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The proportion of people living on less than US$1 a day worldwide dropped by almost half between 1981 and 2001, from 40 to 21 percent of the global population. Given world population growth, this means the number of people living in extreme poverty fell from 1.5 to 1.1 billion.
This progress is evidence that it is possible to reduce the number of people living in extreme poverty by hundreds of millions in just 20 years.
These numbers, drawn from the World Bank's annual World Development Indicators 2004 and based on household surveys around the globe, raise hope that the first of eight Millennium Development Goals (MDGs) set by 189 world leaders in September 2000, namely to reduce the rate of income poverty by half from its 1990 level by 2015, is within our grasp.
The statistics also strongly confirm that, despite what some might suggest, economic growth plays a powerful role in reducing poverty.
In China, for example, average incomes have grown by 8.5 percent a year since 1981, and the number of the poor has dropped by more than 400 million.
Conversely, the number of extremely poor people has almost doubled since 1981 in sub-Saharan Africa, from 164 million to 314 million, an increase from 42 to almost 47 percent of the region's population.
The fundamental reason for this alarming trend is failure to nurture economic growth. During the same period, gross domestic product (GDP) in the region fell by 13 percent.
The emerging global picture is one of wide disparity in the progress achieved in the struggle against poverty. Successes in some countries and regions are cancelled out by reversals in others. Everywhere, the proximate explanation is the same: growth, or the absence of it.
It is true that the same rate of growth can produce more or less change in poverty depending on whether poor people in a country fare as well -- or as badly -- as the rest of the population.
This applies even in the rapidly growing economies of China and India, where inequality of opportunity -- perpetuated by unequal access to health and education -- weakens the poverty-reducing effect of economic growth.
In a sample of 20 developing countries, child mortality rates fell only half as fast for the poorest 20 percent of the population as for the whole population.
China's experience -- and India's, to a lesser but still significant extent -- suggests economic reforms, reliance on private initiative and market mechanisms, and openness to foreign trade and competition can create a climate for triggering and sustaining growth over several years. This growth, in turn, has launched a process of sustained poverty reduction.
Can this formula be exported to other regions?
There is evidence to suggest it can. Many governments in Latin America and Eastern Europe have demonstrated a commitment to reform, including openness to trade and integration. In Africa, the situation is more difficult, with chronic negative growth in many countries, rising poverty over the last 20 years and reduced life expectancy due to HIV/AIDS. To reverse the downward slide observed in many of them, reform, institution-building and sound anti-poverty policies will be essential, as well as two key additional factors: increased market access and increased foreign aid.
To achieve the growth needed to reduce poverty effectively, developing countries need access to foreign markets for their agricultural, manufacturing and service exports. Some 70 percent of the world's poor earn their income from agriculture, but the markets for their products in the rich Organization for Economic Cooperation and Development (OECD) countries are highly distorted.
This occurs, in part, because rich countries spend US$330 billion a year to support their farmers. Reducing high-income country protection in agriculture -- by lowering high import barriers and decoupling direct payments to farmers from past production -- could deliver significant gains to low-income farmers in developing countries.
Outside of agriculture, although average tariffs on manufactures are low in OECD countries, remaining high "tariff peaks" are in sectors that matter most for developing countries, such as apparel and footwear. For example, many south and east Asian countries confront a tariff equivalent to 200 percent or more on their footwear exports to Japan.
Also, even if tariffs are low, some developing countries that enjoy success in exporting to rich countries have faced anti-dumping actions. Developing and transition economies suffer from three-quarters of all anti-dumping investigations in OECD countries, although they only represent one-third of all OECD imports.
Rich countries need to maintain the relatively open access that currently exists for cross-border trade in services, and demonstrate a willingness to expand access to service suppliers from developing countries.
Development aid remains a critical need too, especially in the poorest countries. Much larger investments in education, health and infrastructure are essential to help them reach the MDGs on school enrolment, child mortality, maternal health and HIV/AIDS, and to bring them out of the poverty trap. The current level of official development assistance from 22 OECD countries, at US$58 billion in 2002, remains far below the level needed to make these investments.
We must build on the lessons these poverty numbers teach us. They tell us to spread and adapt to others as much as possible the economic policy reforms east Asia and south Asia are undertaking so successfully. They tell wealthy, middle-income and developing countries to open their markets to develop trade. They also tell us that more aid, effectively managed and targeted at the poorest for their education, health and nutrition, is needed to create the conditions that favor growth.
(China Daily May 11, 2004)
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