Tuesday, March 03, 2015

Are the new UN goals for reduction of poverty realistic?

I quote from a column in The Economist. The United Nations
is deservedly proud of having already met its goal of halving the share of people living in extreme poverty by the end of this year, compared with the level of 1990. In fact, the milestone was reached five years early. In 1990, 36% of the world’s population lived in abject poverty. By 2010 this was down to 18%. In absolute terms, the number of those in such desperate straits has fallen from 1.9 billion to about 1 billion today.
Unfortunately, looking at the goal of eliminating extreme poverty by 2030:
The case that this goal is feasible rests on extrapolations from the economic performance of the past few decades. One approach is to assume that the global poverty rate continues to fall by roughly one percentage point a year, as it has since the 1980s. That would take it below 3% before 2030. If that sounds a little crude, a second method involves simulating the effects of a range of growth rates. The poverty target would be achievable as long as consumption per person in developing countries increases by around 4% a year, roughly the pace it has achieved since 1999. 
Yet recent research from the World Bank itself casts doubt on both of these approaches.* The first projection—that poverty can keep declining by one percentage point a year—is the easiest to dismiss. The chart shows the distribution of spending by people in the developing world in 1990 and in 2011. In 1990 there was a big bulge of people spending just less than $1.25 a day. It took a relatively small boost from growth to lift this group over the threshold. But the people in the bulge are now largely out of extreme poverty; it will take ever-increasing amounts of growth to raise those lower down the scale to the same level. Most of the people still in penury live in countries with chronically weak economies or belong to marginalised groups, suggesting that it would be unrealistic to expect steady advances in their welfare. 
The second projection (based on sustained 4% growth in consumption per person) does take the existing distribution of global poverty into account. But Nobuo Yoshida, Hiroki Uematsu and Carlos Sobrado of the World Bank have pointed out three other flaws. First, the projection assumes that population growth is even across developing countries, when in fact it is higher in the poorest countries than in more prosperous spots. Second, it assumes uniform growth in consumption, but growth rates in the poorest countries, particularly in sub-Saharan Africa, are slower. Third, it assumes constant levels of inequality, when growth in developing nations often comes with increased inequality.
The assumptions appear unlikely to be fulfilled.

Extreme poverty is defined as income of $1,25 per person per day (2005 dollars) or $37.50 per person per 30 day month. Two adults living on $75 per month don't have much of a life, and it is hard to see how they might get by on less. A family of four would presumably have $150 per month, and that seems better until you start thinking of medical expenses, school expenses, and all the rest.

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