Lessons from global poverty reduction

At the start of the New Year, I was giving a set of talks in Beijing on poverty, foreign aid and sustainable development. It gave me an opportunity to renew my interest in better understanding China’s impressive achievements in lifting more than half a billion people out of poverty within two and a half decades. What strategies did China pursue? And what about other countries?

According to the latest available data, almost 800 million people currently live below the international poverty line (defined as $1.90 per person per day). While this means that around 11 per cent of the world’s population continues to live in poverty, there has actually been a major global decline in extreme poverty in the past few decades. This reduction has mainly occurred in two regions – East Asia and Pacific and South Asia – and thus, the geography of global extreme poverty is changing. Indeed, poverty is declining in all regions of the world, but the pace of decline in sub-Saharan Africa is much slower than others.

I have been visiting China regularly since 2011, and even in this short period, have witnessed dramatic changes. The reasons behind China’s success are manifold. Contrary to popular belief, the economists Amartya Sen and Jean Drèze have argued that China invested heavily in health and education and redistribution policies before 1979 – i.e. before it began economic reforms. Thus, it was a case of long-term and strategic planning and investing in human development even before the country achieved high rates of economic growth. Other scholars like Shaohua Chen and Martin Ravallion associate China’s success with its consistent priority of the agricultural sector, while others point to foresighted, although not democratic, leadership. But development across Chinese provinces has been uneven. And I am often told by scholars and leaders in Beijing that “China is the largest developing country in the world” and that millions of people in rural areas continue to live in poverty. Indeed, reducing rural poverty is currently one of Beijing’s main priorities in addition to the promotion of green growth and reduction of pollution, as it gears up to meet the challenges of achieving the Sustainable Development Goals (SDGs).

If we focus on economic growth defined as “GDP per capita”, there are numerous success stories from all over the world. The most widely cited example is, of course, the four Asian Tigers – Singapore, Taiwan, Hong Kong and South Korea – which witnessed exceptionally high rates of growth starting in the 1960s that propelled them into high-income economies. Based on these country experiences, there has been much scholarly work on the notion of the “developmental state”, which is characterised by relatively strong State intervention aimed at achieving high rates of economic growth.

Thus, economic growth alone does not automatically translate into effective poverty reduction unless there is sustained political commitment, well-formulated social policies and a focus on successful implementation of anti-poverty policy.

In the past few years, several African countries have regularly made it into the list of the fastest-growing economies in the world. These include countries that one does not easily associate with rapid GDP growth, such as Ghana, Angola, Mozambique, Ethiopia and Rwanda. Unlike the Asian Tigers, which were successfully able to use growth to eradicate poverty, all of these countries continue to face challenges in distributing the benefits of growth within their countries. While many countries are witnessing rapid and high levels of economic growth, the challenge for them is to convert the benefits of this growth into effective poverty reduction. The success that many countries, including China, have experienced in reducing poverty offers numerous lessons for others.

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