Middle-Income Countries Often Overlooked for Poverty Aid: Experts
The global poverty rate was cut by more than half in 40 years; now, the reduction rate is slowing.
The world has made great progress in eradicating global poverty over the past few decades, but that progress has not been equally felt.
The good news: The global poverty rate has been cut by more than half since 1990, dropping from nearly 36% to 10% in 2015, according to the World Bank.
The bad news: Poverty levels are unlikely to continue dropping at such rapid rates going forward unless foreign aid strategies change, experts say.
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Persistent misconceptions about poverty and how to best tackle it are getting in the way of successfully addressing the problem, a paper published in the Journal of Economic Perspectives in November argues.
The paper points out that much of the progress in poverty eradication made since the 1980s has relied on two approaches: fostering economic growth and redistributing resources to people living in poverty (through the state or foreign aid).
Its authors — Rohini Pande, a professor of international political economy at Harvard University, and Lucy Page, a PhD student at the Massachusetts Institute of Technology — argue that while these two approaches have helped drastically reduce global poverty levels, they are no longer able to drive poverty reduction at rates high enough to end extreme poverty by 2030.
Read More: What Is Extreme Poverty?
As a whole, economic growth efforts have helped reduce the number of people living in poverty in many countries. In the past three decades, countries like India and China saw their economies grow and their gross national income (GNI) rise. As a result, they broke out of the low-income country bracket and into the middle-income country bracket.
But Pande and Page point out that while India, China, and other countries who are more recently considered middle-income have grown wealthier, their poorest populations largely have not.
Forty years ago, nearly all of the world’s poorest people lived in low-income countries. Today, the world’s poorest people can mostly be split into two demographics, the paper argues: people living in conflict-affected, low-income states (like Afghanistan and the Democratic Republic of Congo) and people living in middle-income countries where economic growth is coupled with increasing wealth inequality.
The paper’s co-authors, who published an op-ed in the New York Times on Monday, suggest that in fragile countries, driving economic growth is likely still the best way to help break the poverty cycle. But in middle-income countries with high concentrations of poverty that have seen strong economic growth in recent decades, they say that foreign aid should be invested in “invisible infrastructure,” which includes tax structures and social protection programs.
The authors advocate for aid to be devoted to building up the same policies and programs that developed countries use to help address wealth inequality and ensure that support is redistributed to those who need it most.
“If you look at India, which has the largest population of extreme poor in the world, the government’s development programs have massive budgets,” Pande and Page told Global Citizen via email. “In fact, just the estimated funding lost through mismanagement outweighs the foreign aid India receives.”
They argue that because India is already spending substantial amounts on development program, that aid directed at improving management systems would go a long way in terms of helping the country support its own population.
“Unfortunately, it is a harder sell for donors to, say, help build data capacity for a tax ministry, than to send food to areas hit by famine — but in the end it might do more good for more hungry people,” they said.
When it comes to effectively ending poverty, Pande and Page highlight several inter-linked challenges, including increasing inequality; a decreasing number of low-skilled jobs due to mechanization; conflict; and climate change.
But with political will and thoughtful aid, the challenges are not necessarily insurmountable.