Project 101
Poverty 101
How can we end global poverty once and for all?

Starving children with distended bellies, slums, infant mortality… Even in the 21st century, millions of people still live in extreme poverty. They have to get by on less than Since 2015, this has been recognized as the international poverty line. If you have to live on less than $1.90 per day, this qualifies as extreme poverty.

So world leaders have set themselves a deadline. By 2030 the world must be free of extreme poverty.

The question is how?

Of course there’s no single answer. In this crash course on global poverty, we bring together as many answers as we can. We’ll look at the extent of the problem, the causes, and possible solutions.

And please do keep coming back, because Poverty 101 is just a starting point. We will be adding new articles and fresh insights over the next few months. Join us!

—Translated from Dutch by Maria Sherwood-Smith and Erica Moore

  • Maite Vermeulen
    Conflict and Development Correspondent
    Maite Vermeulen
  • Sanne Blauw
    Numeracy Correspondent
    Sanne Blauw
  • Rutger Bregman
    Progress Correspondent
    Rutger Bregman
  • Dick Wittenberg
    New-to-the-Netherlands Correspondent
    Dick Wittenberg
1

How many people are still living in extreme poverty?

Let’s start with the good news. The percentage of the world population living in extreme poverty has been falling for almost two centuries now.

In 1820, 84% of the world population lived in Of course, in 1820 people hadn’t started collecting data about poverty, but in 2002 economists François Bourguignon and Christian Morrison drew up an estimate of poverty figures going back to that date. They used the poverty line of a dollar a day that was then current. In 2015 the border line was raised to $1.90. By 1981 this had fallen to 44%, and last year it finally dropped below 10%.

That’s quite a feat, given that over the same period the world population increased sevenfold. ​So ever since the Industrial Revolution, more and more people have been benefitting from growing prosperity.

Even more striking: over recent decades the absolute number of people living in poverty has also fallen. Where in 1990 there were still 1.95 billion people in extreme poverty, in 2012 the figure stood at 896 million.

But that’s simultaneously the bad news: 896 million people today are living in poverty. Just let that figure sink in for a moment.

And this is just the people in extreme poverty, with less than $1.90 a day to live on. There are also several billion people who have to get by on two to three dollars a day. They are severely poor, too.

2

What qualifies as poor?

Each country has its own poverty line that determines what qualifies as poor. But these sorts of figures don’t really mean much to most of us – you, like me, probably don’t have much clue whether 32.30 rupees a day is enough to survive on.

So in 1990 the economist Martin Ravallion came up with a way to compare countries with one another: a worldwide poverty line of one dollar a day (now set at Of course, one dollar doesn’t have the same purchasing power all over the world. So the dollar used to express the poverty line is not your garden-variety dollar, but a "Purchasing Power Parity" or PPP dollar. The PPP is a sort of uber exchange rate, which makes it possible to compare a purchase in one country with one in another. A PPP dollar will buy the same amount in Tanzania and in India. per day). This shocking figure – how can you live on just a dollar a day? – increased the visibility of poverty the world over.

In the U.S., nobody has to get by on just $1.90 dollar a day. But that doesn’t mean that there aren’t any poor people. Poverty is not just an absolute; there’s also such a thing as relative poverty. If, for instance, all the kids in your class are in the local sports club, you are poor if you don’t have the money to join. Adam Smith (1723-1790) was a Scottish moral philosopher and a pioneer in the field of political economy. gave a neat definition: Being poor is not being able to "walk in public without shame". Just to get things straight: In Poverty 101, we’re talking about absolute extreme poverty.

3

What does it feel like to be poor?

In Dickisoni, a tiny village in Malawi with just 300 inhabitants, we experienced what extreme poverty means for people’s daily lives.

It means sleeping on the ground. Not having enough to eat. Having just two worn, torn, and faded items of clothing to your name. Not being able to go to the doctor or send your children to school. Having to spend anything you do earn straightaway, day after day. Having no choices and no prospects.

Yet you often hear the claim: Aren’t poor people just as happy as rich people, despite having less money? Research shows this is not the case.

