By Chiara Mariotti, CPAN Research Officer
A key finding of CPAN’s 2014-5 Chronic Poverty Report: the Road to Zero Extreme Poverty was that pro-poorest economic growth is necessary to achieve the first Sustainable Development Goal, eradicating extreme poverty by 2030, and more generally to improve all poverty dynamics.
Pro-poorest growth is an augmented version of pro-poor growth, and is characterised as: i) the bottom 20 per cent of the population growing faster than the average; ii) improvements in living standards of the excluded and backward groups of the population; iii) improvements in poverty dynamics: not only growth of income/consumption of the poorest, but also less impoverishment and more sustained poverty escapes.
Pro-poorest growth is especially relevant to the SDGs agenda to ensure that no one is left behind by the process of growth. Progress has been achieved at the global level, with extreme poverty (measured by the poverty line of PPP$1.90 a day) halving between 2002 and 2012, from 30.96% to 14.88%,[i] but aggregate figures hide massive differences. All regions of the world are characterised by the presence of individuals and groups who did not benefit, or did not as much as the rest, from economic and human development.
In Asia, inequality has increased fast, reversing the previous historical trend.[ii] In many countries, this has translated into a widening of disparities between men and women, rural and urban areas, castes religious and ethnic groups. In others, the gap in outcomes such as access to health and education services has been closing but remains wide.[iii] In Africa, inequality declined on average (Ortiz and Cummins, 2011), but it was associated with a very diversified performance across countries in terms of growth and poverty reduction as measured by monetary and non-monetary indicators.[iv] Latin America has unequivocally become more equal in the last decade, but even there, between 2004 and 2012, more than 130 million people, or one in five Latin Americans, had been chronically poor.[v]
Another issue of concern is that the ‘consumption floor’, or the typical level of well-being of the poorest people (estimated at about half the $1.25 poverty line), has improved very little between 1981 and 2011, despite the reduction in the number of people living in poverty.[vi] This suggests that those who face constraints in being involved in economic and human development have experienced very little absolute gains.
Poverty eradication won’t be possible without sustained growth, and unlikely unless growth is concentrated at the bottom of the distribution. World Bank’s projections show that with distribution-neutral growth (and a 20-year historic growth rate), 6.7 percent of global population will be living in extreme poverty in 2030.[vii] For global poverty to fall below 3%, incomes of the bottom 40% would have to grow 2 percentage points faster than the mean, and average growth should maintain the good performance of the 2000s.
It will not be easy to meet these conditions, but there are some good news: pro-poor growth (possibly pro-poorest too) has occurred in certain countries at certain times, and ultimately the relationship between growth, poverty and inequality can be influenced by policies. In the 2000s, various studies investigated the factors and policies which can improve the impact of growth on poverty, pinpointing the importance of agriculture, the non-farm rural economy[viii] as well as improved access to markets for the poor, enhanced investment in health and education (especially for women) and smoother labour markets.[ix] However, despite this accumulated knowledge, in many countries economic growth is still not fully and beneficially reaching the poorest, with many people being left behind, others being impoverished, or prevented from embarking in sustained escapes from poverty.
This compels an investigation of what policy interventions are required to achieve pro-poorest growth, whether these differ from previous policy prescriptions and whether they differ for countries at different stages of transformation and engaged in different patterns of economic growth. For this reason CPAN has embarked in a research project seeking to answer these questions. Core components of this project are i) the estimation of Growth Incidence Curves for countries in Southeast Asia and Eastern Africa, to identify positive and negative cases of pro-poorest growth; ii) a comparative analysis of policy and non-policy drivers of pro-poorest growth for six selected countries (Ethiopia, Rwanda, Cambodia and Vietnam as positive cases and Lao PDR and Mozambique as negative). The findings of the project will be illustrated in a comparative analysis report, two accompanying policy briefs and a background note discussing the concept of pro-poorest growth. A conference to be held in Manila on the 26-27 on April in collaboration with the Asian Development Bank will offer a forum to academics, policy-makers and practitioners to discuss these themes.
More information on the CPAN project "Leaving no one behind: adjusting economic growth strategies - Pro-poorest growth policy analysis"
[ii] Balakrishnan, Ravi, Chad, Steinberg and Murtaza Syed (2013) ‘The Elusive Quest for Inclusive Growth: Growth, Poverty, and Inequality in Asia’. IMF Working Paper WP/13/152. Washington D.C.: International Monetary Fund.
[iii] Bhatkal, Tanvi with Chiara Mariotti (2016) ‘Who is being left behind in Asia? An illustration in Bangladesh and Vietnam’. Report. London: Overseas Development Institute.
[v] Vakis, Renos; Rigolini, Jamele; Lucchetti, Leonardo (2015) ‘Left Behind: Chronic Poverty in Latin America and the Caribbean, Overview’. Washington DC: The World Bank. https://openknowledge.worldbank.org/handle/10986/21552
[vii] Lakner, Cristoph, Mario Negre, Espen Beer Prydz (2014) ‘How can promoting shared prosperity help to reduce global poverty?’. Policy Research Working Paper 7106, Washngton DC: The World Bank.
[viii] Byerlee, Derek, Xinshen, Diao and Chris Jackson (2005) ‘Agriculture, rural development and PPG post reform. Agriculture, Rural Development, and Pro-poor Growth Country Experiences in the Post- Reform Era’. Agriculture and Rural Development Discussion Paper 21. Washington D.C: The World Bank
[ix] Wiggins, Steve and Kate Higgins (2008) ‘Pro-poor growth and development. Linking economic growth and poverty reduction’. Briefing Paper, 33, January 2008. London: Overseas Development Institute.