Africa is rising - is poverty falling?
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Several people, from The Economist to this blog, have been highlighting Africa's accelerated GDP growth of about 5 percent a year for the decade before the 2008-9 global economic crisis, and the two years since the crisis. But has this growth served to reduce poverty?
The latest globally consistent estimate of poverty rates has an answer: Yes.
Using the measure of people living on $1.25 a day or less, the World Bank's poverty measurement team, led by my colleague Martin Ravallion, estimates that the percentage of poor Africans fell from 58 percent in 1999 to 47.5 percent in 2008. This rate of decline of about one percentage point a year is a welcome change from the previous decade when growth was much slower and the poverty rate increased.
In the past, even when the poverty rate fell, we typically found that the absolute number of poor people rose because of rapid population growth. Between 2005 and 2008, for the first time, the absolute number of poor people also declined, from 395 million to 386 million. Nine million Africans, equivalent to the entire population of Benin, escaped poverty during those three years.
What about individual countries? Here, we should look at national poverty estimates, which use countries’ own poverty lines.
My colleague Mimi Oladipo's post on this blog documented Rwanda's moving one million people out of poverty. In a survey of 18 relatively fast-growing African countries, Andy McKay finds that poverty fell in almost all of them, albeit at different rates.
Ghana and Uganda showed significant declines in poverty, helped by the fact that inequality also declined. Where growth was anemic or negative, as in Cote d’Ivoire, poverty rates increased.
In short, economic growth reduces poverty. But we cannot be complacent. Given that it is the region with the highest poverty rate, Africa's rate of poverty decline is too slow. African countries need to grow faster, and increase the growth elasticity of poverty--the rate at which a given level of growth reduces poverty.
Such blogs remind me why the so called bottom billion remain in poverty or keep increasing in number. In each of the countries cited, inequality has increased over the last decade. A very rich minority and a 99% whose lot in life is getting worse. The number of people living in absolute poverty is increasing (if you do not believe me, ask anyone who lives in Africa to tell you their story or the situation in their country ). At the same time economists spew statistics that paint a rosy picture and statements such as 'Ghana and Uganda showed significant declines in poverty, helped by the fact that inequality also declined'. What??
Much emphasis should be put on the Africa's control of the stock market and the ability of citizens to take entrepreneurship as another alternative.
Thank you for your comment. By "inequality" I was referring to a specific measure of inequality, which captures how far the distribution of income is from perfect equality (everybody has the same income). It is possible that this measure has decreased, and yet people feel that the rich are getting richer, and the poor poorer. We can all cite anecdotes about particular people or circumstances. The question is: what is the overall level of inequality, or poverty? In the cases of Ghana and Uganda, there is robust evidence that the overall poverty rate fell, even if we know individuals who got poorer, and some rich people who got even richer. I should add that Paul Collier's "bottom billion" refers to people living in fragile states, which does not include Uganda and Ghana.
Regardless of the naysayers that will always find reasons to complain, this is evidence that progress has been made. And when this progress can actually be translated into nine million lives improving their prospects, it is reason to celebrate.
Go Africa!
How is your argument proving that growth is not reducing poverty?
The evidence shows there are less poor people in Africa now, which Africans have every right to be commended for. Nobody said the job is done. I agree with Shanta. Go Africa indeed!
Dear Shanta,
Thanks again for an interesting post. While the trend is good news, one has to wonder how the quality of life changed for poor people. How is it different say, between 1.25 and 1.35 or 1.45 or 1.50? The absolute number of poor people may change, but does it really make a difference on how they live? Are they better off at 1.35 or 1.45? I would say, unlikely. So leaving “inequality” aside, does economic growth alone sufficient for betterment of people.
300M people added to the 200M living below $2 a day from 1980 to 2008 is not a decline in any sense. Ask the 500M Africans if they believe poverty is declining.
There are at least 9 million better off, and that is great news. While there is still poverty, and some rich get richer and some poor get poorer, practically speaking improvement is likely to occur incrementally, so patience will be required and remaining positive will assist further improvement.
There is also a growing body of evidence that development activities can and sometimes do result in broad-based improvements in income or livelihoods and commensurate poverty reduction. See the link under Reducing African Poverty at http://www.jfoehmke.com for examples and references.
Thanks for the question. You're right that going from 1.25/ day to $1.50/day is not a big increase in your standard of living. But that strengthens the point that we need even faster growth to help these people rise to, say, $3/day and more.
Eddie, thanks for your comment. By definition, when someone's consumption rises above $1.25/day, they initially remain below $2/day. This is why the number of people living under $2/day hasn't changed by much. While trying to help these people rise above $2/day, we mustn't forget that there are still over 350 million living in extreme poverty, that is, $1.25 /day.
