The Fight Against Poverty Must be Rebooted

The UN’s first Sustainable Development Goal (SDG) calls for the world to “end poverty in all its forms everywhere” by 2030. During the first one and a half decades of this century, the world made significant progress towards this goal, reducing the number of people living in extreme poverty from 1.8 billion in 2000 to c.800 million in 2015, implying a pace that, if sustained, would have seen extreme poverty eliminated before 2030¹ .

Unfortunately, progress has not only slowed between 2015-2019, but actually reversed in recent years, due to the cumulative impact of the Covid-19 pandemic, compounded by high inflation and the “It is because the whole loaf is large enough to satisfy the hunger of all who must be fed that individual want is intolerable .” Jacob Hollander, The Abolition of Poverty, 1914 war in Ukraine, with c.90 million additional people falling into extreme poverty vs. pre-pandemic projections². Recent World Bank estimates, based on current trends, suggest that c.580 million people, or c.7% of the world population, most of whom will be in Sub-Saharan Africa, will still be living in extreme poverty in 2030, implying that only c.11 million people will escape extreme poverty annually between 2022 and 2030³. At this pace, in the absence of major breakthroughs, it will take the world another 50 years beyond 2030 to eliminate extreme poverty.

Moreover, ending “extreme poverty” is only the first frontier of the fight. “Multidimensional poverty” estimates, which look at access to health, education, and other basic services rather than just at “Attaining SDG1 will clearly not be the “end of poverty”… Many of those who are no longer poor by the global [US$2.15] standard will still be poor by the (defensible) standards of the country they live in.” Martin Ravaillon and S. Chen, Global Poverty Measurement when Relative Income Matters, 1914 income, confirm that there are 1.2 billion people globally living in acute deprivation⁴, nearly twice the number of those who are in extreme poverty. Further, many people who may not be below the international poverty line are still poor by the standards of the country they live in. Using more contextual poverty lines for various regions, there are an estimated 2.8 billion people living in poverty across the world, including c.400 million people in high-income countries.

Tackling poverty in “all its forms everywhere” will therefore require radical thinking about how the world can achieve rapid, sustained, and inclusive economic growth. The immediate frontier is Sub-Saharan Africa, which is home to c.60% of the people living in extreme poverty currently. However, investment is also needed in other developing countries to help them transition to upper middle-income and eventually high-income societies. High-income countries have demonstrated that economic growth alone is unlikely to be sufficient to end poverty, and still live with large pockets of poor amidst the rich.

This month’s Sign looks at the faltering fight against poverty, the efforts needed to tackle poverty in all its forms, and touches on the case for poverty alleviation, which is moral, social, political, economic and environmental with consequences that affect everyone.

Where Are We in the Fight Against Poverty?

1. Rapid progress between 2000 and 2019, with 1.1 billion people lifted out of extreme poverty

In the first two decades of this century, the world made rapid progress in the fight against extreme poverty, defined as the international poverty line of US$2.15 per day or c.US$800 annually. The number of people living in extreme poverty declined from c.1.8 billion in 2000 (nearly 30% of the world population) to c.650 million people in 2019 (c.8% of the population).

2. Asia, led by China and India, accounted for virtually the entire global reduction in extreme poverty, while Sub-Saharan Africa was left behind

China’s rise to an upper-middle-income economy and India’s rapid growth was by far the biggest driver of poverty reduction in this century, with these two countries alone accounting for nearly 75% of the reduction in extreme poverty between 2000 and 2019, with c.850 million escaping extreme poverty. Another c.250 million people escaped extreme poverty in the rest of Asia during this period. Progress in the rest of the world was considerably slower, in particularly in Sub-Saharan Africa where the number of people living in extreme poverty remained stagnant around c.400 million, c.60% of the people living in extreme poverty today.

3. Progress had already slowed after 2015, and the pandemic and subsequent crises have delayed the end of extreme poverty by what may be decades

Progress after 2015 slowed considerably as extreme poverty “became increasingly concentrated in regions with lower per capita income growth”⁵ like Sub-Saharan Africa, with only 36 million people lifted out of extreme poverty annually between 2015-2019, half the rate of the preceding 15 years. The Covid-19 pandemic and its aftermath resulted in c.90 million additional people in extreme poverty as of 2022 vs. pre-pandemic projections. Recent World Bank estimates suggest that c.7% of the world population (or c.580 million people) will still be living in extreme poverty in 2030. This slower rate of poverty reduction implies that it will take the world another 50 years (beyond 2030) to eliminate extreme poverty.

