1. Introduction
This article presents a brief history of ideas to end poverty. Although our discussion can be harked back to a time when disciplinary boundaries were far more blurred than they are today, our focus remains on economic thought and its implications for policy. The opening quote (from a prominent economist of the time) is exaggerated, but it is also true, and it is not only for historians. The intellectual history of poverty has had a long consensus among historians and others, and then a long-standing consensus on almost opposite views.
In many places, in many cases, the clear goal of ending poverty is simply a sign of good intentions. It tells the poor and those who care about them that governments (or international agencies) care about them, even if nothing is actually done to alleviate poverty. This can be referred to as a "symbolic goal".
Occasionally, there have been more substantial goals. Anti-poverty advocates look at poverty from different angles: it is the most morally repugnant inequality, stemming primarily from economic and political power rather than the poor choices of the poor; It is a key material constraint on human freedom and social inclusion; It is a risk that rights can be taken away, regardless of current poverty; It is an obstacle to the achievement of other important goals, including economic efficiency, human development, and environmental sustainability. Actions that could be taken in response include the implementation of specific policies and efforts to bring the poor together to address matters of concern to them. As a result, goal-setting is seen as an incentive to achieve better results, and it may be called "motivating goals."
In any case, first of all, we must agree that poverty reduction is a good thing. As we shall see, history has shown that poverty reduction is a modern idea, and its importance was not obvious in the pre-modern period. It may be argued that people's underlying preferences change over time, leading to a growing concern for poverty. This is a simple explanation, but it is undoubtedly difficult to justify. This article will focus on those explanations that do not assume a change in preference. One might agree that poverty reduction is desirable in itself (for a variety of reasons, both intrinsic and instrumental), but it should be carefully weighed against other important objectives. The focus shifts from preferences to constraints, which determine the choices under these trade-offs. While many people agree that poverty reduction is desirable and call for a policy response, it is still insufficient. They must also be able to organize and form coalitions with sufficient impact, which is extremely challenging.
There is a balance between the influencing factors of motivational goals, but this balance can vary with economic development and vary from place to place. In politics, perceived benefits depend on the weight given to the poor, and the weight of the poor depends on their voting power and organizational ability. The cost of poverty eradication through redistribution depends (in part) on the extent of poverty and the resources available in relation to it. It is not surprising that when the full resources of a society make poverty eradication more feasible, the call for poverty eradication is endless. In The Abolition of Poverty, the economist Jacob Hollander (1914, p. 18) put it succinctly: "It is precisely because there is enough bread to feed all those who must be fed that individual scarcity becomes intolerable." In the same way, when people witness poverty rampant and too little bread, economic growth is more likely to be presented as the right path out of poverty.
Advocates of poverty eradication need to have at least a general understanding of what poverty eradication means. The most common definition is that the per capita income (or income of a single adult) for all households is not below the poverty line. This is the definition used in this article, but there are limitations. Poverty has been measured using sample survey data, although this may result in some poor populations being underrepresented, such as the homeless. In other respects, survey-based metrics are not ideal. External shocks and measurement errors mean that survey-based measured poverty occurs temporarily, even if each person's normal standard of living (average consumption over a reasonable period of time) is above the poverty line. Literally, measured poverty may never go away.
There is another problem with standard household surveys: the measured consumption and certain sources of income are largely confined to the household level. Even if we find that all households consume more than the poverty line per capita, it does not mean that poverty is eradicated in the sense of "no poor". There is evidence that the poor often appear in "non-poor" households. (*1. See, e.g., Haddad and Kanbur (1990), Brown et al. (2019), and De Vreyer and Lambert (2020). Even if the criteria for "eradication of poverty" are met, poverty can still exist.
One might go further to argue that some people choose to be poor, and they do whatever they do. This is certainly possible, but it doesn't seem to apply to the majority. In the history of poverty thought, people have often looked for a distinction between "deserving of help" and "undeserving of help" poverty, which has been blamed on the "bad behavior" of the poor, such as not working hard enough. (*1.Although the label is different, this difference is common.) For example, Anderson (1978, p. 69) uses the phrase "lacking only the necessities of life" to describe the (essentially) needy-worthy poor. There is no credible evidence that poor people who are deemed unworthy of help voluntarily choose to become poor (the behaviours observed from the poor are often interpreted as the causes of their poverty, when in fact those behaviours are likely to be a consequence of poverty). More plausibly, it was (and still is) a convenient moral justification for prioritizing limited relief among large numbers of poor people. Moreover, the emphasis on the able-bodied poor as "not worth helping" reflects the desire of the emerging bourgeoisie to maintain the aggregate supply of labour and thus keep wages low. Sometimes this distinction serves other purposes, including to conceal racial or ethnic discrimination based on baseless stereotypes. Jobs and some incentives may certainly be associated with good policy development, but it is difficult to rationalize the constraints that stand in the way of reaching the able-bodied poor.
The expected cost of poverty eradication also depends on the desired minimum income and the time frame to achieve the goal of "zero poverty". These are certainly not exogenous parameters, but parameters that need to be chosen. If the date chosen is too early, or if the poverty line is set so high that the expected cost of eradicating poverty is enormous, it will be difficult to reach a political consensus on direct action and the incentives for the goals will be diminished. This can also happen if the poverty line is set too low, or if the goal is too far away; At this point, the goal may become inconsequential, as no additional effort is required at the moment. A target date of 20 years above (say) 20 years is likely to have little impact on the actions of politicians, administrators or civil society groups. In order to successfully achieve motivational goals in a given environment, it is important to recognize that the goals cannot be too difficult or too simplistic when setting the desired minimum income and date for achieving the goals. (*1. As discussed in Genicot and Ray (2020), this is an illustration of the more general nature of endogenous "wishes.") When a wish (e.g. for a child) is deemed achievable, it may have a positive motivational effect; And if this desire is out of reach, it can be useless or even harmful. ）
This article begins with a brief review of the manifestations of poverty in ancient thought. Section 3 focuses on the period from the middle of the eighteenth century to the end of the nineteenth century, including the 20 years of the end of the eighteenth century, which can be said to have given birth to the idea of poverty eradication, although it was not widely accepted at the time. Section 4 focuses on the changes in mainstream thinking in the late 19th century and how policy concerns about poverty have subsequently evolved. Section 5 looks at the growing interest in poverty eradication in the 60s of the 20th century, and Section 6 turns to the poverty reduction goals launched in the 90s of the 20th century, which led to the first Sustainable Development Goal (SDG1) of the United Nations to "eradicate poverty" by 2030. Section 7 is a summary.