You can see that the average happiness score is lower in the poorest countries, and then the happiness curve flattens out. The richer a country is, the less difference an extra dollar makes to people’s happiness.

Within individual countries we see the same pattern. Poor people feel less happy than their wealthier fellow citizens. The most obvious explanation is: it’s not just a matter of how much you earn; it’s also important you don’t earn less than other people.

4

Where is poverty most severe today?

The huge global decrease in extreme poverty over the last thirty years is largely down to the economic growth of China. China alone was responsible for almost 70% of the worldwide decrease in extreme poverty Between 1981 and 2011, 753 million Chinese people were pulled over the $1.90 a day border line. The worldwide figure in the same period came to 1.1 billion. 1981 and 2011.

Poverty levels fell considerably more slowly in other parts of the world. Extreme poverty is now mainly concentrated in Sub-Saharan Africa. According to the World Bank, the percentage of the population living in poverty is highest in Madagascar (82%), the Democratic Republic of the Congo (77%), and Burundi (78%).

In absolute terms, the highest number of people living in poverty is found in India. A “mere" 21% of the population lives below the poverty line of $1.90 a day, but that amounts to almost 300 million people. The figure for the whole of Sub-Saharan Africa is about 400 million people.

5

How do you measure poverty?

Measuring poverty from year to year is difficult – precisely in poor countries. Where there are no pay slips, you have to rely on large-scale surveys, which are complex and expensive to conduct.

Moreover, countries apply different methods in designing and carrying out poverty research, so it is difficult to compare figures between countries.

And what makes it even more problematic is that often there isn’t even any data available. For almost half of all developing countries there is not enough data for us to monitor the poverty trend The World Bank – the source of the UN’s poverty data – solves the problem of the lack of data by filling in the gaps. It assumes that the poverty trend continues in the same manner or is the same as in the rest of the continent. But it is precisely the poorest countries that have the most trouble getting the information together, which quickly gives rise to an over-optimistic picture of global poverty.

Once you’ve managed to develop a good survey and collect accurate figures about poverty, there are still a whole number of questions the figures fail to answer. You still don’t know, for instance, whether your survey has reached the very poorest people; whether people are constantly poor, or just happened to be poor when you asked them; or whether everyone in a family is equally poor. And what about the perennial question: Isn’t poverty about more than just money? What if you do have money, but there aren’t any hospitals or schools to go to? Measuring those other dimensions of poverty is even more complex.

So it’s simply impossible to say down to the last decimal point whether poverty is decreasing. But you can say something about general trends. We know that poverty has decreased in South America over the past ten years, for instance.

6

Is poverty your own fault?

Thatcher was the first woman prime minister of Britain. She was prime minister from 1979 to 1990 and leader of the Conservative Party from 1975 to 1990. once called poverty “a personality defect.”

And that idea, that poor people are responsible for their own poverty, is still Take the Dutch Participation Act of 2015, for instance, which is intended to "encourage" people on benefits to find employment. "Inappropriate behavior," "a lack of personal hygiene," or "careless dress" will be penalized by a temporary cut in benefits payments. The thinking is that the government can nudge people in the right direction – public information, subsidies, fines, and training – but ultimately it is up to the poor to pull themselves together and drag themselves out of the morass.

Research by psychologist Eldar Shafir and economist Sendhil Mullainathan shows that this way of thinking is fundamentally flawed. Their study shows that poor people don’t display “inappropriate behavior” because they feel like it, but because their “mental bandwidth” is entirely taken up by poverty, to the exclusion of all else.

“If you want to understand the poor, imagine yourself with your mind elsewhere,” Shafir and Mullainathan write. “Self-control feels like a challenge. You are distracted and easily perturbed. And this happens every day.”

It turns out that poverty leads to a drop of about Shafir discovered that in a certain part of India, sugarcane farmers receive about 60% of their annual income in one go, immediately after the harvest. That means they are rich for part of the year, and poor for the other. These farmers turn out to score considerably worse in cognitive tests at the point when they are relatively poor. Not because their brains have changed in some way – they’re still the same farmers – but simply because part of their mental bandwidth is otherwise engaged. That’s similar to losing a night’s sleep, or being alcohol-dependent.