4. “Multidimensional poverty” estimates suggest 1.2 billion people are living in acute deprivation

Estimates of acute poverty based on evaluating people’s access to basic needs including healthcare, education, housing, electricity, clean water, sanitation, etc. and living standards (includes housing, electricity, clean water, sanitation, etc.) suggest that 1.2 billion people, nearly double the number of those living under the poverty line, are acutely deprived of these basic needs, indicating that the international poverty line is not a high-enough threshold.

5. Moreover, poverty is significantly higher in middle- and high-income countries than suggested by the international poverty line

Many people in middle- and high-income countries that do not fall below the international poverty line (US$2.15 per day) still live in poverty based on their national poverty lines, given significant cost of living differences. The comparable national poverty line for lower middle-income countries like India is US$3.65 per day (or US$1,332 annually) while the comparable threshold for upper middle-income countries like China is US$6.85 per day (or US$2,500 annually). In high-income countries like the US, the poverty line for a one-person household is set at c.US$40 per day⁸.

6. 2.8 billion people globally are living below their national poverty lines

Using the relevant poverty lines, Asia still has a long way to go to end poverty. 25% of China and 47% of the rest of East Asia lives below the upper middle-income poverty line; and while India has rapidly tackled and nearly eliminated extreme poverty, 45% of its population (or over 600 million Indians) falls below the lower middle-income poverty line. Poverty is a feature even in high-income countries, where despite significant economic progress and wealth generation, c.390 million people (or c.35% of the population) still live on less than US$40 per day (the same as the number of people in Sub-Saharan Africa that live in extreme poverty). Applying these more contextual thresholds to various regions, it is estimated that c.2.6 billion people, or 34% of humanity, lives in either relative or extreme poverty.

The Agenda for the World to Get Back on a Trajectory to Eliminating Poverty

Despite the rapid progress between 2000-2015, progress seems to be acutely sensitive to event shocks and it is now clear that the seeming progress was not well-enough founded. The fight against poverty has a very long way to go, and meeting SDG-1 by 2030 now seems to be a distant dream, one that without a radical “If [the World Food Program] can describe on this Twitter thread exactly how $6B will solve world hunger, I will sell Tesla stock right now and do it.” Elon Musk on Twitter, November 2021 acceleration in the pace of extreme poverty alleviation in Sub-Saharan Africa, may not be met until 2080. This is only the initial frontier of the fight since it does not address the needs of the nearly three billion people living below their respective national poverty lines across the rest of the world. Charity cannot yield enough to solve the problem of poverty. According to some estimates, the global economy will need to grow at least seven-fold to pull everyone up to a decent standard of living¹¹. At the current rate of c.3.0% real GDP growth, this would take c.65 years, or until nearly the end of the century.

Given these calculations, it would appear that “ending poverty in all its forms everywhere” is a symbolic or moral goal to motivate societies and stakeholders to action, rather than a target that can realistically be achieved in the medium term. If the world is to accelerate the trajectory of poverty alleviation for the nearly three billion people across the world living in absolute or relative deprivation, and to make the goal an achievable one, the main target areas for attention are:

1. c.390 Million People in Sub-Saharan Africa. c.35% of the 1.1 billion people in Sub-Saharan Africa continue to live in extreme poverty, with the largest number of poor in Nigeria, Congo, Ethiopia, Tanzania, Madagascar, Kenya, and Mozambique. To pull these people out of extreme poverty, per capita income growth would need to accelerate by at least c.3x vs. the 1.9% CAGR between 2000 and 2019, to the c.6% levels achieved in Asia when it rapidly reduced extreme poverty.

2. c.770 Million People in South Asia. c.42% of South Asia (largely across India, Bangladesh, and Pakistan) still lives below the lower-middle-income poverty line (US$3.65 per day), of which c.150 million (8.5%) fall below the extreme poverty threshold. This region, led by India, will need to sustain the over 6% per capita GDP growth rates it did in 2000-2019 over a sustained period to eliminate extreme poverty and to pull people into lower middle-income (and eventually upper middle-income) levels.

3. c.670 Million People in East Asia. 32% of East Asia lives below the upper middle-income poverty line (US$6.85 per day), largely across China, Indonesia, the Philippines, and several other smaller countries. The region has seen a rapid transition in the last two decades, and while more advanced countries like China will need to find a way to balance growth towards less prosperous areas, rising economies like Indonesia and the Philippines will need rapid 6%+ per capita income growth as they transition to upper middle-income countries.