2. Ancient sages
In pre-modern times, poverty was considered commonplace, but it was not ignored. Avoiding mass famine has long been a political goal. The focus is often on protecting people from shocks; In other words, the focus is primarily on temporary poverty (in contrast, chronic poverty may exist even if consumption levels remain stable for a long time). A large part of its motivation is to maintain social order. Needless to say, guarding against covariate risks is a top priority, as such shocks can provoke mass protests that threaten the social order (Piven and Cloward, 1979).
This line of thinking spans many regimes in ancient centuries. To illustrate this point, let's take the example of the three sages of the time. Let's look first at the Greek philosopher Aristotle, who wrote his book around 350 B.C. Aristotle developed the theory of "distributive justice", but emphasized meritocracy (meritocracy, Fleischacker, 2004). Only the most skilled applicants may be selected for appointment to public office. Aristotle's idea of justice clearly appealed to the free and aspiring middle class, and also to the poor but free. But this idea poses little challenge to the more fundamental social inequalities. Aristotle was aware of the ideas of "equal opportunity" and the right of everyone to "freedom", but they remained subordinate to the "natural order", in which even the master-slave relationship in the form of slavery was accepted by the elites. Aristotle's idea of justice seems to be in line with the prevailing practice at the time. The democratic government of Athens provided various forms of relief, but its primary purpose was to maintain civil order, not to eradicate poverty or reduce inequality (Taylor, 2017, Chapter 5). The poor may have access to some assistance from the State, but not because they are poor.
On the other side of the globe, in China around 500 BC, Confucius listed poverty as one of the "six evils" that a good government should help people avoid. (*1.The other five calamities are: short life, sickness, worry, ugliness, and weakness.) In addition, there are five blessings: wealth, longevity, well-being, virtue, and appearance. But chronic poverty, associated with wealth inequality, is not a prominent policy issue. The most worrying are the threats to a harmonious social order. For Confucius, as long as this order is maintained, "poverty" will not be able to make waves: "Do not suffer from widowhood but suffer from inequality, and do not suffer from poverty but suffer from insecurity." There is no poverty, no widowhood, no peace" (Confucius, quoted in Dawson, 1915, p. 186).
The third example is Kautilya (also known as Chanakya), an ancient Indian scholar around 300 BC. Kodilier may well have been the first economist. The title of his main work (date unknown) can be translated as "Theory of Benefits" or "Theory of Political Affairs". His policy recommendations included addressing the social costs of external shocks through government-funded public works programs, an early prototype of Keynesian stabilization policies, but he acknowledged that transfers were also an option. Again, the motive is to ensure the stability of the regime.
From the time of these sages to modern times, the government's significant role in poverty alleviation has been largely limited to addressing the short-term causes of political instability, such as famine. Private charities and religious institutions have historically been more important, especially in helping the disabled or infirm. Many theologians hail charity as a personal virtue based on compassion for the unfortunate in distress. Local religious organizations have long played this charitable role.
For the next few thousand years, the stability of the regime will still influence policymaking. At the end of the 18th century, however, a new set of incentives emerged that pointed to the role of the state.
3. The First Poverty Enlightenment and its consequences
Around 1800, there was a large number of poor people around the world. Bourguignon and Morrisson (2002) estimated that 80% of the world's population lived in poverty in 1820 (the earliest year of their study series), according to the World Bank's low international poverty line. Lavalre (2016, Chapter 1) divides these 80% of population data by region of the world. (*1.The quality of the data at that time was very poor, and at best it could only be regarded as approximate reference data.) These figures show that around 1820, about half of Europe's population lived in what we today think of as extreme poverty, that is, poverty as measured by the poverty line of the poorest country in modern times; Poverty rates in the United Kingdom and the United States are likely to be slightly lower than in Western European countries. (*1. See Ravallion (2016, Figure 1.1). What was called "poverty" at the time may have adopted a more lenient standard than that. Jeremy Bentham (1843), describing Britain at the end of the 18th century, estimated that 95% of its population was "poor". But he did not provide evidence. Gazeley and Verdon (2014) estimate that the household poverty rate in rural England was 82% around 1800. These include the working poor and the large numbers of unemployed and beggars that can be found in the new slums of industrialized cities (Engels, 1845, Jütte, 1994). Land changes, such as the British (state-mandatory) enclosure movement, liberated workers from agriculture, although not all of them were quickly integrated into the new urban industrial economy.
For some time, the dominant thought was that chronic poverty was more or less an inevitable product of the transition from feudalism to a capitalist economy, and that capitalism (once slavery was outlawed) required low wage rates. For about 300 years before 1800, the dominant school of economic thought (later known as "mercantilism") regarded poverty caused by low wages as a necessary prerequisite for economic development. The eradication of poverty would bring unimaginable losses to the wealth and power of nations. Hunger motivates people to work, while the lack of hunger is counterproductive. This tolerance of poverty is also found in the United States; "In the first two centuries of national development, Americans took it for granted that most people would be forever poor" (Bremner, 1956, p. 3).
Adam Smith's The Wealth of Nations refuted the mercantilist view that a nation's economic well-being should be judged by the trade balance (exports minus imports). He sought a broader measure based on the dominance of population over commodities. Smith opened up a new way of thinking about the anti-poverty process as an end rather than a threat to development, and that "a society cannot be prosperous and happy if the majority of its members are poor and miserable" (Smith, 1776, vol. 1, chap. 8). Similarly, he sees rising real wages as a good thing, in contrast to long-standing mercantilist views. (Smith also rejected the idea that all rich should be rich; He argues that if inequality stems from monopoly power, it risks being contrary to the interests of the state. There is little evidence that Smith really thought poverty could be eliminated, but he did say that reducing poverty was a good thing. He does not seem to see poverty reduction and economic growth as mutually exclusive. (*2. For Smith's thoughts on this aspect, see Rothschild (1995) for further discussion.) ）
As an example, Smith exemplified that in the last decades of the 18th century, there was a significant change in elite thinking related to ending poverty, which can be called the first poverty enlightenment (Ravallion, 2015). (It should be noted that this is largely based on written records, which do not necessarily adequately reflect the minds of the poor.) Illiteracy was widespread at the time, especially among the poor. (For example, around 1800, about half of the adult population in Britain was illiterate (Lloyd, 2007). ("Literacy" is defined by the minimum standard of being able to write one's own name.) Social fiction by authors such as Charles Dickens and Elizabeth Gaskell provides useful clues to the idea of the poor in the mid-19th century. Around the mid-eighteenth century, there was a greater sympathy for the poor in the text, especially the growing recognition that most of the poor had done nothing to cause their own poverty (Coats, 1992, ch. 5). Today, many people are disgusted by the distinction between the "deserving" and "undeserving" poor; But people at the end of the 18th century gradually realized that at least some of the poor should be helped because they were innocent of their misfortunes.