I suggest you re-read the bottom billion by Paul Collier. Uganda and Ghana are isolated as examples of countries that have fallen into the 'traps' that characterise the bottom billion. the problem with most economists and dare i say development professionals is that they see figures and not people. Most of Africa is at a boiling point because ordinary people who form the majority are experiencing unprecedented levels of poverty and lack of access to basic services. Many wonder how economic indicators keep showing growth when things seem to be getting worse for everybody they know (except ofcourse for the 1%). For an alternative approach to helping Africa, you may want to consider ideas proposed by Dambisa Moyo and Daniel Ben-Ami. There is a tried and tested recipe for creating wealth and it works. The approach used by the Multi-lateral agencies has not led to less poverty. It has contributed to dependence by Africa, more corruption and poverty.
Dear Shanta,
I strongly agree with you that the rate of poverty decline in Africa is very slow. Infact with increasing population in the continent and limited resources still, it is even more difficult to say whether there is truly reduction in poverty. I would be very delighted to hear any suggestions you might have to contribute to the growth of Africa and decrease in poverty.
Vivian, you are right that population growth is slowing the rate of poverty decline. But that is why the recent estimates are so impressive. Despite rapid population growth, the number of poor people has declined (for the first time) by 9 million people between 2005 and 2008.
9million people who have moved from near starvation to rationed food is a measure of progress? Most of Africa is still unchanged over the 50years. Asia is on the upswing, Latin America is moving forward, Eastern Europe and Asia yes. Africa......
Dear Shanta,
Yes, the reports are indeed impressive! Good work being done although there is still much work to be done. I hope there will be better future reports and I would love to contribute to such achievements in Africa.
This is an incredibly salient point. Some governments are much better than others at providing basic services to their citizens—and poor people in those countries are likely much better off than their counterparts in others. This is a dimension of poverty generally not captured by consumption poverty estimates. (Correct me if I’m wrong.) But it is incredibly poignant when attempting to make the claim that people are better off. Moreover, economic inequity is also a powerful force when it comes to standards of living. Since you’re using an average poverty line based on 10-20 of the poorest countries, it’s likely to be more susceptible to the effects of inequity in individual countries. ($1.25 in a highly equitable country is much better off than $1.25 in a highly inequitable country. So, if the majority of progress was made in countries where inequity was also increasing rapidly, it may not be such encouraging news.) A finer resolution analysis of these details would be welcome.
For me the issue is not just how many people in Africa are still living on $1 or $2 a month (which is bad enough) but the general conditions under which these people have to live. Many people in Africa still lack ready access to so many basic social amenities and this needs to change. Governments and leaders in Africa need to do more to drag more people out of poverty. The lack of these amenities only further worsens the living conditions of many Africans and even if there is a sudden jump in income to say $10 a day, many people will still end up spending that money on things their government should have provided as a matter of right in the first place. Nevertheless, any form of improvement in Africa is most welcome but it is important that it filters down to everyone.
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Am a Kenyan by birth & born in a poorer location. I love my village though i always dont think on how i can be politically known but on how i can improve that place. Our economy is very poor that i doesn't favour low earners in anyway. We have very active young people that they have very rich technical know-how that they can improve their status within an year. Agriculture in my home village have positive answers that if at all the government is serious on it people cant starve in Kenya nor wait for what we call 'msaada' . I have a thought in me that i cant give to any of politicians nor the so known big fish in Kenya.
Dear Richard,
I really liked your point that in your village you had very active young people that have very rich technical knowledge.
I am researching an article about communities managing their own resources as cooperatives without the interference of big businesses or governments.
I love your positive attitude and would really like to get a few quotes from you if you have the time? (I won't take up much of it).
If you are available, could you please drop me a line at my email: [email protected]
Kind regards,
Lynette
When I learned economics, I was taught that growth is a necessary but not a sufficient condition for poverty reduction. This seemed radical to those who said growth is sufficient. But I think the so called radical position is too benign. I think we should regard growth as we do technology–something that could be good or bad for poverty reduction, depending on the governance of it. At the extremes we have resource curses (growth in pure GDP terms that is corrosive), but the variation in the impacts of growth on poverty (by sector, location, initial inequality, policy environment, natural environment, market rules) suggests to me that the governance of growth is vital. Growth is not only good or neutral for poverty reduction, it can also be bad. We need to be much more deliberate about setting up growth to reduce poverty.
Dear Shanta, it is true that the number of poor people in the continent dwindled by some 9 million between 2005-2008 -- great news. But since 1990, the MDG baseline year, they actually increased by a staggering 100 million. Furthermore, the World Bank's Global Monitoring Report 2012 projects numbers to increase by some 13 million by 2015 -- that is, reaching the highest level (397.2 million) ever in a quarter century. How would these trends reconcile with the more rosy outlined scenario? Thanks for hosting this interesting debate.
Africa's labour market should be placed in to serious emphasis even though the continent's GDP has grown steadily for the past decade.
Africa's economy is growing steadily but much emphasis should be put on the continent's overall stock market because it contributes largely to the GDP.