Transitioning to No Poverty

The first sustainable development goal (SDG 1) is “to end poverty in all its forms everywhere and for all”, which seems to be non-negotiable for the “world we want”, which would provide minimum living standards for all global citizens. However, the question remains: is this goal feasible, especially given the set-backs in the fight against poverty and the unequal access to health resources that we have observed in 2020 and 2021? If yes, how do governments and civil society need to engage and what resources are needed? In this book, we bring together a diverse set of perspectives on SDG 1 from leading scholars around the world. When we first invited scholars in 2019 to reflect on ending poverty by 2030, the world looked very different; or rather, the necessity of global social protection, decent and not only sufficient livings standards and strong international cooperation to fight global poverty became even more apparent—and the pandemic put a spotlight on the lack of these three components. The COVID-19 pandemic and the resultant lockdowns across the world have not only led to millions of lost lives across the world, but have also led to large numbers of people falling once again into extreme poverty.

Almost one in ten people globally live on less than USD 1.90 per day and recent projections suggest we are not on track to achieve the goal of eradicating such extreme poverty by 2030. What the long-run history of global poverty shows clearly, however, is that the continued presence of extreme poverty is far from inevitable. The aim of this chapter is to inform our aspirations for the future of global poverty by summarising what we know about its history. To provide this long-term perspective, we present global poverty estimates based on two methods: household survey-based estimates from the World Bank and national accounts-based estimates derived from historical data on GDP per capita and inequality. The latter method allows us to estimate the trajectory of global poverty over the last two centuries. We compare the methods and data underlying these two approaches to poverty measurement. There are discrepancies between the resulting estimates and sources of uncertainty in each case. However, there are key points of agreement, and the main trends on which they converge are robust to various sources of uncertainty. This evidence shows a substantial decline in global poverty rates over the last two centuries, with particularly fast progress made in recent decades. The extent of the changes we see over the long run should embolden us to reach not only for the eradication of the most extreme forms of poverty but for much more ambitious goals still.

The first Sustainable Development Goal of “Ending poverty in all its forms everywhere” must be interpreted in light of an understanding of what “poverty in all its forms” means societally. It cannot be reduced to a narrow technical focus on official targets and indicators. There are reasons for concern that the official indicators are unsatisfactory, and that there is a considerable gap between the portrait they present and the societal understanding of poverty. Even if conventional approaches to global poverty estimation are used, considering a range of alternative poverty lines demonstrates that the poverty identification criteria can significantly influence the conclusions drawn about how much poverty there is, where it is, how it is evolving over time, and what are the appropriate priorities and policies. Although poverty is expected to be nearly “eliminated” in regions other than sub-Saharan Africa at the lowest poverty lines, this is not true at higher poverty lines. The projected regional composition of future poverty is also greatly dependent on the choice of poverty line, because poverty in the other world regions increases markedly at higher lines. The elimination of poverty by 2030 was already unlikely, but the global economic contraction due to COVID-19 has made it more difficult.

There is a little-noticed but important difference between the World Bank’s original goal for poverty reduction and the subsequent UN Sustainable Development Goal (SDG). While both target the “$1.90 a day” poverty rate, the Bank’s goal was a 3% rate by 2030, while the SDG is to “eradicate” poverty by 2030. Simple linear projections of recorded progress against USD 1.90 poverty in the world does suggest that we are on track to attaining the UN’s goal. If we can return to the pre-COVID pace of poverty reduction after two or three years, then we should still be roughly on track. However, closer scrutiny of the pre-COVID data leaves one less optimistic. There are a priori reasons why the last few percentage points could be harder to reach with current development policies. Consistent with that hypothesis, the paper documents recent (pre-COVID-19) signs of a levelling-off in progress for the poorest in East Asia—the star performer regionally over the longer term. This is evident in the region’s slower progress recently in both lifting the floor—and thus reaching the poorest—and in reducing the poverty rate. This levelling off is also found, on average, for the 18 developing countries that have reduced their poverty rate from over 10% (around the current global rate) to under 3% during the period 1981–2017. Similar to East Asia, progress in reaching the poorest declined once the last 3% had been reached, though some countries did better than others. Overall, the results suggest that returning to “business as usual” post-COVID will not suffice to eradicate extreme poverty.