4. c.180 Million People in Latin America. c.28% of Latin America lives below US$6.85 per day, despite several countries in the region already having risen to upper middle-income and some to high-income levels. There are large pockets of poor people in the continent’s most populous countries (Brazil, Mexico, Colombia and Peru). Poverty reduction in the region has slowed significantly since 2005 and increased during the pandemic, and will need to accelerate significantly from the c.1.1% real per capita GDP growth it was able to achieve in from 2000-2019.

5. c.175 Million People in the Middle East and North Africa (MENA). c.45% of the MENA region lives below US$6.85 per day, and while many countries in the region have risen to upper middle-income and high-income levels, others have been left behind due to the combined effect of regional conflicts, international sanctions, and political strife, with poverty rates in the region starting to increase from 2011, well before the pandemic. Egypt accounts for 40% of the region’s poor, while large pockets are there in Iran, Iraq, Yemen and Turkey.

6. c.390 Million People in Rich Countries. c.35% of the 1.1 billion people that live in high-income countries live on less than US$40 per day and c.20% live on less than US$30 per day. According to various estimates and survey, the income threshold for poverty in these countries is US$35-40 per day. These societies are already prosperous, however the distribution of income has barely reached the bottom third, and hence per capita income growth is likely insufficient to pull these people out of poverty.

The trend is clear: across regions, the bottom 30-40% (or c.2.6 billion people globally) are extremely economically vulnerable and unable to generate sufficient income to address their basic needs within the context of the countries they are living in, and require urgent interventions by other stakeholders. Achieving this agenda requires a mix of policies, initiatives and funding, of which the most potent levers are:

1. Implementation of financial inclusion technology platforms. The Technology as a Force for Good report estimates that 20% of the SDGs can be met by the transfer of existing telecommunications and digital technologies¹². For poverty alleviation, the key takeaway from the report was the potential of FinTech suites which facilitate mass financial inclusion, such as the one India implemented to allow half a billion Indians to enter the financial system with modern banking, credit and insurance products in under a decade¹³.

2. Provision of finance to the mass population at scale and profitably. Microfinance has proven to be a viable model of funding the lives of the poor, at scale and profitably in Bangladesh, India, East Asia, and parts of Latin America. Globally, microfinance providers serve over 140 million households¹⁴ with c.US$226 billion of loans outstanding¹⁵, through women borrowers who use this access to cost-effective credit to fund their livelihoods and small businesses. In most regions (other than Africa), low credit costs relative to net interest spreads¹⁶ have allowed the industry to maintain attractive profitability metrics, attract scaled private equity and debt funding, and scale rapidly organically.

3. Financing quality affordable housing and small businesses for the poor. Home ownership is a stepping stone out of poverty and extreme inequality has made it difficult for the poor to live close to centres of economic activity, with over 1 billion people living in slums currently¹⁷. With microfinance providing the entry into the credit system and the establishment of a credit history, the groundwork is laid for other forms of secured and unsecured credit to be underwritten, profitably, such as affordable home loans, small business loans, and others, to help the poor climb the economic ladder.

4. Implementation of basic protective finance. With the poor acutely vulnerable to economic downturns, health shocks, accidents, and natural calamities, a set of tech-enabled insurance products can form the basis of a basic security net for raising the poor, including critical health insurance cover, life and accident insurance policies. With enough success cases of these across the world, these require regulation to allow market entry and public-private partnerships to ensure they reach the targeted recipients and to avoid profiteering.

5. Provision of digitally-enabled health and education inclusion to the masses. Digital technologies enable the delivery of education, basic healthcare, and work to all and have the ability to radically reduce the cost of delivering quality health or education services. On the whole, the challenge is the barriers to implementation and scale (government policy in each of these areas in particular and unfriendly investment policies) rather than the state of technology or availability of providers.

6. Investment in infrastructure. For Africa and Asia’s rising lower middle-income economies, investment in transportation infrastructure, renewable power and distribution, and modern telecommunications has the ability to spur rapid productivity and per capita income growth over a sustained period. Recent estimates suggest that c.US$6-7 trillion investment is needed annually until 2050 for infrastructure alone, to meet both sustainability and development goals¹⁸.

7. Industrial transfer to the Global South. . In the last two decades, China has shown the way in terms of attracting foreign direct investment. As the West and China enter a period of rivalry, countries with the right policies and assets become more attractive to those reshoring away from China, including India and the rest of Asia in the first wave¹⁹. International agencies have a role to play alongside the private sector and host country governments need to help Sub-Saharan African countries open up for investment and join the wave. There is also the potential of ‘South-South’ cooperation and investment between some of the fast-rising developing countries and Africa.

