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Giving and misgivings: Poverty across the globe and effect on welfare

(Sixth in the series of an address delivered at the Rotary Foundation dinner/dance at the MUSON Centre, Marina, Lagos on 8th February 2020)

Global poverty is one of the very worst problems that the world faces today. The poorest in the world are often hungry, have much less access to education, regularly have no light at night, and suffer from much poorer health. To make progress against poverty is therefore one of the most urgent global goals

On the digital inclusion front, it cites a program in India that changed how the government helps people get natural gas to heat their homes. Previously, the government subsidised the cost of natural gas, but this led to inequity: Wealthy people could simply buy more cheap gas. Instead of offsetting the market price, the country began a new program, which created bank accounts for the poor that they could access via mobile phones and were protected by biometric identification (to avoid fraud).

Now, when people buy natural gas, a credit is applied to their account after purchase. With the savings from not subsidising an entire industry, the government funded a program that lowers the costs of buying and hooking up a gas stove in the first place. Natural gas stoves aren’t great for climate change, but for women who previously had to spend hours gathering firewood and suffered health issues from the smoke in their homes, a gas stove can be a life-changing intervention.

For climate adaptation, the report cites Ethiopia, which has been financing agriculture-related public works projects that both offer employment and help subsistence farmers store and conserve, practices that have become even more vital as climate change has made rainfall more unpredictable. It’s also put more resources into agriculture extension programs that can predict weather patterns and help farmers prepare for the unexpected.

“These aren’t rich countries,” adds Desmond-Hellmann. “And they’ve achieved progress with a model that can be adopted for limited budgets. So those kinds of things are meant to make this come to life for policy makers who do have limited resources… Even countries who feel like they’re getting it right need to look at an inequity within their country.”

Most people in the world live in poverty. Two-thirds of the world population live on less than $-int. 10 per day. And every tenth person lives on less than $-int. 1.90 per day. Both can be seen in this visualisation.

The research here is concerned with the living conditions of the worst off: those who live in extreme poverty. The World Bank is the main source for global information on extreme poverty today and it sets the “International Poverty Line”. The poverty line was revised in 2015 – since then, a person is considered to be in extreme poverty if they live on less than 1.90 international dollars (int.-$) per day. This poverty measurement is based on the monetary value of a person’s consumption. Income measures, on the other hand, are only used for countries in which reliable consumption measures are not available.

A key difficulty in measuring global poverty is that price levels are very different in different countries. For this reason, it is not sufficient to simply convert the consumption levels of people in different countries by the market exchange rate; it is additionally necessary to adjust for cross-country differences in purchasing power. This is done through Purchasing Power Parity adjustments.

It is important to emphasise that the International Poverty Line is extremely low. Indeed, “extreme poverty” is an adequate term for those living under this low threshold. Focusing on extreme poverty is important precisely because it captures those most in need. However, it is also important to point out that living conditions well above the International Poverty Line can still be characterised by poverty and hardship. Accordingly, in this entry we will also discuss the global distribution of people below poverty lines that are higher than the International Poverty Line of 1.90 int.-$. But relying only on higher poverty lines would mean that we are not keeping track of the very poorest people in the world and this is the focus of this entry.

Poverty is a concept intrinsically linked to welfare – and there are many ways in which one can try to measure welfare. In this entry we will focus mainly (though not exclusively) on poverty as measured by “monetized” consumption and income, following the approach used by the World Bank. But before we present the evidence, the introductory sub-section here provides a brief overview of the relevance of this approach.

Global poverty is one of the very worst problems that the world faces today. The poorest in the world are often hungry, have much less access to education, regularly have no light at night, and suffer from much poorer health. To make progress against poverty is therefore one of the most urgent global goals.

The available long-run evidence shows that in the past, only a small elite enjoyed living conditions that would not be described as “extreme poverty” today. But with the onset of industrialisation and rising productivity, the share of people living in extreme poverty started to decrease. Accordingly, the share of people in extreme poverty has decreased continuously over the course of the last two centuries. This is surely one of the most remarkable achievements of humankind.

Closely linked to this improvement in material living conditions is the improvement of global health and the expansion of global education that we have seen over these last two centuries. We also discuss the link between education, health, and poverty in this entry.

During the first half of the last century, the growth of the world population caused the absolute number of extremely poor people in the world to increase, even though the share of people in extreme poverty was going down. After around 1970, the decrease in poverty rates became so steep that the absolute number of people living in extreme poverty started falling as well. This trend of decreasing poverty—both in absolute numbers and as a share of the world population—has been a constant during the last three decades. But as we highlight in the first section of this entry it is unfortunately not what we can expect for the coming decade. It is the fact that still almost every tenth person lives in extreme poverty and the slowing progress against extreme poverty that motivate this entry.

Over the course of the last generation more than a billion people left the most destitute living conditions behind. Can we expect this progress to continue over the coming decade?

The world economy is growing. In less than a generation the value of the yearly global economic production has doubled.

For those who harbour misgivings about impactful philanthropy while our treasury has been leaking, the lightening rod is the sheer scale of the amount of funds looted not only by late President General Sani Abacha and others (before and after).  From Abacha alone, the recovered funds are as follows:

“Nigeria’s Minister of Justice and Attorney General Abubakar Malami said that Abuja has reached an agreement with a number of countries, including the United States, France, and the United Kingdom, for the repatriation of $500 million in looted public funds. This follows an earlier agreement with Switzerland for the return of $321 million allegedly stolen by the former military head of state, Sani Abachi. Though the attorney general provided no details, he said that “specific projects” have been identified to which the returned funds will be committed. After the Paris Club write-off in 2005 of an estimated $18 billion in debt, the Nigerian government identified projects to fund with the money freed up by the reduction in debt service, including the expansion of female education in the north. However, it is unclear how long the funding continued.

During his April 30 visit to Washington, DC, President Muhammadu Buhari publicly thanked President Donald Trump at their joint press conference for the administration’s assistance in the recovery of looted assets. He referred to the “machinery” the respective attorney generals had put in place for the return of some $500 million of looted assets “siphoned away in banks around the world.” Buhari also praised the U.S. Kleptocracy Asset Recovery Initiative at the U.S. Department of Justice (DOJ). Established in 2010, this initiative uses civil forfeiture proceedings to recover looted assets parked in, or laundered through, the United States. Notably, in 2017, the U.S. DOJ filed a civil complaint seeking the recovery of approximately $144 million allegedly laundered in the United States by two Nigerians associated with the former Minister of Petroleum Resources Diezani Alison-Madueke.

 

JK Randle

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