In vowing to eradicate poverty and hunger by 2030, the international community has set itself an extremely ambitious goal as the success of this venture depends on effectively addressing a number of challenges in the poorest countries. The classic instruments of development cooperation can contribute little to this agenda. Instead, a much broader agenda must become a political priority of the international community and must involve political, economic, and occasionally, even military engagement.

We show that “Leave no one behind” (LNOB) can be a meaningful guiding principle for national development policy as well as development cooperation in middle-income economies, as very unequal progress threatens the gains for the poorest countries graduating from low to middle-income status. Our review, measuring the progress of LNOB, clearly illustrates the huge data gaps that remain for key LNOB indicators. Disaggregated indicators or data to compute them are often not (yet) available. Our brief and selective review of LNOB-relevant policies and approaches in middle-income countries shows a very rich foundation for evidence-based policy-making, particularly in education, health and social protection. Some clear messages emerge, for example, a clear call for progressive universal policies in education that emphasize equality in learning achievements. In general, the sectorally interlinked challenges of implementing LNOB demand integrated approaches that combine education, health, and labor market components and pay attention to mainstreaming anti-discrimination efforts.

Our paper evaluates SDG1 with regard to labour reforms in Sri Lanka, by seeking to understand how women workers in the garment sector may be affected by proposed changes to the laws. Our paper is based on a decade of fieldwork, supplemented by interviews and recent archival work. We first give an account of Sri Lanka’s recent history. It offers a necessary context, given that politics and legacies from the ethnic conflict continue to mar current efforts. Critically, it is found that ethnic divisions continue to create tensions, and that these have often been exacerbated by labour conditions. Through investigating the place of women workers in Sri Lanka’s apparel sector, including the North and the East of Sri Lanka, we show that labour insecurity remains, and discrimination is rife. Importantly, Sri Lanka has thus far failed to position women’s experiences accurately in SDG1 by failing to consider its linkages to SDG5, SDG8 or SDG10. The current inability of policies to alleviate the position of women workers in relation to SDG1 places added importance to recent labour policy reform, which tends to be neglected because of an emphasis on creating pro-market friendly labour conditions.

Social protection has become very important in development policy, due partly to the widening gap in health, income and opportunities between the rich and the poor. The growing number of national social protection policies and interventions implemented by many developing countries, particularly in sub-Saharan Africa, ties into the emerging consensus around the view that social protection provides an effective response to poverty and vulnerability in developing countries. This chapter examines the history of social protection in Ghana, highlighting the key social protection reforms and interventions to assess how they are aligned with the attainment of societal equity. The historical antecedent of social protection policies and programs in the past three to four decades is therefore provided in order to illustrate a rigorous background for the design and strengthening of social protection in the decade ahead. We also provide a discussion on the financing of social protection policies and their long-term sustainability, emphasizing the role of technology in the sustainable delivery and targeting of social protection programs.

Against the backdrop of the shift in emphasis from the MDGs, with the educational focus on access, to the SDGs with the focus on educational outcomes and equity, this chapter discusses some education issues and policy responses in seven southern African countries. These countries—South Africa and its six neighbours—cover a wide economic development range: Mozambique is a low-income country, Lesotho, Zimbabwe and Eswatini lower-middle income, and Namibia, South Africa and Botswana upper-middle income countries. Examples from these countries show little evidence that the focus in policy debates and practice has shifted to the educational goals formulated and propagated by the international community. This may well also be the case in many other developing countries. The continued focus on broadening access needs to be supplemented with steps to reduce “learning poverty”.

We review the literature on early childhood development as well as the current knowledge on developmental gaps between high-, middle- and low-income countries. While current data on children’s early developmental outcomes are limited, the available evidence suggests that early trajectories are comparable among children growing up in home environments providing adequate support and stimulation globally. Large gaps in physical and likely also cognitive early development persist in low- and middle-income countries due to poverty, lack of maternal education and lack of early learning opportunities. These gaps can be reduced by continued efforts to reduce poverty and increase education, as well as targeted government programs to support parents and children during the first few years of children’ lives.