8. Harness Africa’s solar potential to power the continent and the world. . Africa accounts for 60% of the world’s solar resources and yet has only 1% of the world’s solar capacity²⁰, and nearly 50% of Sub-Saharan Africa still does not have any access to electricity²¹. There is a significant untapped opportunity to create energy security for Africa²², with c.US$190 billion of investment needed annually between 2026-2030, two-thirds of it for renewables²³. With further investment, the continent can become a major solar energy exporter, supplying up to 20% of Europe’s electricity demand²⁴, and thereby helping drive both its own prosperity and the global energy transition.

9. Invest to support green growth in developing countries. Clean and sustainable growth is critical for developing economies as they are the most vulnerable to the potential impacts of climate change²⁵. Green growth also has the potential to help accelerate growth globally increasing 2050 GDP across the G20 by nearly 5%²⁶. Developed economies, which are the biggest drivers of global emissions, therefore have a critical role to play in investing in clean growth in developing regions to help those economies scale rapidly, and to ensure that in the pursuit of poverty reduction, the world does not lose sight of its emissions targets.

10. Pricing externalities as part of valuing natural resources and fostering systemic change. With a population of one billion in 1800, at the beginning of the industrial age it might have made sense to mine and burn fossil fuels to power growth. However, with eight billion people in 2023, and another two billion in the next three decades, the consequences of our actions need to be properly accounted for. This can help credit the Global South for its natural resources²⁷.

The Case for Poverty Reduction, In Brief. The case for global poverty alleviation is not only a moral one, but also a highly pragmatic one. In terms of managing downside risks, in a highly mobile internet connected world and with rising climate risks and security issues, the poor will migrate to neighbouring countries and further afield, while the poor inside rich countries will tend to be excluded from education, healthcare and higher quality work, and become more susceptible to National Populism. Further, without raising the income levels of developing countries, it is unlikely that their growth will be environmentally-friendly, and this will in turn accelerate climate change and wreak havoc on all. In terms of creating new opportunities , the c.85% of the world that lives in the Global South²⁸ is rapidly getting connected to the internet, with the cost to reach universal internet access by 2030, estimated at US$428 billion²⁹, being negligible compared to the potential economic benefits, estimated at 5-45x the investment cost³⁰. This will make for attractive customers and profitable growth, providing an incentive to global industries and investors. Just as China’s customers could not be ignored by global enterprise, and nor will India’s 1.4 billion people, nor will Africa’s population of 2.5 billion in 2050.

Conclusion: Fighting Poverty is a Fight That Can, and Must, be Won

Over the course of the last two centuries, the Malthusian belief that poverty is an inescapable consequence “It has appeared that from the inevitable laws of our nature, some human beings must suffer from want. These are the unhappy persons who, in the great lottery of life, have drawn a blank.” Thomas Malthus, An Essay on the Principles of Population, 1798 of growth has been resoundingly disproven. This period has witnessed not just remarkable economic growth, but an equally remarkable rise in living standards across the world. Instead, Adam Smith’s initial intuition that poverty and inequality are a hindrance to progress has, in fact, been validated. The most certain route to economic advancements lies in ensuring the active participation in economic growth of all individuals, particularly the most impoverished.

It is worth noting that the world has made more progress over the last 50 years than at any other time in history. It took the c.150 year to reduce the proportion of its people living in extreme poverty from 80% to 50%, and in contrast, it took only c.50 years to reduce this from 50% to 8% currently (see chart³¹). But this progress hides two important realities. Firstly, the extreme poverty threshold is far too low to accurately measure poverty today, and multidimensional poverty estimates and national poverty lines suggest the actual proportion of the world living in poverty is closer to one-third. Secondly, it obscures the sharp slowdown and reversal in poverty alleviation in recent years which started soon after the adoption of the SDGs and was badly exacerbated by the pandemic and its aftermath.

What has changed fundamentally in the last few decades is that the world has become unaccepting of poverty as inevitable, and moved the goalpost from simply reducing poverty to eliminating it and creating a shared “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, clothe, and lodge the whole body of the people, should have such a share of the produce of their own labor as to be themselves tolerably well fed, clothed, and lodged.” Adam Smith, The Wealth of Nations, 1776 prosperity for all. Many countries have assumed the challenge of addressing poverty themselves rather than waiting for others to help solve it for them, and those with the means have started stepping in and helping in whatever ways they can. This was the spirit that led to SDG-1. The fact that eliminating poverty is the first SDG reveals a shared human-centric approach to economic development and environmental sustainability which the world now aspires to and judges itself by.

