The Persistence of Poverty

“More than a half century of persistent efforts by the World Bank and others have not altered the stubborn reality of rural poverty, and the gap between rich and
poor is widening.”

– World Bank Strategy for Rural Development, 2003

The persistence of global poverty is both disturbing and humbling. Policymakers have long recognized the moral and practical need to address the substantial number of people who lack basic amenities such as adequate nutrition, housing, education, or opportunity. But decades of piecemeal efforts have brought only limited success. (See Box 1.1: The Dimensions of Poverty)

Ending world poverty first become a stated goal of politicians from industrialized countries in the 1940s, when U.S. President Franklin Roosevelt stated his desire to extend “freedom from want” not only to the people of the United States, but to people in every nation (Roosevelt 1941). The United Nations Charter, crafted in the same era, explicitly acknowledged the need to promote “social progress and better standards of life” across the globe (UN 1945). Almost 60 years later, at the United Nations Millennium Summit in 2000, more than 100 heads of state committed to reach the eight Millennium Development Goals (UN General Assembly 2001:55).

These commitments confirm the simple fact that poverty remains an obstacle to the development aspirations of most nations. It goes without saying that poverty levies heavy personal costs on the poor themselves. It robs families of security, opportunity, and health. In so doing, it also robs nations of the potential contributions these families could make to economic growth, social well-being, and political stability. Poverty thus squanders a nation’s human capital. It acts as a drag on economic development, requiring substantial state expenditures to address (UNDP 1996:5). Poverty also undermines national security by promoting disaffection and magnifying class and political divisions within society, increasing migration, and potentially contributing to international terrorism (Sachs 2003:27). When combined with other driving forces, it also can exacerbate local and global environmental problems, contributing to unsustainable land and resource use (ASB 2003:2; Duraiappah 1998:2177). Given this list of ills, it is clearly in the self-interest of every nation to confront poverty.

And, indeed, nations have made some progress in combating poverty. The percentage of people suffering severe poverty – those who live on incomes of roughly $1 per day (1993 prices) – has fallen from 40 percent of the world’s population in 1981 to 21 percent in 2001. This means that the number of impoverished people has dropped by an estimated 400 million – from roughly 1.5 to 1.1 billion – over 20 years, in spite of a 1.6 billion rise in world population during that period, most of which took place in poor nations (Chen and Ravallion 2004:31). (See Box 1.1: The Dimensions of Poverty)

This positive development is, however, largely the result of rising incomes in China and India. The populations in these nations are so large that improvements in their poverty rates can easily influence world poverty totals. For example, China’s robust economic growth, coupled with de-collectivization of agriculture, stronger property rights, and other policy changes, resulted in a substantial drop in the number of people in profound poverty, particularly in the early 1980s and mid-1990s. In fact, China’s accomplishments alone accounted for much of the global progress against poverty in the last 20 years (Dollar 2004:31; Chen and Ravallion 2004:18).

There are other success stories as well. The poverty rate in Vietnam dropped sharply over five years – from 58 percent in 1992 to 37 percent in 1998 – on the strength of its economic growth and pro-poor policies (Glewwe et al. 2000:39; Kakwani 2004:6). In just eleven years