If a genie had popped out of my coffee cup early one morning just after I had been invited to lead the 1990 World Development Report on Poverty and offered me one wish, what would I have asked for? My answer will seem obvious once it is recalled that as we set about our task all we had at our disposal was information on levels of poverty and their changes over time in barely a dozen countries. What was so desperately needed, and what I would have requested, was vastly more knowledge about the poor and how their well-being was, or was not, improving. The genie did not disappoint. He did not solve my immediate problem, but over the next 25 years the statistical foundation for understanding poverty as reported by the World Bank’s PovcalNet has been utterly transformed—with coverage now extending to 128 developing countries and including over 1,000 household surveys, an outcome not even dreamed of in 1990. This is not measurement for measurement’s sake, however. Thanks to these efforts, our grasp of the growth-inequality-poverty interplay and our appreciation of the factors—income and non-income, internal and external—affecting the well-being of poor households have taken giant steps forward.
A second, major advance is the proliferation of innovative, micro-interventions that are proving effective in reaching and benefitting the poor. Over the last two decades, safety nets, workfare programs, conditional cash transfers, microfinance and similar programs have sprung up in many guises in all parts of the developing world. Research has followed suit, and, in doing so, has demonstrated that concern about equity-efficiency trade-offs can often be overcome by careful consideration of the market imperfections that trap the poor. Measuring the benefits of these interventions has profited enormously from the emergence of rigorous impact evaluation, a development that could be so much more valuable for policy if it paid equal attention to costs, since benefits without costs is like, well, Little without Mirrlees.
The last 25 years have also seen a broadening of the concept of poverty. While WDR90 went beyond consumption as the sole dimension of living standards by encompassing, in particular, health status and educational attainment, other aspects—political voice, domestic violence, vulnerability to shocks, gender differences—have increasingly received attention. Often informed by qualitative techniques such as self-assessments, focus groups, and participant observation, these additional dimensions have brought color to the black-and-white of numbers, proved a valuable crosscheck on quantitative approaches, and contributed to the design and implementation of poverty programs.
How would these advances—in poverty statistics, micro-interventions, and a fuller characterization of poverty—have affected the WDR90 strategy? The first has, in the main, supported the 1990 report’s focus on broad-based, labor-using growth and making sure social services, especially primary health care and education, reach the poor. In contrast, had knowledge of the other two, especially the tidal wave of evidence on social protection programs, been available in 1990, the two-pronged strategy would certainly have been expanded to incorporate a third tine aimed at maintaining minimum living standards and protecting the poor by means of state-contingent transfers (pensions for the old), incentive-based transfers, support for market-based enterprise (micro-insurance), and more participatory delivery mechanisms.
The last quarter-century has witnessed a stunning decline in extreme poverty. Indeed, the Millennium Development Goal of halving the 1990 level was achieved five years before the target date of 2015. What will the next quarter century bring? The answer of course depends on what countries do. Current discourse in policy circles does not bode uniformly well. Thus, the attention presently given to “inclusive growth,” growth that benefits all segments of society, runs the risk of detracting from efforts to give special consideration to those in greatest need. And concern with the expanding absolute gap between the incomes of the rich and the poor, especially in countries like China and India where inequality has increased, has resulted in questions being raised about the continuation of policies that to date have proven successful in reducing poverty. Reassuringly, proposals for the Sustainable Development Goals retain the focus on extreme poverty and with good reason—a billion people, one in every seven, remain mired in a desperate fight for daily survival and we are now better equipped than ever to effectively lift them out of poverty.
Assuming countries persist with a poverty focus, what can we expect? WDR90 predicted correctly that sub-Saharan Africa would be the only region to see extreme poverty increase. In fact, by 2011 there were more poor people on the African continent than in either East Asia or South Asia. This outcome reflects the dismal performance in sub-Saharan Africa with respect to the two prongs of the 1990 strategy, compared with the tremendous progress in Asia. Circumstances, however, are changing. Sub-Saharan Africa’s recent growth acceleration, if sustained, will ensure substantial declines in poverty in the coming years, while slower growth will temper the rate of poverty reduction in Asia. In addition, China and other Asian countries will need to rely more heavily on the administratively challenging redistributive policies of the third prong to combat rising inequality and to reach the remaining poor, an increasing proportion of who will be those unable to participate in economic activity. Nevertheless, for the developing world as a whole, there is every prospect of eliminating extreme poverty within the next quarter century. However, there will be a sizeable residual remaining in countries ravaged by conflict or suffering from serious misgovernment (and hence incapable of implementing the original two prongs) and in those countries unable to provide adequate social protection for the poorest members of society (the third prong).