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Global data

Poverty is worsening

by Hans Dembowski


The World Bank expects extreme poverty to increase this year. The reasons are Covid-19, violent conflicts and climate change. That is the most important message in a recently published report.

The report’s title is “Reversals of fortune”. It is the 2020 edition of the series called Poverty and Shared Prosperity. The authors reckon that 100 million people will be pushed into extreme poverty because of Covid-19 in the course of this year alone. That is a dramatic increase. In 2017, the total number of extremely poor people worldwide was not quite 690 million, according to the report, and the number had been declining for a long time. That decline had been slowing down in recent years, and has now been reversed, so hunger is obviously becoming worse.

Global heating is compounding the problems. The World Bank estimates that the manifold impacts of climate change will plunge up to 132 million more people into extreme poverty in the course of this decade. Violent conflict is said to be devastating as well. The report warns that the pandemic, environmental problems and civil strife cause mutually reinforcing problems.

While the poor remain predominantly rural, young and uneducated, the authors point out that other groups are increasingly being affected too: “The new poor tend to be more urban than the chronically poor and to work outside of agriculture, in sectors including informal services, construction and manufacturing.” Social mobility is being reduced while inequality is widening.

Assessing global statistics diligently, the authors sound the alarm unmistakably. They want action be taken to stop the downward trend. Unfortunately, their proposals are less convincing than their warnings. Suggestions such as “closing the gap between policy aspirations and attainment” are easier said than done. The statement that “success requires leadership that is fully committed to securing political accountability and financial support” is certainly correct. The big question, however, is what considerations lead to policymakers often being less than fully committed. For diplomatic reasons, the multilateral institution usually shies away from addressing such explicitly political issues.

A long-standing pattern of World Bank reasoning is to try to leave as much as possible to market forces. Accordingly, the new report proposes to make efforts to identify the needy and then provide targeted support. The problem with this approach is three-fold:

  • it requires considerable administrative capacities,
  • uses resources for excluding people not considered sufficiently needy, and
  • tends to breed resentment among those who feel poor, but do not benefit.

Building rudimentary social-protection systems that serve all people to some extent typically costs more money, but it is far less controversial politically. Moreover, it contributes to nation building (see my contribution in Monitor section of D+C/E+Z e-Paper 2019/11).

The report is not easy to read. The World Bank is developing its own technical jargon, and the technocratic style means relevant political challenges are not clearly spelled out. To some extent, one must expect a multilateral institution to do both. On the other hand, clearer messages would help the global public to understand these issues, and the pressure on policymakers to improve governance might grow.

World Bank, 2020: Reversals of fortune. Poverty and Shared Prosperity Report 2020.