Working out how to help the world’s poorest depends on where they live
WHERE do the world’s poor live? The obvious answer: in poor countries. But in a recent series of articles Andy Sumner of Britain’s Institute of Development Studies showed that the obvious answer is wrong*. Four-fifths of those surviving on less than $2 a day, he found, live in middle-income countries with a gross national income per head of between $1,000 and $12,500, not poor ones. His finding reflects the fact that a long but inequitable period of economic growth has lifted many developing countries into middle-income status but left a minority of their populations mired in poverty. Since the countries involved include giants like China and India, even a minority amounts to a very large number of people. That matters because middle-income countries can afford to help their own poor. If most of the poverty problem lies within their borders, then foreign aid is less relevant to poverty reduction. A better way to help would be to make middle-income countries’ domestic policies more “pro-poor”.
Now Mr Sumner’s argument faces a challenge. According to Homi Kharas of the Brookings Institution and Andrew Rogerson of Britain’s Overseas Development Institute, “by 2025 most absolute poverty will once again be concentrated in low-income countries.” They argue that as middle-income countries continue to make progress against poverty, its incidence there will fall. However, the number of poor people is growing in “fragile” states, which the authors define as countries which cannot meet their populations’ expectations or manage these through the political process (sounds like some European nations, too). The pattern that Mr Sumner describes, they say, is a passing phase.
Messrs Kharas and Rogerson calculate that the number of poor in “non-fragile” states has fallen from almost 2 billion in 1990 to around 500m now; they think it will go on declining to around 200m by 2025. But the number of poor in fragile states is not falling—a testament both to the growing number of poor, unstable places and to their fast population growth. This total has stayed flat at about 500m since 1990 and, the authors think, will barely shift until 2025. As early as next year, the number of poor in what are sometimes called FRACAS (fragile and conflict-affected states) could be greater than the number in stable ones. That would imply something different to Mr Sumner’s view: instead of being irrelevant to poverty reduction, foreign aid will continue to be vital, since fragile states (unlike middle-income ones) cannot afford to help the poor but instead need help themselves.