Of course, setting a goal does not mean that meeting it will be easy. Indeed, the current failure of failing to meet SDG-1 is a wake-up call for the world. With Asia’s rise and likely victory over poverty, poverty’s next mile is Africa. However, it cannot be forgotten that poverty exists throughout the Global South with poor next to rich and also in the very rich nations where poor live on the outskirts of urban centres and in effective ghettos. The challenge of raising everyone’s living standards to upper middle-income or high-income levels remains a daunting one. Further, ensuring that this happens without creating catastrophic environmental damage adds an existential dimension to the challenge.

The blueprint and the technology for ending poverty already exists. Large developing countries like China and India, which are as socially and politically complex as any country, have shown how to break out of a pattern of poverty and pull their societies towards middle-income and soon high-income levels. It is also now clear that smart climate investments can drive economic growth and energy security, and are not necessarily an inhibitor to growth. This fight will not be won in a few years, but it can be won far quicker than the current trend line suggests. This requires recent crises and setbacks to be seen as a call to action with the clear understanding that the consequences of not acting are unbearable and the benefits are enormous. It is unlikely the world can progress to its highest potential, regardless of how much innovation we unlock or absolute wealth we create, with one-third of its population in poverty. An inclusive, sustainable, and superior global society is a pre-requisite for human progress.

The Leader: Endnotes

1. Source: World Bank, Poverty and Inequality Platform

2. Source: United Nations, Department of Economic and Social Affairs, Statistics Division (https://unstats.un.org/sdgs/report/2022/goal-01/)

3. Source: World Bank, Nov-2022 (https://www.worldbank.org/en/topic/poverty/overview)

4. Source: UNDP 2022 Global Multidimensional Poverty Index (MPI)

5. Source: World Bank Blogs; Marta Schoch, Nishant Yonzan, Ruth Hill, Christoph Lakner; November 30, 2022

6. Source: ibid; the World Bank’s estimates of percentage of people living in poverty have been calculated based on the World Bank’s world population forecast until 2030

7. Source: UNDP 2022 Global Multidimensional Poverty Index (MPI), World Bank Poverty and Inequality Platform, Alkire, Kanagaratnam and Suppa (2022), from Our World in Data

8. Source: US Department of Health and Human Services 2023 Poverty Guidelines for a one-person household

9. Source: Jolliffe et al. (2022); World Bank, from Our World in Data

10. Source: GPC estimates based on data from World Bank Poverty and Inequality Platform; different poverty thresholds have been applied to different regions based on the average income ranges for countries in these regions

11. Source: Our World in Data, How much economic growth is necessary to reduce global poverty substantially? Max Roser, March 2021

12. Source: Technology as a Force for Good: Technology for a Secure, Sustainable and Superior Future,

13. See Sign of the Times Leader from September 2022: Technology as the Enabler of Systemic Financial Revolution

14. Source: Convergences

15. Source: Precedence Research

16. Source: Microfinance Profitability, Peter Muriu, Birmingham Business School

17. Source: UN DESA, Statistics Division (https://sdgs.un.org/goals/goal11)

18. Source: Higher end of estimates is US$6.9 trillion annualy (from OECD, UNEP, World Bank Group, Financing Climate Futures: Rethinking Infrastructure) while lower end of estimates is US$6.3 trillion annually (from OECD, Investing in Climate, Investing in Growth)

19. Source: Nomura, Diversification from China: The Push and Pull Factors, August 2020

20. Source: International Energy Agency, Africa Energy Outlook 2022

21. Source: World Bank

22. Source: PwC, Africa Energy Review 2021

23. Source: World Economic Forum

24. Source: Centre for Economic Policy Research, Rethinking African solar power for Europe

25. Source: OECD, Green Growth for Developing Countries: A Summary for Policymakers

26. Source: OECD, Investing in Climate, Investing in Growth

27. Please see interviews with Paul Polman, former CEO of Unilever, and Phoebe Koundouri on the nature of capitalism needed to address global sustainability challenges; from the the Force for Good Initiative

28. Source: Peterson Institute for International Economics

29. Source: ITU, includes investments for universal 4G coverage, policy interventions to make data affordable and investments in developing digital skills and content

30. Source: Tony Blair Institute for Global Change

31. Source: World Bank Poverty and Inequality Platform