The SDG agenda needs to extend beyond shifting programs and policies to address poverty. It also requires a range of fiscal issues to be revisited, especially in countries in Africa that are poor and also resource constrainted. Current levels of public spending in Africa that effectively reach and benefit the poor are not nearly sufficient and often poorly spent. This chapter explores how poverty reduction can be accelerated by mobilizing more resources, domestically and internationally, and by spending more efficiently and with a greater focus on the needs of the poor in terms of both raising their income today and investing in the next generation in Africa. What is the path to tackle these challenges? First, on the revenue side countries need to mobilize more resources domestically. While mobilizing domestic revenues (with VAT expansion currently a favorite vehicle), countries need to make sure the poor are net receivers. Other promising avenues include improving tax compliance, with a larger focus on local large taxpayers, corporate taxes and transfer (mis)pricing (which is a global agenda), as well as excise and property tax collection. Yet, even with improvements in domestic resource mobilization, international development assistance will still be critical in the poorest and most fragile countries, for both direct spending as well as to leverage private capital. Aid makes up more than 8 percent of GDP for half of low-income countries in Africa, but in recent years aid to countries in the region has been declining. Second, spending patterns need to shift towards more pro-poor investments and improve in terms of the levels spent in critical sectors, the instrument/programs for a given investment, and the efficiency of implementation. In levels, spending on “pro-poor” sectors has a mixed track record with some generally reaching international targets (such as education) but others falling short for many countries (health, WASH, risk management, and agriculture and rural infrastructurel). The choice of program design matters for given spending—untargeted programs can result in large shares of spending going to non-poor households. One obvious area for attention is the currently high subsidy expenditures (in energy and fertilizer)—often regressive with little impact on poverty. Cash transfers seem more effective and efficient than subsidies where evidence exists, but more is needed to compare their performance relative to public good provision for the poor in agriculture and rural infrastructure, security, risk management, education and health. Agricultural and rural spending should tilt more heavily towards investment in public goods. Finally, there are significant inefficiencies in spending that need to be addressed. The low quality of health and education services cannot be explained just by the low spending levels.

The donor community has taken a prominent role in the implementation of the Millennium Development Goals (MDGs), and is likely to stay strongly involved when it comes to achieving the poverty-oriented targets of the Sustainable Development Goals (SDGs). Against this background, the present paper provides an overview of the empirical evidence regarding the impact of international development cooperation on economic growth, (monetary and non-monetary) poverty and inequality in order to assess whether donors have directly or indirectly contributed to achieving internationally agreed upon poverty reduction targets. The general conclusion is that development cooperation can help achieve growth and poverty reduction in partner countries, even though the effects are likely to be modest. Most confidence can be put into the finding that, in accordance with the MDGs, aid for social infrastructure has contributed to achieving non-monetary goals such as higher school enrollment and lower infant mortality. In contrast, it is inherently difficult to empirically identify income effects of foreign aid at the macro level, which the long-standing and still unresolved debate about the aid–growth relationship illustrates.

Social protection schemes are effective instruments to fight poverty in “normal” times. During crises, they are even more important to prevent people from falling into poverty, as the COVID-19 pandemic has demonstrated. Developing countries have long struggled to generate sufficient tax revenue to fund the social programs and investments needed to protect their populations. In recent years the donor community has increasingly converged on a consensus around the need to boost tax revenue as part of the broader development agenda. At the same time, donors have also promoted and defended international tax standards that benefit their business communities, and which, to a degree, work against the ability of developing countries to obtain a fair share of taxes from multinational corporations operating in their jurisdictions. The rules for taxing multinational enterprises are brokered by the Organization for Economic Co-operation and Development (OECD), the club of industrialized countries where donor governments are heavyweights. This chapter analyzes the reform of the OECD transfer pricing regulation after the financial crisis, which promised to simplify transfer pricing rules in a way that strengthens the position of developing economies towards multinational enterprises. The reform largely failed to deliver on its promise but was a success for those who benefit from the status quo. The political economy behind the reform points to the lack of policy coherence among donor countries and the deep politicization of the seemingly technical topic of international tax policy.