7

Is poverty the fault of the West?

The wealth enjoyed by most people in the West is due in large part to our history of colonialism. For decades we have pillaged our way – by means of slavery, the appropriation of resources, and dishonest trading regulations – through countries that are often still considerably poorer than our own.

In the 1980s, furthermore, the World Bank and the IMF imposed economic policies on poor countries, but these policies took no account of the poorest levels of society.

As yet, we at The Correspondent have written little about the connection between Western imperialism and poverty. But keep coming back! We will be adding new articles and fresh insights in the coming months.

8

Is poverty the government’s fault (and what if the government’s corrupt)?

Of course it’s a government’s job to ensure that its citizens do not live in poverty. But what if that government is completely dysfunctional? What if the politicians and government officials are only concerned with getting rich themselves?

Take Angola, for instance. Officially the country falls in the mid-range of the world ranking of richest and poorest countries, but the country’s wealth only makes its way into the hands of a small percentage of the population. About 40% of Angolese citizens still live in extreme poverty.

The West’s answer to these sorts of questions is often that we should make sure not to channel aid through the government, because then it won’t end up where it’s needed most. That makes sense, of course, but there’s a hidden snag in this thinking. Aid organizations then take over the role of the government.

We see it in Haiti, for instance, where about 80% of the schools on the island are now in the hands of aid organizations. This means the Ministry of Education has virtually no influence within its own sector.

The president of Somalia, Hassan Sheikh Mohamud, expressed this neatly when he pointed out to the international aid community, “Yes we are corrupt; yes we are incompetent; yes lawlessness is rife. But there is only one Somali government, and if you don’t treat us as a government, we will never become a government.”

9

Can international agreements eradicate poverty?

Until the year 2000 there weren’t really any international agreements about fighting poverty. In that year, the Millennium Development Goals were established to inject new momentum into the fight. And the emphasis lay on the first of these eight goals: to halve extreme poverty all over the world within the space of 15 years.

Did we succeed?

Yes.

But that is due in very large part to the economic growth of China. The poverty rate in Africa has not been halved – far from it.

Since last September, the United Nations has a new goal: to eradicate extreme poverty by 2030. This is one of the U.N.’s new Sustainable Development Goals.

Where the Millennium Development Goals fit neatly on a fridge magnet, you’ll need a whole refridgerator door for the Sustainable Development Goals. There are no fewer than 17 goals on the list. And that carries a risk. How can you make sure countries don’t just focus on the goals that are easiest to achieve?

The list is so long because the whole world had a say in defining the goals – an unprecedented diplomatic battlefield that insiders have referred to as fraught and “messy”. Diplomats quite literally came to blows over this.

So it’s a long list, but one that is endorsed by every single country. And that gives cause for hope. Consider Colombia, for instance, which has gone all out to incorporate these goals into public policy.

10

Can development aid eradicate poverty?

Some $91.5 billion per year, $7.6 billion per month, $2,940 per second – that’s what the The members of the Organization for Economic Cooperation and Development (OECD) of wealthy countries spend on development aid. Over the past 50 years the total amounted to $4.8 trillion. A huge sum? Maybe, but it’s about the same as the cost of the wars in Iraq and Afghanistan.

In a poor country, you can do a lot of good with that amount of money. Theoretically. Strangely enough, though, we don’t actually know if that’s really the case. It’s only in the past ten years that researchers have systematically started to investigate what sorts of aid are effective.

They carry out experiments in which one group receives development aid and a similar group doesn’t: the difference between the groups shows the impact of the aid. If we look at the Journal of Development Economics, for instance, one of the leading academic journals in this field, we see that until ten years ago scarcely one experiment per year was published; since then, the number of articles has skyrocketed.

There are dangers in this proliferation of experiments, however. It remains highly questionable whether a given experiment is also applicable to other countries, or even to other regions in the same country. Perhaps micro-financing might work well in Kenya, but have little impact in India. And how do you measure the effects of a sound justice system, democracy, freedom, or reconciliation?

