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Poverty's success story

By Laurence Chandy and Geoffrey Gertz
Wednesday, January 26, 2011; A23

The World Economic Forum convening this week in Davos, Switzerland, is organized around the theme of "Shared Norms for the New Reality." As in past years, the conference will feature plenty of debate about how to solve global challenges in a multipolar, interdependent world. This "new reality," however, is getting a little old.

Politicians, commentators and pundits have long opined - in Davos and elsewhere - about the arrival of emerging markets and the shift of economic power away from the West. Indeed, this theme is arguably the leading narrative in geopolitics and economics. The rise of the developing world quite rightly shapes our understanding of investment opportunities, the balance of military power, global governance and more.

Yet on one issue our understanding remains impervious to this new reality: the state of global poverty. Our sense of this topic remains firmly rooted in the year 2005 - the last year for which the World Bank has produced data on the number of people living on less than $1.25 a day. Thus we are routinely told that "today," 1.37 billion people around the world are poor, including 456 million in India and 208 million in China, but such figures are six years out of date.

A lot has changed in the past six years. The economies of the developing world have expanded 50 percent in real terms, despite the Great Recession. Moreover, growth has been particularly high in countries with large numbers of poor people. India and China, of course, but also Bangladesh, Tanzania, Ethiopia, Vietnam, Uganda, Mozambique and Uzbekistan - nine countries that were collectively home to nearly two-thirds of the world's poor in 2005 - are all experiencing phenomenal economic advances.

In the new Brookings Institution report "Poverty in Numbers: The Changing State of Global Poverty from 2005 to 2015," we updated the World Bank's official $1.25-a-day figures to reveal how the global poverty landscape has changed with the emergence of developing countries. We estimate that between 2005 and 2010, nearly half a billion people escaped extreme hardship, as the total number of the world's poor fell to 878 million people. Never before in history have so many people been lifted out of poverty in such a short period. The U.N. Millennium Development Goals established the target of halving the rate of global poverty between 1990 and 2015; this was probably achieved by 2008, some seven years ahead of schedule. Moreover, using forecasts of per capita consumption growth, we predict that by 2015, fewer than 600 million people will remain poor. At that point, the 1990 poverty rate will have been halved and then halved again.

The decline in poverty is happening in all the world's regions and most of its countries, though at varying speeds. The emerging markets of Asia are recording the greatest successes; the two regional giants, China and India, are likely to account for three-quarters of the global reduction between 2005 and 2015. Over this period, Asia's share of the world's poor is anticipated to fall from two-thirds to one-third, while Africa's share is expected to rise to nearly 60 percent. Yet Africa, too, is making advances; we estimate that in 2008 its poverty rate dropped below the 50 percent mark for the first time. By 2015, African poverty is projected to fall below 40 percent, a feat China did not achieve until the mid-1990s.

These findings are likely to surprise many, but they shouldn't. We know that growth lies at the heart of poverty reduction. As the growth of developing countries took off in the new millennium, epitomized by the rise of emerging markets, a massive drop in poverty was only to be expected.

With few exceptions, however, those who care about global development have been slow to catch on to this story. We hear far more about the 64 million people held back in poverty because of the Great Recession than we do about the hundreds of millions who escaped impoverishment over the past six years. While there is good reason to focus public attention on the need to support those still stuck below the poverty line, there is also reason to celebrate successes and to ensure that policy debates are grounded in reality.

When talk at Davos inevitably turns from the haves to the have-nots, participants should avoid falling back on their long-held views. It is time to break our collective cognitive dissonance, by which we exalt the remarkable growth of developing countries while simultaneously bemoaning the intractability of global poverty.

Laurence Chandy is a fellow in the Brookings Institution's Global Economy and Development program. Geoffrey Gertz is a research analyst with the program.

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