Understanding Poverty

What is poverty?

Poverty is hunger. Poverty is lack of shelter. Poverty is being sick and not being able to see a doctor. Poverty is not being able to go to school and not knowing how to read. Poverty is not having a job, is fear for the future, living one day at a time. Poverty is losing a child to illness brought about by unclean water. Poverty is powerlessness, lack of representation and freedom.
Poverty has many faces, changing from place to place and across time, and has been described in many ways (for a collection of readings, see the Literature of Poverty). Most often, poverty is a situation people want to escape. So poverty is a call to action -- for the poor and the wealthy alike -- a call to change the world so that many more may have enough to eat, adequate shelter, access to education and health, protection from violence, and a voice in what happens in their communities.

Dimensions of Poverty

To know what helps to alleviate poverty, what works and what does not, what changes over time, poverty has to be defined, measured, and studied -- and even lived. As poverty has many dimensions, it has to be looked at through a variety of indicators -- levels of income and consumption, social indicators, and now increasingly indicators of vulnerability to risks and of socio/political access.

So far, much more work has been done using consumption or income-based measures of poverty. But some work has been done on non-income dimensions of poverty, most notably in the Human Development Report prepared annually by the United Nations Development Programme, and new work is underway in preparation for the World Development Report on Poverty and Development. See New Directions in Measuring Poverty below.

Measuring poverty at the country level

The most commonly used way to measure poverty is based on incomes or consumption levels. A person is considered poor if his or her consumption or income level falls below some minimum level necessary to meet basic needs. This minimum level is usually called the "poverty line". What is necessary to satisfy basic needs varies across time and societies. Therefore, poverty lines vary in time and place, and each country uses lines which are appropriate to its level of development, societal norms and values.

Information on consumption and income is obtained through sample surveys, during which households are asked to answer detailed questions on their spending habits and sources of income. Such surveys are conducted more or less regularly in most countries. These sample survey data collection methods are increasingly being complemented by participatory methods, where people are asked what their basic needs are and what poverty means for them. Interestingly, new research shows a high degree of concordance between poverty lines based on objective and subjective assessments of needs.

Measuring poverty at the global level

When estimating poverty world-wide, the same reference poverty line has to be used, and expressed in a common unit across countries. Therefore, for the purpose of global aggregation and comparison, the World Bank uses reference lines set at $1 and $2 per day in 1993 Purchasing Power Parity (PPP) terms (where PPPs measure the relative purchasing power of currencies across countries). It has been estimated that in 1999 1.2 billion people world-wide had consumption levels below $1 a day -- 23 percent of the population of the developing world and 2.8 billion lived on less than $2 a day. These figures are lower than earlier estimates, indicating that some progress has taken place, but they still remain too high in terms of human suffering, and much more remains to be done. And it should be emphasized that for analysis of poverty in a particular country, the World Bank always uses poverty line(s) based on norms for that society.

Because of the time involved in collecting and processing the household survey data upon which these figures are based, and because of the complexities of the estimation exercise, these figures appear with a lag.

New directions in poverty measurement

While much progress has been made in measuring and analyzing income poverty, efforts are needed to measure and study the many other dimensions of poverty. Work on non-income dimensions of poverty -- defining indicators where needed, gathering data, assessing trends -- is presented in the World Development Report (WDR) 2000/01: Attacking Poverty, which was published in September 2000. This work includes assembling comparable and high-quality social indicators for education, health, access to services and infrastructure. It also includes developing new indicators to track other dimensions -- for example risk, vulnerability, social exclusion, access to social capital -- as well as ways to compare a multi-dimensional conception of poverty, when it may not make sense to aggregate the various dimensions into one index.

In addition to expanding the range of indicators of poverty, work is needed to integrate data coming from sample surveys with information obtained through more participatory techniques, which usually offer rich insights into why programs work or do not. Participatory approaches illustrate the nature of risk and vulnerability, how cultural factors and ethnicity interact and affect poverty, how social exclusion sets limits to people participation in development, and how barriers to such participation can be removed. Again, work on integrating analyses of poverty based on sample surveys and on participatory techniques is presented in the WDR. To learn more about this work, see the WDR 2000/01: Attacking Poverty.

Living standards have improved...

Living standards have risen dramatically over the last decades. Per capita private consumption growth in developing countries has averaged about 1.4 percent a year between 1980 and 1990 and 2.4 percent between 1990 and 1999. So millions have left behind the yoke of poverty and despair. But population in the developing world has grown rapidly -- from 2.9 billion people in 1970 to 5.1 billion in 1999 -- and many have been born into poverty.

The proportion of the developing world's population living in extreme economic poverty -- defined as living on less than $1 per day (in 1993 dollars, adjusted to account for differences in purchasing power across countries) -- has fallen from 29 percent in 1990 to 23 percent in 1999.

Substantial improvements in social indicators have accompanied growth in average incomes. Infant mortality rates have fallen from 107 per 1,000 live births in 1970 to 59 in 1999. On average, life expectancy has risen by four months each year since 1970 (see also trends in life expectancy). Growth in food production has substantially outpaced that of population. Governments report rapid progress in primary school enrollment (see also trends in education). Adult literacy has also risen, from 53 percent in 1970 to 74 percent in 1998. And gender disparities have narrowed, with the female-male difference in net enrollment rates decreasing from 11 percent in 1980 to 5 percent in 1997. The developing world today is healthier, wealthier, better fed, and better educated.

...but wide regional disparities persist.