The ideas of Rousseau and Condorcet provide an intellectual starting point for this shift in thinking, namely that poverty is largely man-made and not the natural order of things. Kant (1785) advocated a more respectful attitude towards the poor, implying that the responsibility for lifting people out of poverty should be borne by the state, not private charities (Fleischacker, 2004). During this period, David Davies (1776) and Frederick Eden (1797) also made the first attempt to define the poverty line, describing the standard of living in rural England. (*1. Davies (1776, p. 33) did not use the term "poverty line" (which first appeared in Charles Booth's study around 1900), but calculated a sum of money for working-class families to "enable them to be self-sufficient, to live comfortably, and not dependent on the aid of the parish.") Stedman Jones (2005) argues that this is the time when the idea of poverty eradication emerged.
The policy concept of poverty reduction is becoming more and more prominent. An interesting example is Thomas Paine's advocacy of a land tax to pay a uniform dividend. Whether Paine (1797) had a vision to eradicate poverty is unknown, and he seems more concerned with recognizing social rights to natural resources. (*2. Paine's (1791) Treatise on Human Rights also outlines how fiscal policy can be improved to reduce poverty, although it does not mention poverty eradication as the goal.) Whether the unified dividend he proposes to eradicate poverty depends on a number of factors, including the distribution of land ownership and whether the benefits of land taxes (taking into account the impact on other wages and prices) lift everyone out of poverty. But Paine's idea did contain the possibility of eradicating poverty. This was the germ of what is known today as the concept of Universal Basic Income (UBI).
Around the same time, Jeremy Bentham refuted many rights-based policy theories and based social choice on its impact on individual utility. According to later generations (including his student John Stuart Mill), Bentham's "principle of maximum happiness" meant that when some gained and others lost, social choice should maximize the sum of their utility. Based on the intuitively persuasive assumption of diminishing marginal utility of income, Bentham's utilitarianism logically repudiated income inequality (a thought that developed more rigorously with the marginalist revolution in economics in the late 19th century). But it only provides a conditional consequentialist justification for narrowing income inequality among the same people; The reason for "conditional" is eroded when the marginal utility of a given income is different for people, and/or when redistribution leads to a loss of average income.
Bentham's utilitarianism did not justify the eradication of poverty. Theoretically, the gains for the richest can be large enough to justify the losses for the poorest. Bentham did, however, advocate policies that contribute to poverty reduction. An example is (see Bentham's treatise around 1800, which Mill elaborated on) for the exemption from income tax on all income below the critical level of "subsistence"; Above this level, taxes can be proportional to income, but (given the exemptions) the overall tax rate arrangement will be progressive (the average tax rate is higher when income is higher). (*1. The reason is that (at least to some extent) the poor are already burdened with regressive indirect taxes. See Scheve and Stasavage (2016, Chapter 2). This is where the idea of progressive taxation came from, and it was about 100 years before progressive income tax was introduced in most countries.
Around this time, anti-poverty policies were enacted in Europe and North America, such as various "Poor Laws". The day-to-day inconveniences of the poor and beggars in large cities have given rise to "poverty relief", which is aimed only at the "deserving of help" poor, to protect them from temporary hardship that prevents them from working, or to help them cope with (physical/mental) disabilities. These policies are not aimed at eradicating chronic poverty. Indeed, the frequent distinction between the "deserving" poor and the "undeserving" poor makes it clear that the poverty of low-wage workers is not a concern for policymakers. In practice, however, it is not always possible to distinguish between the "deserving" poor and the "undeserving" poor. Publicly funded workhouses are a common policy tool to help distinguish between the two. The idea of the policy was that the welfare recipient needed to agree to receive all in-kind assistance, such as room and board in a workhouse, and that the work itself was not the focus. (*2. William Petit (1662) thought that it would be better to hire the idle poor in a completely wasteful way than to leave them idle, so he proposed a plan to move the stones of Stonehenge to Tower Hill. The real purpose was to ensure that the poor worked for a wage, no matter how low, than in a workhouse. The job requirement continues to this day as a means of preventing the so-called "undeserving" poor and non-poor from seeking relief.
Some countries invest more in poverty relief than others. The Poor Laws in England are a well-known example, and the literature on this is abundant. Each parish has an obligation to address its poverty by using state-contigent transfers to help those deemed unable to work, such as elderly widows or people with disabilities, funded by local property taxes (of course, wealthy parishes tend to be more generous, leading to horizontal inequalities). Solar (1995) argues that Britain's Poor Law (dating back to around 1600) was crucial to the country's long-term social stability, including in the late 18th century, when there were great fears that the French Revolution would spread across the English Channel to England. In the eighteenth century, poverty relief took on a new role, including addressing seasonal unemployment in the agricultural sector (Boyer, 1990).
By the end of the 18th century, in much of England, the Poor Law had evolved into the Speenhamland System. It comes in several variants, but the main idea is to provide an income guarantee that is linked to the price of bread and adjusted for the size of the family. If, as Paine suggested, funding was provided by people living above this level of income, perhaps a minimum income could be guaranteed. Contrary to Paine's suggestion, however, it provides a targeted wage subsidy to ensure that the desired bread purchasing power is met. If you earn less than that, you will receive the required subsidy; If you earn more than that, you get nothing.
The distinction between universal basic income and targeted transfers that ensure a minimum income is a source of enduring confusion in the history of poverty alleviation thought. In terms of incentives, the difference between the two is enormous: assuming that such programs are paid for by non-poor people, mean-tested transfers aimed at reaching the minimum income create negative work incentives because (at least on the surface) a person's final income is not related to how much work or effort he has. This was the main reason why two of the most respected economists of the time, Thomas Malthus and David Ricardo, were so unwavering in their critique of the Speamland Plan that the Royal Commission developed an extremely negative assessment of the project. It has been argued that child welfare encourages higher fertility rates, which in turn leads to greater poverty among assisted families. Without the motivation to work, agricultural output will fall and there will be fewer and fewer workers in the new capitalist industries (Polanyi, 1957). The Spinham Lambland Plan was also seen as counterproductive to workers. Engels (1845) and others claimed that employers only had to cut the wages of their workers and let the Spencham plan make up the difference.
