Eradicating poverty – a matter of political will

Progress is too slow and uneven

As much as we would like such a positive narrative to be true, a lucid analysis of the facts shows that the picture is much more mixed, and that self-congratulatory messages are uncalled for. This is what the UN Special Rapporteur on extreme poverty and human rights, Philip Alston, warns in a report published last July entitled: The parlous state of poverty eradication. [2]

As pointed out by Mr Alston, the trouble with most celebratory accounts of poverty eradication is precisely that they rely on the International Poverty Line mentioned above, which can hardly be considered as a minimally adequate standard of living. As of today, the IPL is defined as a daily consumption or income level equivalent to US$1.90. [3] Anyone whose resources are above that level will therefore not be included in the global poor headcount. Obviously, this way of presenting our social reality is highly misleading: someone slightly above $1.90 a day is still unacceptably poor. [4] This is a level of miserable subsistence, largely insufficient for covering one’s basic needs in terms of food, clothing, housing, healthcare, education, energy, transportation and communication.

As a matter of fact, the World Bank is beginning to acknowledge the shortcomings of its IPL, and recently started to produce statistics based on higher poverty lines. Using a threshold of US$5.50 a day, the number of poor people was estimated to be 3.6 billion (67% of the world population) in 1990, and 3.3 billion (44%) in 2017. A very different picture thus emerges: by that metric, almost half of the world population is still considered poor today, and the absolute number of people living in poverty has barely diminished in 27 years (though their proportion has decreased, as the world population has grown). Other measures, not based on a monetary threshold but directly assessing whether basic needs are satisfied, also confirm that poverty is still widely prevalent: the UN Development Programme thus estimates that, in 2020, about 4.2 billion people were experiencing deprivation in relation to at least one of 10 basic needs (nutrition, sufficient years of schooling, access to sanitation…), and that among them 1.3 billion were experiencing deprivation in at least 5 of those 10 areas. [5] Even in high-income countries, national poverty rates are often in double digits, with homelessness and hunger on the rise.

Another problem is that improvements in standards of living have not been evenly distributed geographically. Most of the positive news comes from East Asia (notably China), and to a lesser extent from Latin America; while some other areas are experiencing deeply worrying trends. This is particularly the case of Sub-Saharan Africa, where the number of people living under the miserable $1.90 line has actually increased between 1990 and 2018, from 284 to 433 million (though the corresponding rate has modestly decreased). Using the $5.50-a-day line, the same increasing trend is also visible in South Asia, in the Middle East and North Africa region.

Moreover, it is almost certain that the Covid-19 and climate crises will significantly worsen this already gloomy picture. The World Bank estimates that the pandemic will push between 110 and 150 million back below the $1.90 line, while climate change is likely to have even worse consequences if governments continue to postpone the required actions.

The world is thus still far from poverty eradication. For sure, some progress has been made over the last decades, and the number of people living in absolute deprivation has decreased. But the pace of improvement is unacceptably slow. Some regions are left behind, and the health and climate crises are jeopardizing the meagre results obtained so far. It is time for a radical overhaul of the global poverty eradication strategy. Some proposals, put forward by Mr Alston or by other authors, are outlined below.

Concrete solutions abound

The first requirement is to rethink the relationship between poverty and growth. The core of the current poverty reduction strategy is to promote economic growth through pro-market reforms, with the underlying idea that a “rising tide lifts all boats”, also known as “trickle-down economics”. But this strategy has largely failed at lifting people out of poverty. Over the last decades, the rich have captured the lion’s share of income and wealth growth, while the poorest were left behind. Blind pro-growth policies have mainly fuelled inequality within many countries, while at the same time causing massive ecological destruction. Of course, improving the life of billions of poor people will necessarily translate into higher growth statistics for today’s low-income countries; but growth should only be seen as a side effect, not as the main target. Moreover, it is possible to achieve a deeper and faster poverty reduction with less growth if efforts are explicitly targeted on the poor. A qualitative, pro-poor growth strategy is thus more effective and ecologically sustainable than a quantitative, pro-market one.

In particular, it has become clear that poverty cannot be eradicated while maintaining the same level of inequality in the world: if all the poor were to reach a decent standard of living, while the rich were to maintain their huge income and wealth differential, this would mean a global GDP far above what planet Earth can sustain. [6] Achieving both poverty eradication and ecological balance thus requires a significant reduction of global inequalities. In other words, we have no choice but to share the resources of the world.

The fiscal system is a critical tool to achieve this. The problem, however, is that there is very little tax justice in the world today. Tax havens, legal loopholes, tax competition, plutocracy and sheer fraud have all reduced the fiscal resources of states. Powerful ideological forces try to disqualify the very idea of justice through redistribution. The result is that billionaires and multinationals often pay ridiculously low overall tax rates, while states in the Global South lose a substantial amount of resources that could otherwise be used to fight poverty. A co-ordinated global tax reform is thus needed, so that tax justice becomes a reality at both the national and international levels. A global and progressive wealth tax, as advocated by economist Thomas Piketty, could, for example, be part of the solution.

Direct financial donations to low-income countries are also an important element of an effective poverty eradication strategy. The sad reality is that the official development assistance (ODA) granted by rich countries remains far below the official target of 0.7% of their own GDP; moreover, what they count as donations often includes items that do not directly benefit the population. Even worse, the financial flows that go in the opposite direction, from South to North, are on average larger, so that developing countries remain net providers of financial resources to the rest of the world! External debt repayments and illicit capital flights to tax havens largely explain this outrageous situation. A large-scale debt forgiveness and a clampdown on offshore financial centres should thus be decided, in parallel to a significant increase in aid flows.

If external help is important, it should be emphasized that migrants actually provide the main source of financial flows entering poor countries, through the money they send back home. Those remittances globally reached US$550 billion in 2019, much higher than the US$152 billion donated by rich countries. Migration is thus a powerful lever for reducing global inequalities, since both the migrants and the families left behind can benefit from an improvement in their standard of living. However, one of the greatest paradoxes of our time is that goods and capital can move almost freely across borders, while people, especially in the South, continue to be severely restricted in their movements. Migration policies should thus be reshaped so as to open new opportunities for organized and legal labour migrations, while avoiding the pitfalls of brain drain. It is widely acknowledged that rich countries, whose population is aging, would also benefit from such a workforce inflow.

Trade policies are another important dimension, especially in the agricultural sector. The United States and the European Union have been heavily subsidizing their own farmers for decades, encouraging them to dump their products at very low prices on international food markets. On the other hand, poor countries have been forced to dismantle their protective mechanisms through the structural adjustment programs imposed on them. As a consequence, local food producers in the South, especially in Sub-Saharan Africa, have been ruined, unable to compete. The social impact has been disastrous, since farming can account for up to two-thirds of the jobs in those countries. A new global regulation of the agricultural sector, based on food sovereignty and fair producer prices, should thus be put in place. In particular, agricultural products exported by the North should no longer be subsidized, and the South should be allowed to implement price regulation schemes. [7]

Above all, policymakers must listen to the voice of those directly affected, since they are in the best position to know and decide what is good for them. Achieving true democratic participation on a global scale is the most effective way of ensuring that the needs of all will be taken into account. The choice is between continuing with the old ways, naively waiting for growth to solve the problem, or acting decisively to put an end to this ongoing tragedy. More than ever, eradicating poverty is a matter of political will.