While there has been great progress in alleviating poverty, it has been far from even, and the global picture masks large regional differences.

Poverty is rising rapidly in Europe and Central Asia, and continuing to rise in Sub-Saharan Africa. In Asia, where most of the world's poor live, the proportion in poverty has declined dramatically over the past two decades, but the recent crisis has slowed progress. And 490 million people still remain in poverty in South Asia.

There are sharp regional differences also in a number of social indicators.

Most developing regions have seen infant and child mortality rates decline sharply. But South Asia’s infant mortality rates today are about the same as East Asia’s in the early 1970s, reflecting both poor progress in South Asia and favorable initial social conditions in East Asia. Sub-Saharan Africa’s infant mortality rates are well above those in East Asia some 30 years ago, and child mortality is rising because of the AIDS epidemic. On average, 151 of every 1,000 African children die before the age of 5, and 92 in 1,000 before the age of 1. Nine African countries have under-five mortality rates in excess of 200 (Angola, Burkina Faso, Guinea-Bissau, Malawi, Mali, Mozambique, Niger, Rwanda, and Sierra Leone). (For more information, see trends in infant and child mortality).

Gross primary school enrollment rates have risen in all regions. But Sub-Saharan Africa’s rates, having risen from 51 percent of the eligible population in 1970 to 80 percent by 1980, fell back to 78 in 1994, reflecting larger problems. Again, averages disguise wide country disparities. Nine countries in Africa have fewer than half their children enrolled in primary school (among them, Burkina Faso, Ethiopia, Mali, and Niger). (Click here for trends in education).

The extent of gender disparities in education, as measured by the male-female gap in the percentage of 6-14 year-olds in school, varies enormously across countries. Female disadvantage in education is large in Western and Central Africa, North Africa and South Asia. In several Latin American countries, instead, there is a female advantage (see also trends in education of girls).

Millennium Development Goals (MDGs)

The uneven progress of development is worrying. The flows of trade and capital that integrate the global economy may bring benefits to millions, but poverty and suffering persist. In an integrated world, disease, environmental degradation, civil strife, and criminal activity are also global concerns.

Responding to concerns about global poverty, international development agencies have begun to reexamine the way they do business. They are looking at impacts more than inputs by establishing performance targets, and they are enhancing their accountability and transparency by measuring progress towards these goals.

The Millennium Development Goals (MDGs) summarize the development goals agreed on at international conferences and world summits during the 1990s. At the September 2000 Millennium Summit, world leaders distilled key development goals and targets in the Millennium Declaration. Based on the declaration, the International Monetary Fund (IMF), the Organization for Economic Co-operation and Development (OECD), the United Nations, and the World Bank have devised a comprehensive set of eight goals, 18 numerical targets and over 40 quantifiable indicators to assess progress. The eight goals are:

Eradicate extreme poverty and hunger
Achieve universal primary education
Promote gender equality and empower women
Reduce child mortality
Improve maternal health
Combat HIV/AIDS, malaria, and other diseases
Ensure environmental sustainability
Develop a global partnership for development.
While each goal is important in its own right, they should be viewed together as they are mutually reinforcing. Achieving them will require building capacity for effective, democratic, and accountable governance, protection of human rights, and respect for the rule of law. The World Bank will systematically monitor progress in achieving these goals in the countries it assists (see the Millennium Development Goals website for more detail on the MDGs).

Achieving the goals

The poverty goal calls for reducing by half the proportion of people living on less than a dollar a day by 2015. A reduction from 29 to 14.5 percent would reduce the number of poor people from 1.2 billion in 1990 to 890 million in 2015.

Is this achievable? Income poverty is a function of growth -- if the incomes of all grow at the rate of growth of the economy, then fewer people will have incomes below the poverty line every year -- and of the extent to which the incomes of the poor grow as an economy expands. Thus, the answer depends on prospects for growth and for the distribution of income.

If countries were to continue to grow as they did over the period 1990-95, and all benefited equally, then the global poverty targets will be met. Some countries did not grow fast enough, but the countries with the highest number of poor people -- India and China -- did; if this continues, the goals will be met.

But past trends may not be a good predictor of growth -- and the global economy is slowing down as a result of the East Asian crisis. Predictions made in January 1998 indicated that most regions were expected to reach the goals. The exception is Sub-Saharan Africa, where growth is expected to fall short.

Income distribution also matters. Increasing inequality in income distribution will reduce the numbers who benefit from the same average rate of growth. While the distribution of income tends to be stable over time, there is some evidence that inequality was deteriorating in East Asia before the crisis, and inequality remains very high in Sub-Saharan Africa (particularly in South Africa) and Latin America. (For more information, see Trends in inequality.)

Achieving the social goals will not be easy. If infant mortality rates were to remain at 1990 levels, the number of infant deaths would total some 8.8 million in 2015. Reaching the target of reducing infant mortality by two-thirds would require bringing this number down to about 3 million (more on trends in infant mortality). Similarly, attaining the primary school enrollment goal would require enrolling some 200 million more children in primary school than there are today, and increase of 41 percent over current levels (more on trends in primary enrollments). For a detailed analysis of whether the goals are attainable, see L. Demery and M. Walton (1998), Are Poverty Reduction and Other 21st Century Social Goals Attainable?

Reaching these targets will not be easy. But sufficient political will, improvements in female education, health programs, and income growth for all could bring infant mortality and education targets within reach. Otherwise, the costs would be enormous.

fr.: Poverty Net 〔http://www.worldbank.org/poverty/mission/up1.htm〕