Over the next 200 years, these criticisms of the Spinham Plan were repeatedly mentioned. (*1. See, for example, Polanyi (1957, Chapter 7), Anderson (1978), and Himmelfarb (1984). However, a careful analysis of the available evidence at the time also yields only limited support. The incentive effect on the labor supply side does not seem to be as large as critics think. Based on data held (but not used) by the Royal Commission, Brauger (1963) did not find that the Spinhamland Plan suppressed wages or reduced agricultural productivity. (*2. See also Glaper (1970), Block and Somers (2003), and Clark and Page (2019).) In practice, the program appears to provide limited unemployment insurance and avoids the need to pay insurance to able-bodied workers who are employed (Boyer, 1990, Block and Somers, 2003). There is conclusive evidence that the program encourages higher fertility rates (Boyer, 1990).
Following the report of the Royal Commission, the critics prevailed, and the Spencham Plan was abandoned in the 1834 reforms. The reform called for more workhouses, believing that they would be extremely uncomfortable, that only those who really needed help would be willing to accept relief, and that when better opportunities arose, they would gladly leave. Some scholars (Polanyi, 1957, Besley et al., 2004) have pointed out that the 1834 reform was born during the structural transition from a feudal agrarian economy to an urban industrial capitalist economy. It is important for obtaining information on who is poor and why, and calls for stronger incentives to ensure that only the "deserving" poor seek help from the Poor Law. This is a plausible argument, although it was not uncommon when such reforms were not considered 50 years ago. The discussion of the 1834 reforms must also take into account the political and economic context of the time. Fears that the French Revolution would cross the English Channel had subsided, and Napoleon had been defeated, although this left many unemployed retired soldiers resorting to the Poor Law. Rural landowners exerted constant political pressure to cut spending, after all, it was they who paid taxes to finance the Poor Law. This reform of the workhouse enabled achieved the goal of drastic cost cuts, almost inevitably depriving many poor families of benefits (Lindert, 2004). Similar reforms have been implemented in the United States, and have had roughly similar effects (Katz, 1996).
During this period, economics gradually became a highly regarded field of study, but it did not provide any justification for the assumption that poverty could be eradicated. A recurring argument is to limit state intervention. Nor is economic development seen as a way out of poverty. Where slavery was abolished, the "poor" essentially referred to the poor and the working class, and the real wage rate of unskilled labour was the most important economic variable determining the welfare of the poor (as Engels described in 1845, wage inequality still existed among workers). It is true that the poor can benefit from higher wages, but this is considered unsustainable. Ricardo's view of diminishing returns holds that there is a strict limit to output growth given by technology. Most importantly, an increase in the wage rate (and thus a reduction in the poverty rate) will lead to a rapid increase in the supply of labor, which in turn will bring the wage rate back. Malthus became famous for what came to be known as the Malthusian Trap, and it was widely accepted in the 19th century (Sandmo, 2015). This is in stark contrast to the earlier insights of Condorcet, Smith and others, who argued that poverty reduction would lead to lower fertility rates.
The neo-Marxist school of economics likewise offers no hope for the eradication of capitalist poverty. Echoing the thinkers of the Enlightenment in the 18th century, Marx rejected any notion that poverty was some state of nature. He refutes the classical economists' argument that population growth keeps wage rates at a fixed level of "survival"; (*1. See Baumol's (1983) discussion of Marx's theory of wage determination.) Nor does it believe that wage rates will automatically fall to clear the market; Even if wages are at the "survival" level, full employment will not be achieved, although it is never clear what that means. (*2. This statement is very common in writings about the Industrial Revolution in Britain.) Wages there seem to have been high (relative to Western Europe), which may be one of the reasons why the Industrial Revolution arose in Britain. In Marx's view, it was the existence of surplus labor (Marx, 1867, Chapter 25, "Reserve Army of the Unemployed") that depressed wages, allowing poverty to persist, at least in the absence of strong trade unions.
The 19th century did introduce more policies to promote poverty reduction, including the rise of popular public education (albeit slowly and controversially), similar to that advocated by Condorcet around 1790, but had little practical impact at the time. In any case, pervasive chronic poverty always seemed unavoidable for much of the 19th century. This coincides with the fact that we do not find the phrase "end poverty", "eradicate poverty" or "end poverty" in the digital literature of that period. (*1. This can be verified by entering these terms on Google Ngram Viewer.) ）
Although the first Poverty Enlightenment gave birth to the idea that poverty reduction is a good thing, for most of the 19th century it was not well developed or even encouraged. It takes a hundred years or more for the seedlings of ideas to eradicate poverty to bear fruit.
4. "A serious flaw in the organization of our economy"
In the 19th century, progress was made in eradicating global poverty, with poverty rates falling by about 15 per cent throughout the century (Bourguignon and Morrison, 2002). Efforts in Western Europe and North America have improved even more, with the poverty rate falling from 50%~60% in 1820 to about 20% at the end of the 19th century (Ravallion, 2016, Figure 1.1). One possible explanation is that real wages have risen in newly industrialized countries. The Industrial Revolution in Britain initially brought only modest increases in real wages, but this began to change in the 19th century, and by 1900 the real wage rate was four times higher than in 1800 (Crafts and Mills, 1998). However, overall income inequality in industrialized countries tended to increase for much of the 19th century (Milanovic, 2016).
By the end of the 19th century, it was found that mainstream society was emerging into a view that poverty should and could be eradicated. In his famous textbook, Principles of Economics, Alfred Marshall discusses the "evil" of poverty and expresses "the hope that poverty and ignorance can be gradually eradicated" (Marshall, 1890, p. 3). This is both a moral objection to poverty and a salutary economic justification. In Marshall's (1890, p. 594), "Wealth inequality ... is a serious flaw in the organization of our economy. In stark contrast to mainstream thinking, Marshall (1890, p. 191) argued that poverty was one of the root causes of underinvestment in children's "human faculties." Poverty limits the production of this vital capital, which in turn can hinder economic growth. Marshall didn't talk much about specific anti-poverty or redistributive policies, but his concerns were obvious.
Historian Webb (Webb, 1974, p. 384) points out that in Britain, it was from the late 19th century that there was widespread recognition that poverty "can and must be eliminated". People in other parts of Europe and North America are also slowly waking up to a new optimism at the turn of the century and in the first 15 years of the new century about the prospects for human progress, especially poverty reduction. (See, for example, Vecchi's (2017, Chapter 9) discussion of Italy and Bremner's (1956, Chapter 8) discussion of the United States.) The new perception of poverty eradication marked the beginning of progressive reforms in many countries in the (emerging) "rich world," including earlier forms of social security, minimum wage, and progressive income tax. The phenomenon began in Western Europe and spread to North America and Japan. There is no doubt that these policies contributed to a decline in income inequality in rich countries in the first decades of the 20th century, although other factors were also at play, such as the destruction of capital assets by the First World War (Piketty and Saez, 2014).
