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Poverty

Relative Deprivation, Discontent and Revolutions

Paolo Verme's picture

Social scientists have for long acknowledged that people evaluate their own wellbeing not only on the basis of what they have but also on the basis of what they have relatively to what other people have. Adam Smith (1776) wrote that "By necessaries I understand not only the commodities which are indispensably necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without".1 And Marx (1847) wrote that "A house may be large or small; as long as the neighboring houses are likewise small, it satisfies all social requirement for a residence. But let there arise next to the little house a palace, and the little house shrinks to a hut”.2 

Despite the old age of these ideas, it is only during the second half of the twentieth century that scholars have tried to provide more analytical substance to the concept of relative deprivation. Duesemberry (1949)3 proposed a relative income hypothesis based on the idea that people determine their savings behavior not on their absolute incomes but on their relative position on the income scale. Runciman (1966)4 built an entire theory of social justice around the concept of relative deprivation defined as the sense of frustration that people experience when they observe other people having something they desire and within their reach but unattainable. While popular, these new theories struggled to become mainstream and it is only recently and thanks to studies on happiness that the concepts of relative deprivation have acquired new life.

Who are the bottom 40%?

Jos Verbeek's picture

Who are the bottom 40 percent of society? Where do they live? What do they do? What other characteristics do they have?

These are just some of the questions we are hoping to answer as part of the World Bank Group’s new mission critical – to end extreme and chronic poverty by 2030 and boost shared prosperity. The renewed effort against poverty is needed as more than one billion people in the developing world continue to live in abject poverty (i.e. on less than $1.25 a day).

Poverty reduction at the forefront of development

Punam Chuhan-Pole's picture

The Millennium Development Goals (MDGs) put the fight against poverty at the center of the international development agenda.  And progress has been noteworthy - so much so that it is now fueling more ambitious goals on poverty reduction. But this also brings new demands for better data to measure progress.

 UN Secretary General Ban Ki-moon recently called the MDGs “the most successful global anti-poverty push in history.” With their mutually reinforcing linkages, they committed the world to reducing extreme poverty to historically low levels, while also improving education, health, nutrition, and other development prospects for hundreds of millions of the world’s poorest people. There is no doubt that since their announcement in 2000, the MDGs have raised the profile of poverty reduction in national development strategies, aid discussions and allocation, and the international development discourse. Systematic cross-country monitoring of simple to understand targets proved to be an effective tool in raising this profile.

Shared Prosperity, Poverty Mitigation and the Art of Reasoning

Kaushik Basu's picture

The growth v. inequality debate attracts such widespread participation because, at entry level, it makes such minimal demands on the human intellect. But the debate can be conducted at many levels, leading us into some intricate and indeed treacherous terrain. The newly-declared goals of the World Bank Group—to end extreme poverty in the world by 2030 and to promote shared prosperity in all societies—take the Bank into this disputed terrain and compel it to join in this important policy debate. I have just published a paper to elaborate on the meaning of these goals, examine their strengths and weaknesses, and to initiate a discussion of what kinds of policies these goals push us towards.

Poverty and Disasters—Why resilience matters

Jun Erik Rentschler's picture
Family whose home floods every year. Colombia | Photo: © Scott Wallace / World Bank
Family whose home floods every year. Colombia
Photo: © Scott Wallace / World Bank

It is an alarming trend: extreme weather events and disasters recorded around the globe are increasing in frequency, and in the magnitude of overall economic losses they cause. The recent devastation left by Taiphoon Haiyan in the Philippines is a tragic reminder that many countries around the world continue to be highly vulnerable to natural hazards. While low- and high-income countries alike experience extreme natural events, it is particularly in lower income countries where such events result in economic and humanitarian disasters.

However, the statistics on casualties and economic losses reported in the media fail to give us the full picture of a much more complex, extensive, and prolonged tragedy — which is mainly experienced bythe poorest.

Getting to Zero in the fight against extreme poverty

Lisa Horner's picture

We could be the generation that puts an end to extreme poverty. This is a bold claim that often prompts raised eyebrows and murmurs of disbelief. But it is an idea that Save the Children, The World Bank, and others have been reiterating as we engage with the international process to define a new  framework to replace the Millennium Development Goals (MDGs) – a set of concrete human development targets that have united global efforts to fight poverty since 2002, and are set to expire in 2015. 

But while ending extreme poverty is, of course, a laudable vision, is it a feasible proposition?  Could we really be the generation that achieves it, finishing the job that the MDGs started?

Why Didn’t the World Bank Make Reducing Inequality One of Its Goals?

Jaime Saavedra-Chanduvi's picture

The World Bank Group (WBG) has established that its mission, endorsed by the governors of its client countries, is centered around the goals of sustainably ending extreme poverty and promoting shared prosperity.  Extreme poverty is monitored by the percent of people living below the $1.25-a-day threshold.  The Bank’s mission thus gives a clear message:  Extreme poverty, hunger, destitution must come to an end.

To monitor progress in shared prosperity, the WBG will track the income growth of the bottom 40 percent of the population in each country.  The clear signal the WBG wants to give is that the institutional mission is about reducing poverty, fostering growth and increasing equity, so we need to monitor what happens to welfare of the less well off in every country.  Improving averages is not enough; a laser focus on those who are at the bottom of the distribution at all times, everywhere, is needed.

Growth Still Is Good for the Poor: New paper also looks at shared prosperity

LTD Editors's picture

Incomes in the poorest two quintiles on average increase at the same rate as overall average incomes, according to a new working paper by David Dollar (Brookings Institution), Tatjana Kleineberg and  Aart Kraay. In a global dataset spanning 118 countries over the past four decades, changes in the share of income of the poorest quintiles are generally small and uncorrelated with changes in average income. The variation in changes in quintile shares is also small relative to the variation in growth in average incomes, implying that the latter accounts for most of the variation in income growth in the poorest quintiles. These findings hold across most regions and time periods, as well as conditional on a variety of country-level factors that may matter for growth and inequality changes. This evidence confirms the central importance of economic growth for poverty reduction and illustrates the difficulty of identifying specific macroeconomic policies that are significantly associated with the relative growth rates of those in the poorest quintiles. This reprise of Dollar and Kraay's earlier work also looks at the World Bank's new "shared prosperity" goal by considering the income growth rates of the poorest 40% of the population in each country in addition to looking at the poorest 20%.

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