, Washington, DC: cgd, 2011, p 15.

46 Ibid. p 13.

47 N Loayza, J Rigolini & G Llorente, Do Middle Classes bring Institutional Reforms?, Working Paper 6015, Washington, DC: World Bank, 2012.

48 See D Brautigam, O-H Fjeldstad & M Moore, Taxation and State Building in Developing Countries, Cambridge: Cambridge University Press, 2008; and M Moore, How Does Taxation affect the Quality of Governance?, Working Paper 280, Brighton: ids, 2008.

49 T Moss & B Leo, ida at 65: Heading Toward Retirement or a Fragile Lease on Life?, Working Paper 246, Washington, DC: cgd, 2011; and J Karver, C Kenny & A Sumner, mdg s 2.0: What Goals, Targets and Timeframe?, Working Paper, Washington, DC: cgd, 2012.

50 imf, World Economic Outlook database, Washington, DC, 2012.

51 FO Aldenhoff, ‘Are economic forecasts of the International Monetary Fund politically biased? A public choice analysis’, Review of International Organizations, 2(3), 2007, pp 239–260.

52 World Bank, PovcalNet.

53 See also Karver et al, mdg s 2.0; and C Kenny & D Williams, ‘What do we know about economic growth: or why don’t we know very much?’, World Development, 29(1), 2001, pp 1–23.