The rise in experimental research does give us more insight into whether development aid works. But that doesn’t automatically mean that aid that has not been investigated doesn’t work.

The simple answer remains that generally we just don’t know.

11

Can trade eradicate poverty?

One of the first economists to challenge the idea that development aid would eradicate poverty was Dambisa Moyo. In 2009 she published the book Dead Aid, in which she makes a fiery plea against development aid and in favor of trade.

This is music to the ears of Dutch social-democrat Lilianne Ploumen. She is the first government minister in the Netherlands to combine the portfolios of Foreign Trade and Development Cooperation. “Eventually development aid will disappear altogether,” Ploumen predicted shortly after her appointment.

Despite Ploumen’s fine words, Western countries still make it difficult for developing countries to sell their products on Western markets. Moyo estimates for example that Africa misses out on $500 billion each year due to trade barriers, predominantly agricultural subsidies, that favor farmers Incidentally, African countries also make it difficult for one another. The average African import tax on agricultural products stands at 34% – which is one of the reasons why African countries conduct just 10% of their trade with other countries in the continent. By way of comparison: in Europe this figure lies at 63%.

If that fair, open trade did come, it would mean unimaginable growth for developing countries. The Copenhagen Consensus Center calculated that of all the possible ways to help the developing world to move forward, this would have – by far – the greatest impact on poor economies.

But would it lead to less poverty? Not necessarily. The wealth of a growing economy doesn’t always filter through to the poorest layers of the population.

12

Can a better government eradicate poverty?

Imagine a world without any official land registration system. In many developing countries there is scarcely any such system. And this makes it impossible for poor people to officially own the land they live on, the land where they grow their vegetables.

The result? Uncertainty. Why invest in a decent house, or crops that promise better long-term yields, if your land might be stolen from under you at any moment?

Another example: the tax authority. If the tax system doesn’t function, the government misses out on billions of dollars of potential income, money that could be spent on social services or infrastructure. On the fight against poverty.

The influential book By economist Daron Acemoglu and political scientist James A. Robinson. argues very convincingly that – throughout history – it is these sorts of institutions that have been responsible for some countries becoming rich and others poor.

So why do we tend to pay relatively little attention to these institutions in the fight against poverty? Simply because it sounds so boring! Our correspondent Maite Vermeulen gave a TEDx Talk about this.

Source: YouTube

13

Can I eradicate poverty?

If you’re reading this, there’s a good chance you’ve wondered at some point: what can I do to help eliminate poverty?

For about ten years now, a specific movement has been trying to answer that question. Its followers call themselves Effective Altruists. They work out the effects of various aid scenarios – on the basis of scientific experiments – and choose the cause with the greatest impact. Deworming children in developing countries, for instance, turns out to be an extremely effective measure.

Effective Altruism does entail risks, however. Though there may be numerous solutions, effective altruists focus solely on those whose impact has already been proven. There are many things, however, that have not yet been investigated or cannot be measured. Precisely with large and complex problems – war, poverty, discrimination – there is no one solution that outperforms all others. It is often a matter of various different factors that together can bring about system change in the long term. That can never be captured in a simple impact calculation.

Nevertheless, many people wonder: What’s the best charity for me to donate to? That’s something we’d like to devote some attention to in The Correspondent in the future.

14

A world without poverty. Is that possible?

As recently as fifty years ago, the central question of our Poverty 101 crash course – how can we banish poverty? – was not even widely viewed as a desirable scenario. For centuries, poverty was seen as a necessary evil. Hunger was thought to ensure that people would work hard, and low salaries were alleged to be essential for economic growth.

Since the 1990s that view has been overturned: Poverty must be eradicated.

And suddenly it even seems feasible. The United Nations has set itself the goal of ending extreme poverty by 2030. And according the World Bank, it should certainly be possible by 2050.

The Swedish statistician Hans Rosling shows why it is indeed feasible to rid our world of extreme poverty. As he puts it: “Compared with other enormous problems, like climate change or war, eradicating extreme poverty is peanuts.”

Let’s hope he’s right.

Source: Vimeo