From the end of the 19th century onwards, people's thinking about poverty changed, and we can look for possible causes. The reduction in poverty means that direct intervention in poverty is more politically feasible, in large part because less redistribution is required at this time than general poverty. In addition, universal suffrage has not yet been achieved (although some countries have achieved universal male suffrage). In the 19th century, however, literacy rates increased dramatically, which helped to disseminate knowledge and promote collective action to achieve goals such as poverty reduction (and universal suffrage).
The rise in inequality in the 19th century, and the lack of significant progress in softening the social impact of capitalism, indirectly contributed to the formation of socialist organisations and workers' movements in Europe and North America. Unions also continued to infiltrate relatively unskilled workers, initially limited to skilled workers. All of this has spurred pro-poor policy reforms, but it has also been accompanied by a lot of controversy and long-term lag effects.
In the eighties of the 19th century, German Chancellor Bismarck famously introduced comprehensive social insurance in an attempt to "draw workers away from the socialists" (Landauer, 1959, p. 276). By the eve of the outbreak of the First World War, the socialist movement had drawn on strong international forces and, over time, had also merged with many labour movements.
New knowledge has also played a role in quantifying the extent of poverty and understanding its causes. Although citizens who have escaped poverty often learn about the living conditions of the less fortunate from newspapers and works of art, the relevant science is still weak or absent. This changed with Charles Booth and Seebohm Rowntree's groundbreaking empirical study of the living conditions of poor Britain at the end of the 19th century, in London and York, respectively. Their observational study was very detailed, although certainly not a rigorous sample survey (the corresponding tools have not yet been developed). Both Booth and Rowntree have struggled to respond scientifically to the casual rhetoric of left-wing social commentators about the extent of poverty. Booth, a politically conservative shipowner, responded (with skepticism) to a Marxist group's assertion that a quarter of Londoners were poor. After 17 years of looking at it and employing hundreds of people, he came to the conclusion that the figure was 30 per cent, and he also taught Londoners a lot about urban poverty.
In the process, Booth launched the Modern Society Survey Movement (Bateman, 2001). Encouraged by the American economist Richard T. Ely, among others, the movement grew rapidly in the late 19th century. Richard Ely researched poverty and founded the American Economic Association (Kathleen Corman was one of the co-founders, and she was equally interested in poverty). Booth's efforts led W.E.B. DuBois and Robert Hunter to conduct a similar study of poverty in the United States and even in other countries, including India (Thorner, 1967). The old "eligibility for relief" view of poverty emphasizes charity and dependency, while the new perspective, derived from new data, emphasizes the multiple economic and social factors that contribute to chronic and temporary poverty (Bremner, 1956, chap. 8).
By the beginning of the 20th century, people had come to accept the notion that social progress could be assessed at least to some extent by tracking how many people lived below a certain point in the income distribution. This chosen point can be called the "poverty line", but for many economists and statisticians, it is not the point. As Arthur Bowley (1915, p. 213) put it: "Perhaps the best way to measure a country's progress is to measure the proportion of people living in poverty; For the purpose of observing this progress, it does not matter at which point the precisely selected key criterion is always strictly maintained. In the United States, Allyn Young (1917) also advocated that the focus should be on the distribution of income or wealth levels, rather than on newly constructed measures of inequality, including the Gini coefficient.
The development of the idea of poverty eradication in the twentieth century was not flat. In certain periods in the United States, such as the twenties of the twentieth century and the period immediately after World War II, there seems to be a widespread misconception that poverty is in fact over, reflecting the "fear of ... a universal belief in universal prosperity" (Trattner, 1999, p. 308). In the aftermath of the Great Depression, concern about poverty gained political momentum. U.S. President Franklin D. Roosevelt (1937) famously said in his second inaugural address: "Our progress will be judged not by how much wealth we have added to those who are well-off, but by whether we have provided adequate means of subsistence for those who are poor and needy." Among the new social programs that Roosevelt bundled under the umbrella of the New Deal was the Social Security Act, which introduced federal pensions for seniors, transfers for families with dependent children, and unemployment benefits. In addition, the federal progressive income tax previously introduced (under President Taft) provided financial support for social security.
The Great Depression illustrates how a large covariate shock can foster long-term social progress, although other factors, including policy ideas, must be presented. The political constraints of social policy remain enormous; For example, out of respect for Southern Democrats, the New Deal largely avoided the long-standing racial inequality in the United States, which had significant power in Congress at the time.
The Great Depression also challenged the notion that inequality is pro-growth. Poverty caused by mass unemployment (apparently not caused by the bad behavior of the workers) was the driving force behind the Keynesian revolution in economics. Keynes (1936) argued that effective aggregate demand (i.e., consumption rather than saving) is a key constraint to achieving full employment, an argument that points to the role of government in macroeconomic stability. It also proposes a new view of inequality. The fact that poorer people tend to have a higher marginal propensity to consume on new income means that lower inequality will boost growth until full employment is achieved (Keynes, 1935, chap. 24). (*1. For other discussions of poverty and anti-poverty policies in Keynes's book, see Pressman (1991).) Keynes did not explicitly address poverty. However, in an article published in 1930, he optimistically stated that the "economic problem" (which he called the "struggle for survival") would be resolved within 100 years, i.e., by 2030 (Keynes, 1930, p. 4). In addition, Keynes gave advice on anti-poverty policies.
In the middle of the 20th century, there was a serious discussion about the idea of eradicating poverty. (*2. Beaudoin (2007, p. 100) traces the idea of poverty eradication back to the aftermath of World War II.) And as we have seen, this idea has deeper ideological roots, dating back to the 18th and 19th centuries. The unequal bearing of the socio-economic costs of World War II has led to a strong interest in progressive policies, including more inclusive social protection programs. Scheve and Stasavage (2016) argue that war creates a desire to raise the top marginal tax rate to compensate people for the unequal cost of war.) Of course, this will depend on how the extra income is used. The economist and politician William Beveridge (1942) used a landmark report outlining Britain's radical new policies on social security, family allowances, and income support (Keynes supported Beveridge's proposal, but was concerned about funding, including family allowances). The aim is to eradicate poverty, but Beveridge opposes household surveys, arguing that "inclusive" measures are more conducive to social cohesion. In time, the disgraced English workhouse will also come to an end.
