We know that fiscal policy can be harnessed to reduce inequality in low- and middle-income countries, but until now, we knew less about its ability to reduce poverty. Our recent volume looks at the revenue and spending of governments across eight low and middle income countries (Armenia, Ethiopia, Georgia, Indonesia, Jordan, Russia, South Africa and Sri Lanka), and it reveals that fiscal systems, while nearly always reducing inequality, can often worsen poverty.
: refugees, rapid and unsustainable urbanization and climate change, failure to meet basic infrastructure needs, youth unemployment and disengagement, and stubbornly poor health and education outcomes, to name a few. Set against a backdrop of political and public pressure to do more with less – and see results faster than ever – even the most optimistic among us are likely to view the glass half empty.
Beatrice Montesi, GAIN
Martin P. Gambrill, The World Bank
Rebecca Jean Gilsdorf, The World Bank
Crowded slums, poor sanitation and unhealthy diets. It’s a potent cocktail and for too many families across the world, a daily reality. Right now, an estimated one billion people live in slums and that number is expected to double by 2030. Slums are where the many deprivations facing the urban poor collide, including lack of access to clean drinking water, sanitation, safe and nutritious foods, sufficient living space, durable housing and secure tenure (UN Habitat). They’re where human waste is routinely emptied into streets, canals, and garbage dumps. And where overcrowding and low rates of immunization and breastfeeding combine to exacerbate the already perilous problems children face.
Children growing up in these surroundings are at a higher risk of death and disease and are more likely to be chronically malnourished (Ezeh et al. 2017). For example, forthcoming World Bank research from Bangladesh shows that children living in slums are 50 percent more likely to be stunted than children living in other urban areas. This doesn’t just have implications for today - , and face a higher risk of chronic disease as they grow older. Tragically, these effects are often passed on to offspring, trapping families in poverty and malnutrition for generations, as per findings in a forthcoming World Bank report called Uncharted Waters.
Indonesia continues to make strides in expanding access to early childhood education (ECE) across its vast archipelago, now reaching some 70.1% of 3-6 year olds. Yet despite this increased availability, quality of services continue to be poor, especially in rural and low-income areas. In particular, there continues to be reliance on under-qualified teachers, with many having received inadequate formal training, or none at all.
Global economic growth is accelerating. After registering the slowest pace since the 2007-2009 financial crisis in 2016, global growth is expected to rise to a 2.7 percent pace this year and 2.9 percent over 2018-19.
While much has been said about better economic news from the major advanced economies, the seven largest emerging market economies—call them the Emerging Market Seven, or EM7 – have been the main drivers of this anticipated pickup.
The contribution of the seven largest emerging market economies to global output has climbed substantially over the last quarter century.
The EM7 -- Brazil, China, India, Indonesia, Mexico, Russia and Turkey – accounted for 24 percent of global economic output over 2010-2016, up from 14 percent in 1990s. Although this is a smaller share than the Group of Seven major industrialized economies, the G7’s portion of global economic output has narrowed to 48 percent from 60 percent over the same time frame.
In 2006, I was working in Aceh, Indonesia (with the Red Cross), a region devastated by the 2004 Indian Ocean tsunami. Amongst other post-disaster recovery activities, we were working with 20 coastal communities, helping them with community-managed small grants and encouraging them to invest in disaster resilience within their communities.
To my delight, all 20 communities, independently, chose to invest in the restoration of their mangroves that had been completely or partially destroyed by the tsunami. To them, losing their mangroves was like losing their ancestors: Mangroves defended them, provided them with food and a livelihood, and made their coastline beautiful. The mangroves were their pride, and reclaiming the mangroves was of the highest priority for them as a community.
When people spend money, their decisions are often influenced by the desire to signal wealth and attain social status. This insight is not entirely new – even Adam Smith, in the Wealth of Nations, complains that his contemporaries spend too much on “status goods” that are not a necessity of life, and which they most likely can’t afford.
Social signaling motives in consumption seem to be present in many different economic settings, and may in fact be so widespread that they can be linked to larger economic phenomena, such as inequality and persistent poverty. Studies using household surveys show, for example, that the poor around the world spend a strikingly large share of their income on visible expenditures, which may have negative implications for asset accumulation, household indebtedness, and investments in education.The same pattern has been shown to hold for ethnic minorities in the Unites States – so much so, that a recent study argues that differences in conspicuous consumption may account for as much as one third of the wealth gap between Whites and African Americans
“Peatlands are sexy!” They aren’t words you would normally associate with peatlands, but judging from the large audience that participated in the lively discussion on financing peatland restoration in Indonesia at the “Global Landscapes Forum: Peatlands Matter” conference, held May 18 in Jakarta, it seems to be true. The observation was made by Erwin Widodo, one of the speakers in the World Bank-hosted panel discussion at the event.
For me, it was a great honor to moderate a panel comprised of several of the leading voices in the space: Kindy Syahrir (Deputy Director for Climate Finance and International Policy, Finance Ministry), Agus Purnomo (Managing Director for Sustainability and Strategic Stakeholder Engagement, Golden Agri-Resources), Erwin Widodo (Regional Coordinator, Tropical Forest Alliance 2020), Christoffer Gronstad (Climate Change Counsellor, Royal Norwegian Embassy), and Ernest Bethe (Principal Operations Officer, IFC).
It was the right mix of expertise to address the formidable challenges in securing resources to finance sustainable peatland restoration in Indonesia. These include finding solutions to plug the financing gap, and identifying instruments and the regulatory framework necessary to strengthen the business case for peatland restoration. A significant amount of finance has been pledged. But one of the key issues the panel needed to address was how to redirect available finance towards more efficient and effective outcomes to reach sustainable restoration targets.
Eliminating inequality is integral to the Sustainable Development Goals , from ‘universal access’ to water, to ending poverty ‘everywhere’. Yet in a world where the politics of who gets what is increasingly polarised, leaving no-one behind is fundamentally a political project.
In a recent study with WaterAid in Nepal, for example, we found that in rural areas a combination of poverty, caste, and geography have shut the poorest fifth out of politics. While access to water has increased significantly for others, they are lagging behind.
Every city, country or district has its own political rules, most of which aren’t written down. Yet despite all this complexity, experts working on essential services like water, sanitation, health or education can avoid some common political missteps, wherever they work. Here are four most typical ones: