Why all countries should contribute to ending global poverty
In 1969, richer countries agreed to commit 0.7% of their gross national income to international development aid. The world has changed since then, and a new era calls for a fresh approach to poverty eradication, involving a scaled financial commitment from all countries.
LONDON – Trillions of dollars have already been spent on the global response to the COVID-19 pandemic, and no one knows what the final bill will be. Is it possible to respond to a much longer crisis – global poverty – with even a fraction of these resources?
Richer countries are currently committed to spending 0.7% of their gross national income (GNI) on international development aid. This target was established by the Pearson Commission in 1969, and approved in a United Nations General Assembly resolution the following year. Countries reached this agreement a half-century ago in a world in which global poverty was at very high levels. At the time, the world was justifiably perceived in binary terms: The North was wealthy, and the South was poor.
Much has changed in the intervening 50 years. Some countries have met the 0.7% target, but many others have yet to do so. Many developing countries experienced rapid economic growth in the 2000s – not only China and India, but also a number of African countries. Although all gains are currently in jeopardy, prior to the pandemic, at least, the world had entered a new era, with fewer low-income countries. At the same time, the higher global ambitions set out in the UN’s Sustainable Development Goals (SDGs), committed countries to end poverty in all its forms by 2030.
A new era needs a new approach. The COVID-19 pandemic makes this need even more urgent. My colleagues and I propose a scaled financial commitment to development, with a twist: it should be universal across all countries, rich and poor.
Before describing the proposal, it is necessary to ask what has changed since the 0.7%-of-GNI target was adopted. During this period, two “new middles” emerged. The first is an increase in the number of middle-income countries – now home to much of the developing world’s population. In many of these countries, aid levels are already low relative to domestic resources and non-public international flows. At the other end of the spectrum, about 30 countries remain “stuck” in terms of growth. These highly aid-dependent states are home to approximately 10% of the population of developing countries – not a “bottom billion,” but a bottom half-billion.
The other “new middle” comprises those who have escaped poverty, but remain vulnerable to falling back into it. This group, as we show, represents more than two-thirds of the developing world’s people.
If measured using the World Bank’s definition of extreme poverty – living on $1.90 or less per day – global poverty has fallen (although the decline is more modest when China is excluded), and income has grown among many of the world’s poorest. Extreme poverty now affects only some 10% of the population in developing countries, down from around 50% 40 years ago.
But poverty remains at startling levels when measured at the World Bank’s poverty thresholds of $3.20 and $5.50 per day. It is sobering to note that every 10 cents added to the poverty line increases the global headcount of the poor by 100 million. Moreover, the poverty count at $1.90 doubles when one considers multidimensional poverty, which includes health, education, and nutrition.
When using a threshold that is associated with a permanent escape from the risk of future poverty – $13 per day in 2011 purchasing-power-parity terms – some 80% of the population in developing countries remains poor. Furthermore, poverty does not only occur in Sub-Saharan Africa and in fragile or conflict-affected states. It is widespread. In short, the second “new middle” are those in developing countries living above the $1.90 poverty line, but below the $13 vulnerability-to-future-poverty threshold.
Against this backdrop, and amid the global pandemic, our proposal calls for a “universal development commitment” (UDC) from all countries – rich and poor alike. Given their aim of poverty eradication, the SDGs would inevitably be the core focus of any such UDC.
One option for a UDC would be to institute a sliding scale. For example, high-income countries could keep the commitment at 0.7% of GNI, while upper middle-income countries would contribute 0.35%. Lower-middle-income countries would earmark 0.2% of their GNI, with lower-income countries contributing just 0.1%. These are gross contributions, not net. In this scenario, the total finance available for development would amount to almost $500 billion per year.
These additional resources could, in principle, lift the remaining approximately 750 million people out of $1.90-per-day poverty; end hunger and malnutrition for an estimated 1.5 billion people; end preventable child mortality; make primary and secondary schooling possible for all children; and provide access to safe and affordable drinking water for over one billion people, as well as providing adequate sanitation for more than two billion people. And in this scaled-contribution scenario, $200 billion would still remain available to support the achievement of other SDGs.
Developing countries would gain by contributing, because a universal development commitment would lead to more resources for those countries overall. Moreover, and equally important, contributing would ensure that poorer countries have a voice in funds’ governance, whether symbolically, as a sign of their moral right to be heard, or physically, as members of the board deciding on priorities and policies.
There are undoubtedly numerous other questions our proposal raises. But the principle remains simple: Every country pays into the system, and the money is spent on ending global poverty. Amid a global pandemic, and with the SDG deadline a decade away, the world needs a universal development commitment sooner rather than later.
The views expressed in this piece are those of the author(s), and do not necessarily reflect the views of the Institute or the United Nations University, nor the programme/project donors.