Shortly after World War II, United Nations reports and resolutions referred to the need to eradicate poverty. (*4. The earliest example I found was an official UN document from 1947.) Article 25 (1) of the 1948 United Nations Universal Declaration of Human Rights states: "Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing, medical care and necessary social services; The right to protection in the event of unemployment, sickness, disability, widowhood, old age or other uncontrollable loss of earning capacity. "There is no doubt that this is a noble aspiration, yet (like many other rights-based decrees) is vague and has little to say what it means or how it can be realized.
After World War II, many "developing countries" were freed from the control of colonial rulers, who, among other concerns, never made serious efforts to eradicate poverty. Most of the first governments of the newly independent countries embraced this goal, although it was a long time before it could be achieved. On the eve of India's independence, Prime Minister Jawaharlal Nehru (1947) delivered a speech on the Covenant of Destiny at the first Parliament, defining the "Indian cause" as "ending poverty, ignorance, disease, and inequality of opportunity." In the decades that followed, India made rapid progress in many areas, including the measurement of poverty, thanks in particular to the introduction in 1950 of the National Sample Survey by the world-renowned statistician P.C. Mahalanobis, and pioneering studies by several scholars (Dandekar and Rath, 1971, Bardhan and Srinivasan, 1974, Sen, 1976, etc.). Democracy can help drive the implementation of anti-poverty policies, even if they do not always match the capacity of governments to implement them, especially in poorer countries. (*1.For example, Dutta et al. (2014) discussed the performance of India's National Rural Employment Guarantee Scheme in Bihar, one of the poorest states. India has long been setting symbolic targets. Unfortunately, the sustained reduction in the incidence of poverty is not among the many achievements of India in the 40 years since independence; Until the mid-80s of the 20th century, this process was slow (Datt et al., 2020). In the decades following independence, India's stagnation in poverty eradication was not primarily due to rising inequality but to weak economic growth.
After World War II, development also became one of the mainstream issues. New areas of research have emerged, new policy issues, new government departments, and new international organizations, including the World Bank. In the beginning, poverty alleviation did not occupy an important position. But that's going to change.
5. The Second Poverty Enlightenment
In the 60s and 70s of the 20th century, people began to pay great attention to the idea of poverty eradication. (*2. See also Google Ngram Viewer.) Note that from the early 80s of the 20th century, the terminology of "eradicating poverty" shifted to the less moderate terms "eradicating poverty" and "ending poverty". This was the Second Poverty Enlightenment (Ravallion, 2015). The world has ushered in a change in thinking. The United Nations declared the sixties of the twentieth century the first "decade of development", expressing the ambition to free poverty in the post-colonial era. As UNICEF (1961) put it: "The 'Third World' countries, which have emerged from colonial status, now need to be lifted out of poverty. This marks a gradual shift in focus from "development," which only considers economic growth, to embracing poverty reduction and human development. The ILO began to emphasize that the achievement of "basic needs" (e.g. adequate food, health care, safe drinking water) was a priority for development (ILO, 1976). Higher incomes become important only after these basic needs have been met. The World Bank has adopted "Poverty and Human Development" as the theme (and title) of its 1980 World Development Report. During this period, development economics also emerged as a field, and development studies was in its infancy. The academic journals World Development and Journal of Development Economics were founded in 1973 and 1974, respectively.
All of this is a sign of a significant change in development thinking that has had a lasting impact (more on this in Section 6). In retrospect, however, what happened in the United States since the early 60s of the 20th century is historically remarkable because it combines the idea of eradicating poverty with the joint efforts to achieve it. To some extent, the United States is gradually catching up with Britain and most Western European countries in its anti-poverty policies. Regardless, the story of the United States, despite its peculiarities, reflects a broader global theme of the period.
After World War II, the average standard of living in the United States continued to rise. This increase has been accompanied by a decline in the overall poverty rate and has also brought about structural shifts in the economy, particularly the mechanization of agriculture and the migration of large numbers of southern workers to northern cities. The broader context of rising average living standards also means that poverty is seen as a national stigma and needs to be addressed politically.
Nor is the general rise in affluence sufficient to correct the racial inequality in American history, which is associated with poverty but has its own unique history and causes in the context of entrenched racism. In the nation's history, this American identity has often made it more difficult to build effective coalitions against poverty. In the '60s, when the civil rights movement shifted to the challenge of eradicating poverty, the common ground between the two became apparent: the recognition that the lack of civil rights was one of the causes of poverty in the United States, and the recognition that different racial and ethnic groups shared class interests. As in other periods of history, the perception of overall affluence has led to a stronger call to action to eradicate poverty. In his acceptance speech for the 1964 Nobel Peace Prize, Martin Luther King Jr. said, "Poverty is nothing new, it's just that we have enough resources to get out of poverty." ”
Social commentary is a timely catalyst. Michael Harrington (1962) unexpectedly hit the bestseller list with "The Other America," which vividly depicts the lives of the poor in the United States. (*1. Around this time, other masterpieces describing poverty also appeared; In the United Kingdom, for example, Brain Abel-Smith and Peter Townsend (1966) wrote The Poor and the Poorest. Economists are also gearing up. John Kenneth Galbraith (1958) (and Harrington) described the emerging "minority poverty" in the United States. As the economy grew, the "old poor" joined the growing middle class, while others were left behind or trapped in poverty from which they could not escape. In 1964, the eminent Swedish economist Gunnar Myrdal gave a speech at Georgetown University calling for a "Marshall Plan for the Eradication of Poverty" (Hunter, 1964). Muirdahl also suggested that special treatment should not be explicitly given to black Americans, lest it provoke a backlash from some white Americans. Muirdahl was clearly trying to influence President Johnson's "War on Poverty" plan (building on President Kennedy's previous initiative), which was announced to Congress shortly after Muirdahl's speech.
The goal of the "war on poverty" is to end poverty unequivocally, but no official date has been given for its realization. The policy objective is conceived that economic growth will be the primary driver of poverty reduction, and the main policy challenge is to ensure that the poor in the United States have the capacity to participate in and contribute to growth. This new policy initiative comes at a time of rising affluence and declining poverty, and calls for greater efforts to "redouble our efforts to eradicate poverty" (Johnson, 1964, p. 55). This gesture of formulating the issue is extremely politically appealing. As Alice O'Connor (2001, Chapter 6) points out, while inequality of opportunity is emphasized, words such as "inequality" and "redistribution" are avoided. In a way, this statement focuses more on packaging than substance. The policy instruments of the "War on Poverty" programme are primarily redistributive.
