The World Bank’s classification of economies as low-, lower-middle-, upper-middle-, or high-income has a long history. Over the years these groupings have provided a useful way of summarizing trends across a wide array of development indicators. Although the income classification is sometimes confused with the World Bank’s operational guidelines, which set lending terms and are determined only in part by average income, the classification is provided purely for analytical convenience and has no official status.
Not so long ago, those countries designated as “low-income countries” (LICs) in the World Bank’s World Development Indicators accounted for the bulk of the world’s poor, such as by the $1.25 a day standard. Today many very poor people live instead in what are called “middle-income countries” (MICs). The change seems dramatic. Almost all (94%) of those below $1.25 a day in 1990 lived in LICs. By 2008 the proportion was down to 26%, with the rest in MICs. Andy Sumner attracted much attention to this aspect of how the global profile of poverty has changed in his paper “Where do the Poor Live?.” Amanda Glassman, Denizhan Duran and Sumner dub this emergence of large poverty counts in MICs as the “new bottom billion.”
There has been much discussion about the implications of this change for overseas development assistance (ODA) and development policy more broadly. In particular, there have been calls for concentrating ODA on the LICs, assuming that the MICs can now look after their own poor.
But we need to look more closely at this “LIC-MIC” distinction, to understand why we have seen this change in the global poverty profile, and what relevance it might have for development policy.
As debates on the post-2015 framework gear up, a strong view is emerging that the next development framework must aim at finishing the job that the Millennium Development Goals (MDGs) started at the beginning of the 2000s. There are many lessons that the development community has learnt about what worked and what should be improved this time around. A new report by Save the Children published today on the occasion of the second meeting of the United Nations High Level Panel on post-2015 in London, Born Equal: How reducing inequality could give our children a better future, argues that inequality is one of the MDGs’ blind spots that needs to be addressed in the next development framework to accelerate progress towards the MDGs and to deliver the promise to eradicate extreme poverty.
Last week I was fortunate to attend the World Bank-IMF annual meetings in Tokyo. The main purpose of my visit was to ensure the smooth functioning of a seminar on the ’Next Generation of MDGs’ and the post-2015 global development framework. I hope many of you watched the discussion, which was live web streamed. For those who missed the discussion by the high level panel, moderated by the World Bank’s brand new Chief Economist, Kaushik Basu, watch it here.
The panel consisted of an impressive group of people: President Ellen Johnson-Sirleaf of Liberia; Helen Clark, Administrator of the UNDP, Gunilla Carlsson, Minister for international Development Cooperation, Sweden; Miguel Castilla, Minister of Economy and Finance, Peru; and Emerging Markets’ just-crowned Minister of Finance of the Year, Akihiko Tanaka, President of the Japan International Cooperation Agency (JICA); our co-host, Homi Kharas of the Brookings Institute and Dr. Jim Kim, President of the World Bank, who got caught up in meetings and was unable to be there the whole time.
On October 8, President Mohamed Morsi issued a decree pardoning all ‘Arab Spring’ political prisoners. While the decree, if implemented, marks a milestone in Egypt’s hard-fought 21-month-long revolution, the quotient of inequality that contributed to setting it off still remains.
From the Arab Spring to Occupy Wall Street, inequality has risen to the top of social agenda. However, our measures of inequality are often limited to final outcomes, such as income, wealth, and educational achievement, which do not distinguish between the impact on inequality of personal responsibility and that stemming from factors beyond the scope of individual responsibility.
World Bank Group President Jim Yong Kim laid out his vision October 12 for transforming the institution into a “solutions bank” that uses evidence and experience to solve problems and listens more closely to the people coping with economic and social challenges in their daily life.
“… It is time to move from dreaming of a world free of poverty to achieving it,” Dr. Kim said at the opening plenary session of the 2012 Annual Meetings in Tokyo. The meeting was attended by representatives from the Bank’s 188 member countries and Japanese Crown Prince Naruhito.
“It is time to bend the arc of history. With global solidarity underpinned by a relentless drive for results, we can, we must, and we will build shared prosperity and end poverty,” Dr. Kim said.
A few weeks ago, World Bank President Jim Yong Kim started a global conversation on what it will take to end poverty, and invited the public to send him feedback. On the opening day of the 2012 Annual Meetings in Tokyo, he shared some of his own ideas for tackling the problem during a live interview with the Wall Street Journal.
Dr. Kim sat down with Jacob Schlesinger, Tokyo bureau chief for the Wall Street Journal and Dow Jones Newswires., to discuss a variety of concerns--from the need to create jobs and find solutions to climate change, to Dr. Kim’s pledge to ramp up efforts to achieve the Bank’s longstanding goal of eliminating extreme poverty.
On the latter topic, a woman from Ghana asked, “What will happen if poverty ends? What next?”
At the World Bank Group, we want to help create a social movement to end poverty and to enhance shared prosperity. But how do you do that? More broadly, how do you start any social movement?
It's not easy. The world is littered with failed attempts. The roadblocks are numerous - including skeptics casting doubt, saying the task is impossible and that others have tried and failed. Why spend time on a futile endeavor? Even if Albert Camus thought he was happy, Sisyphus never did get the boulder to the top of the mountain.
But in nearly three decades of working to fight poverty, I have come to conclude that optimism in the face of seemingly intractable problems is a choice. If your cause is just and you are working in an institution with the means to truly make a difference in the lives of the poor, optimism of the spirit is a moral responsibility.