Is it possible to end extreme poverty? And by 2030?
That’s the aim of the first of the 17 UN Sustainable Development Goals (SDGs). These were adopted by all nations and have begun to drive conversations at global gatherings, including those that I have contributed to in recent weeks. This ambitious goal builds on the dramatic fall in worldwide poverty since 1990. Then, over one-third of the world’s population lived on less than $1.25 per day, adjusted for purchasing power parity or what a dollar buys in a country. That measures the level of abject poverty, and has since been adjusted to $1.90 per day. Based on these measures of extreme poverty, we are at a historic point where just 1 in 10 people in the world are poor. It means that over 1 billion people have been lifted out of extreme poverty since 1990. The halving of the global poverty rate happened more quickly than the UN’s Millennium Development Goals (MDGs) had envisioned. The MDGs aimed to halve poverty worldwide from 1990 levels by 2015 – it was achieved in 2010. So, the current SDGs are more ambitious. The aim is to end extreme poverty in just 13 years by 2030. It means lifting the remaining 767 million poor out of poverty. But, what has worked before may not be enough this time. In other words, most of the poverty reduction occurred because of China’s economic growth as well as the rest of the East Asian region – countries which are on course to ending poverty. The poverty rate in East Asia fell from 61% to 4% between 1990 and 2015. In South Asia, it's dropped from more than half (52%) to 17%. By contrast, the number of poor isn’t declining in Sub-Saharan Africa and more than 40% of Africans still live in abject poverty. This is despite Africa registering the second fastest growth rate after only Asia during this period. The implication is that though it has worked largely for China and other Asian nations, economic growth isn’t enough to reduce poverty. High levels of inequality, for instance, mean that an economy can grow and not help the very poor. So, that means eradicating poverty requires new strategies, in addition to what has been tried in the past couple of decades. Half of the 767 million poor live in Africa and one-third are found in South Asia. The remaining poor dwell in East Asia, Latin America, and Eastern Europe, all regions which are on track to end poverty. Thus, the poor in Africa and South Asia should now be the focus. And devising economic growth that helps the poorest will require new approaches. For instance, reducing income inequality should be a higher priority. That typically requires redistributive policies, but also pre-distribution ones such as mandating education to better equip the workforce. Also, capital accumulation tends to be the engine of growth for industrialising nations, so investment funds are needed. This can come from public and private sources, and usually involves both governments and businesses working together to get financing into countries to fund entrepreneurship and infrastructure. How these funds are deployed, of course, is where novel strategies are particularly needed. For instance, effective deployment of funds requires an understanding of the needs of the locality. Some of the most knowledgeable of a community’s needs are found in civil society organisations. NGOs or non-governmental organisations of any stripe can, for instance, help transmit the needs of a locality to government and businesses so that funding and resources can be used more effectively to foster economic growth. There is also a degree of accountability from smaller groups rooted in a community, as much of the evidence from social capital studies show. Of course, there is not one recipe for economic success. But, involving more participants with a stake in society is worth considering. After all, policymakers and businesses have increasingly sought feedback from their citizens and customers about governance and needs. It’s just a step further to encourage individuals to become involved to help grow their communities. Governments do not have all the answers, nor do business. Working with communities to support economic growth would be a natural step. Without trying more eclectic ways of thinking about growth strategies, poverty is likely to persist. To realise the ambition of living in a world without extreme poverty will require trying something different and more collaborative going forward. Our Chair contributes to the FT annual survey
1. Economic prospects How much, if at all, do you expect UK economic growth to slow in 2017? Please explain your answer. I expect UK economic growth to remain fairly resilient, supported by relatively optimistic consumer confidence, a slower pace of fiscal austerity, and a weaker Pound. The UK will still be in the European Union in 2017, so there will be no fundamental change to market access to the EU Single Market. However, growth may be weaker than in 2016 if businesses defer investment decisions as a result of the continuing policy uncertainty related to Brexit. 2. Brexit Compared to what you thought 12 months ago about the UK's long-term economic prospects outside the EU, are you now more optimistic or more pessimistic than you were? More optimistic than 12 months ago Feel about the same as 12 months ago More pessimistic than 12 months ago Please explain your answer. I feel the same. Access to global markets is the key to the UK's long-term economic prospects. So, on the positive side there is undoubtedly a renewed vigour for striking international trade and investment deals, especially in fast-growing parts of the world and in the trade in services. However, it is likely to take longer than the rather optimistic assessments of how quickly these negotiations can be done. 3. Inflation Inflation has started to increase in recent months. To what extent do you expect inflation to rise in 2017? I expect inflation to rise but not to the heights seen in the aftermath of the 2008 financial crisis as the driver is the weaker Pound and not global price pressures. But, as we have seen in recent months, some of these price pressures are likely to be absorbed into profit margins, so the pass-through into consumer price inflation may be weaker than expected. 4. Monetary policy In December, the Monetary Policy Committee said the next interest rate move could as easily be up as down. Will there be a shift in this monetary policy stance by the end of 2017? Please explain your answer. The chances are that the MPC will not increase interest rates in 2017. The impact of Sterling's weakness on inflation is likely to be viewed as a temporary issue and not a serious risk to the inflation target over a two-year horizon. Plus, with the ECB extending QE to the end of 2017 (albeit with a smaller programme) while the Fed may well raise rates again, the contradictory impact from the UK's major trading partners will also contribute to a wait-and-see tendency. 5. Immigration Immigration is likely to be central to the Brexit negotiations in 2017. How much do you think immigration will change and what effect do you think this will have on the UK economy? I don't see much change in immigration next year as the process for leaving the EU is unclear and likely to take some time, so freedom of movement will be unaffected for a while. Of course, as the UK may want to remain in the EU Single Market at least for certain sectors, much of the economic impact will depend on if the EU will insist on maintaining free movement of people for any such access. 6. Fiscal policy Philip Hammond is expecting government borrowing to fall in 2017. His new fiscal rules provide headroom for more borrowing than currently forecast. To what extent will he need to use it and why? If growth disappoints, or higher borrowing costs result from rising inflation, then the Chancellor may find he borrows slightly more than expected. But unless anything major hits the economy or the public finances, he will likely hold back from any significant change in fiscal policy in the next year and wait until the impact of Brexit is clearer. 7. Donald Trump How do you think Donald Trump's presidency will affect the UK economy in 2017? Trump may favour trade deals with similarly developed economies as those tend to have less of a negative wage impact, so the UK could find itself as one of the trading partners the U.S. is looking to forge a bilateral trade deal with. But, Trump's focus appears to be on withdrawing from trade agreements or renegotiating current America's current 14 FTAs. In any case, if any informal trade talks were to occur, it would boost sentiment with respect to the British economy. Otherwise, his fiscal stimulus is likely to boost the dollar which will contribute to a weaker Sterling, among other currencies. Of course, Trump will continue to add uncertainty to the world, and any change to global growth will also affect the UK economy in 2017. |