As part of this effort, a series of new federal programs have been introduced. Getting the poor to find work is obviously important, but the "war on poverty" program focuses more on the supply side of the labor market. (In parallel with the "war on poverty," the government has also taken comprehensive fiscal measures to ensure full employment.) Anti-poverty programs cover nutrition (food stamps), health (Medicare and Medicaid), education (including early childhood education), housing, training, and various community initiatives, with more or less clear mandated goals. Some of the programs continue to this day. Transfers to poor families continued, the largest of which was the Aids to Families with dependent Children (AFDC) program.
New knowledge contributes to a better understanding of poverty and how to deal with it, and this knowledge will also influence policy responses. The first Poverty Enlightenment lacked the theories and data that we rely on today as we try to understand poverty and inform public action. By the end of the 50s of the 20th century, the situation had changed. Researchers and policymakers can base their arguments on a range of theories and data. The data in question also includes qualitative research, such as Harrington's, but most qualitative studies use large sample surveys and analyses to measure living standards and set poverty lines. In the early 60s of the 20th century, many people were surprised to learn that official statistics showed that nearly 20% of Americans and 50% of black Americans lived in poverty.
By any standard, the United States' expertise in poverty is admirable. Fifty years later, a group of prominent American economists on poverty reviewed the "War on Poverty" program, describing the 1964 President's Economic Report (Johnson, 1964), which Johnson commissioned to initiate the initiative, as "a milestone in poverty analysis to date" (Haveman et al., 2015, p. 594). A 130-member task force was then formed, and key laws were enacted within six weeks. In addition, the University of Wisconsin-Madison created the Institute for Poverty Studies.
Some commentators are skeptical of this new "knowledge of poverty," arguing that it deliberately focuses on individual behavior and diverts attention from deeper "structural" inequalities. On the issue of the feminization of poverty in the United States, O'Connor (2001, p. 254) contrasts two approaches: "mainstream poverty research" that "personalizes and decontextualizes the problem," and approaches that point to "persistent gender inequalities in welfare systems, families, and the workforce." While these criticisms highlight genuine concerns, emerging scientific tools for poverty research also contribute to a better understanding of deeper constraints on behavior, which are linked to multidimensional socioeconomic inequalities. The study of poverty in the context of the family as the primary unit of observation does not mean that we believe that poverty is entirely the result of the wrong choices of individuals. Using these and other new analytical tools, including various modelling tools, a novel knowledge base on poverty has emerged, including research on the functioning of labour and credit markets, the origins of specific aspects of certain aspects of poverty, such as those related to racial and gender discrimination.
The idea of guaranteeing a minimum income has always been in the "war on poverty" option. Milton Friedman (1962) proposed a variation of this idea, a negative income tax. This actually extends Bentham's idea of tax exemption for all income below a certain threshold (Bentham's "subsistence income"), except that in Friedman's proposal, savings from tax revenues and/or other welfare expenditures would be used to enable everyone to meet a minimum standard of living. This is equivalent to a universal basic income (such as that proposed by Paine) funded by a progressive income tax. Note, however, that Friedman's proposal is intended to replace existing welfare programs, so it is uncertain how much poor households will benefit (to the extent that these benefits benefit the poor), and some may even end up getting worse. Thus, a holistic approach to financing UBI is essential to assess the effectiveness of this idea (Atkinson, 1995).
In the late sixties of the twentieth century, the United States came close to achieving some form of income security, which was (surprisingly) proposed by President Nixon in 1969 (Steensland, 2008). Nixon's Family Assistance Program was not a universal basic income or a minimum income program based on household means surveys, but the marginal tax rate was high. The program provides a flat payment for less than a certain income, which then gradually decreases at a marginal tax rate of 50% as income increases. (*1. See Lampman (1971, p. 162).) (Part of the funding for the program comes from the elimination of funding for families with dependent children.) Initially, there was no distinction between the "deserving" poor and the "undeserving" poor, or between the "unemployed" poor and the "employed" poor; All the poor are eligible for assistance. This is an important breakthrough in thinking about anti-poverty policies in the United States and elsewhere, which treat the "undeserving" poor as people who are judged to be poor because they do not work hard. (*2. See Katz (1987, 1996) and Gans (1995) for discussion.) ）
Nixon's plan was opposed by his adviser Martin Anderson, who quoted Polanyi's (1957) interpretation of the 1834 Royal Commission's report on the negative incentive effects of the Spinhamland Plan (Section 3). (*3. Anderson (1978, Chapter 5) seems to state what he suggested to Nixon 10 years ago. For more discussion, see Steensland (2008, Chapter 3) and Bregman (2017, Chapter 4). But even if one accepts the historical record of the Spencham Plan, the two plans would have very different incentives, because the Spencham Plan (at least on paper) would imply a marginal tax rate of 100 percent for the poor, compared to a marginal tax rate of 0 or 50 percent for the Nixon Plan. Nor is there any evidence that Nixon's advisers read Braug's (1963) paper. (*4. In the debate at the time, Anderson's (1978) statement did not mention Braug's work.) If they read it, they might pause and question the accuracy of the surviving historical record of the Spencham Plan, even if it was clearly for the political purposes of opponents of welfare reform. (Ten years later, in 1978, Anderson repeated his analogy between the Nixon and Swingham Plans.) ）
In 1972, Nixon proposed a modified plan that included a job requirement that able-bodied beneficiaries must register with the Department of Labor in order to find work. As a result, the idea of the "unworthy" poor quietly returned. Although this legislation was well received by the media and the public (Steensland, 2008, p. 123), it did not pass the Senate. Opposition abounded. Some do not support the gender and racial equality implicit in the policy. Some people think that the job requirements are racist. Others feel that the level of welfare is too low. A similar program (during President Ford's administration in 1975) emerged, the "Earned Income Tax Credit," which provided income subsidies to low-wage workers through the federal income tax system (tied to household size and adjusted accordingly); With broad bipartisan support, this plan continues to this day.
In thinking about how best to combat poverty, the question of whether economic growth or income redistribution should be more important remains a matter of debate. In a report to the U.S. Congress, economist Robert Lampman (1959), one of the architects of the Johnson administration's "war on poverty," calculated based on survey data from two dates, 1947 and 1957, showing that the poverty rate in the United States had fallen from 26 percent to 19 percent. He boldly predicted that poverty would be "largely eliminated" within 30 years. Lampman sees economic growth as the main driver of the poverty reduction process, but is also aware of the need for social redistributive policies. Economic growth after World War II was accompanied by a decline in inequality, and Lampman seems to think that this situation is unlikely to change.
