The truth on poverty reduction around the world

Facts and figures from the United Nations show that 767 million people live below the international poverty line of $1.90 a day.

At risk of sounding repetitive, Nigeria is now the official poverty capital of the world. Official according to the world poverty clock although the government is still waiting for official confirmation from our statisticians to know for sure. This poverty is expected to continue for a while as many are projecting that sub-Saharan Africa in general, and Nigeria and the Democratic Republic of Congo in particular, are set to house the majority of the world’s poor.

However, if you have been following the Nigerian economy you would know that poverty is not a new thing. It may have been rising (still waiting for official confirmation of course) but it has been there for a while. So why are we in the news all of a sudden? Well, the other centres of global poverty have somehow managed to take massive steps towards eradicating poverty in their countries. In 1960 about 65 percent of the world lived in poverty. This dropped to 44 percent in 1981 and today has dropped to just over 8 percent of the world population living in extreme poverty. The Nigerian and African story is not necessarily that poverty has been increasing (which it has in many cases) but that the rest of the world has been very good at eradicating poverty, leaving Nigeria and Africa behind.

The obvious next question is “how did the rest of the world do it”. On this note, a new paper published by Lant Pritchett at the Centre for Global Development identifies some important observations. A significant part of the poverty reduction has been driven by economic growth in not just large economies like China and India but in smaller countries like Vietnam. Between 1980 and 2017, China reduced poverty from 84 percent to less than two percent today. In Vietnam, poverty dropped from 33 percent in 1993 to less than 10 percent in 2016.

Over this same period, many rich countries and development agencies have launched various programs and interventions across many countries including in Africa, trying to alleviate poverty. The verdict according to Pritchett? Economic growth and migration are responsible for almost all poverty reduction over the last four decades. Almost all countries that have reduced poverty significantly over the last few decades have experienced periods of strong economic growth. Economic growth is a necessary condition for any sustainable reduction in poverty. It does not mean that growth automatically reduces poverty, but no growth definitely implies that poverty is not going to be reduced.

The second most important factor in poverty reduction was migration. People being able to move from poor countries to rich countries to work. According to Pritchett, the “magnitude of the income gains of the “best you can do” via direct interventions to raise the income of the poor in situ is about 40 times smaller than the income gain from allowing people from those same poor countries to work in a high productivity country like the USA”. Facilitating the migration of people, therefore, has a lot more potential to reduce poverty than the average intervention program. A hidden message for those who believe Nigerians trekking across the desert to wash plates in Europe is embarrassing. This, of course, is not to say that intervention programs have no impact. Some of them do, but the impacts are minuscule both in terms of their absolute effects and in comparison to the impacts of broad-based economic growth or migration.

All this must be taken within the context of our attempts to fight poverty here in Nigeria. How can you reduce poverty when your economy is growing at one percent? How can you reduce poverty when your economy is not creating enough jobs? In the next couple of weeks, the National Bureau of Statistics will release more recent unemployment data and the unemployment rate is probably going to be higher than its already high 18.8 percent as at the third quarter of 2017. By all measures, we are in dire straights and the questions have to be centred on how to generate sustained economic growth that creates jobs. The palliative interventions such as traderMoni and N-Power, however useful they may be, cannot replace the need for real policy to spur growth in key job-creating sectors. Without that, we are really in trouble.

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