By contrast, Galbraith (1958) does not expect economic growth in the United States to have a large impact on poverty, which has gradually concentrated in those groups that (he argues) have benefited little from average productivity gains. Galbraith stressed the need for targeted redistribution; Lampman, on the other hand, argues that a combination of general growth and social policy is expected to sustainably reduce poverty. This debate between Lampman and Galbraith will reverberate around the world.
The concept of relative poverty also emerged during this period. The American economist Victor Fuchs (1967) proposed that the poverty line should be set at 50% of the current median income. This naturally makes reducing inequality all the more important; Indeed, if the poverty line is set at a fixed percentage of the current median or average income, the immediate effect is that when all income levels increase in the same proportion, the measure of poverty does not change, even if the poor benefit is absolute. (*1. Since the idea first appeared, it has been claimed that it is absolutely impossible to eradicate relative poverty, and that it will always be with humanity.) However, there is no theory as to why income distribution does not reach a level where all people live above 50 per cent of the average income, say. As with absolute poverty, whether this is politically feasible is another matter. Any process of economic growth that does not change relative inequality will result in the fact that the poverty measure remains the same. Later, Atkinson (1998) adopted Fox's advice when describing poverty in Europe, and it was used by Eurostat and OECD.
The U.S. "war on poverty" targets absolute poverty, measured by a fixed real poverty line (i.e., the poverty line at constant prices) over a period of time. Lampman (1971, p. 53) acknowledges that "income poverty is a relative problem" but still uses the absolute poverty line (in fixed real terms), which echoes the view of Bauley (1915). Rampman is aware of this contradiction, but he believes that once absolute poverty is eliminated, the next generation can still choose a higher real poverty line and then continue to eradicate poverty with a new one. [Lampman does not mention Rawls's (1971) insight, but his reasoning is a practical operation of the "maximum-minimum criterion," which maximizes the welfare of the disadvantaged.] However, if "yes, poverty is relative," but "now we can ignore it and leave our troubles to the next generation," that is certainly a questionable answer. The next generation will see neither an end to poverty nor a new official poverty line. (*1. Although there have been suggestions; See comments by Watts (1986), Citro and Michael (1995) and Blank (2008). In fact, Lampman implicitly acknowledges that there is strong political resistance to revising the poverty line. (*2.Blank (2008) provides a more comprehensive interpretation of this in the context of the United States.) ）
If people are concerned about both their absolute standard of living and their own income relative to others in their country of residence, then setting an absolute or relative poverty line at a fixed proportion of the mean or median is untenable (Ravallion, 2020c). A better option would be to accept that the poverty line should rise as average income continues to grow, rather than directly proportional, i.e., that the poverty line is "weakly relativistic" with a strict positive lower bound.
The official poverty line in the United States has always been absolute, but the initial poverty line established by Morly Osansky (1965) is constantly updated on the basis of the (urban) consumer price index used to measure inflation. Today, Americans' subjective poverty line (where their real income level is below which Americans see themselves as poor and vice versa) is above the current official poverty line. The absolute poverty line used by Hunter (1904) in the United States is only 10% lower than the current official poverty line (Ravallion, 2016a, Chapter 1). Despite the increase in average living standards, the official poverty line has not risen for more politically related reasons (Blank, 2008).
Around this time, a second new direction of poverty measurement emerged, which was to include as much information as possible on the distribution below the poverty line, thus proposing various "higher-order" measures. Harold Watts (1968) took the first steps by working on the U.S. government's "war on poverty" work (and the first director of the Institute for Poverty Studies at the University of Wisconsin). Instead of measuring poverty by using a proportion below the poverty line, Watts suggested that the mean proportionate poverty gap should be measured, thereby (indirectly) emphasizing income inequality among the poor. In the 70s and 80s of the 20th century, a series of papers laid a more solid theoretical foundation for measuring poverty and constructing new indicators. (*3. Papers from Sen (1976), Foster, Greer and Thorbecke (1984), and Atkinson (1987).) Foster et al.'s "squared poverty gap" is the most widely used distribution-sensitive index. It turns out that the original Wolds Poverty Index conformed to the rationale that people had proposed for a good indicator (Zheng, 1993), but it was not widely used. ）
The United States did not end poverty in 1990. There have been criticisms of anti-poverty programs, and in the 80s of the twentieth century there was a backlash against such programs. President Ronald Reagan (in his speech to Congress in 1988) made a striking statement: "The federal government has declared war on poverty, and poverty has won." "The immediate cause of the slowdown in progress towards poverty eradication is not weak economic growth (despite the low growth and high inflation that occurred in the late 70s and early 80s of the 20th century). The anti-poverty program is not a failure; Poverty rates tended to decline until the late 70s of the twentieth century after the start of the "war on poverty", and would almost certainly have been higher without these programs (Haveman et al., 2015). (*1. This can be assessed using the U.S. Census Bureau's new Supplemental Poverty Measures, which more fully consider the benefits of in-kind programs and tax systems.) The official poverty line (based on pre-tax cash receipts) does not show this decline. See Haveman et al. (2015, Figure 1). Evidence suggests that some major programs, such as food stamps, have helped reduce poverty (Jolliffe et al., 2019).
To be precise, the immediate cause of the stagnation of poverty eradication in the United States since the 80s of the twentieth century is that redistributive efforts have not been sufficiently intensified as market income inequality has increased. (*2. Over time, poverty reduction efforts have shifted from cash to in-kind transfers and tax-linked benefits (Haveman et al., 2015) to those seen as "worth helping" the poor, especially the elderly and the disabled (Moffitt, 2015). It's a political change. We no longer hear of a Republican president in the late '60s who resorted to the welfare state to eradicate poverty; Instead, we will only see the reforms of the mid-'90s, supported by Democratic presidents, seen by critics as a threat to the welfare state. (*3. In the mid-90s of the 20th century, reforms under President Clinton imposed job requirements for many welfare beneficiaries, including support for families with dependent children, and then funding for families with dependent children shrank significantly (Haveman et al., 2015). Growth will continue, but it will bypass large numbers of poor people. In the United States, the Second Poverty Enlightenment ended disappointingly, as did the first. Looking back, Galbraith is closer to the truth than Lampman.
These changes are taking place in the United States at a time when developing countries are thinking about poverty has changed dramatically. They also make a piece of history.
6. Poverty eradication became a development goal at the end of the 20th century
The Second Poverty Enlightenment of the sixties and seventies of the twentieth century brought greater attention to global poverty, while the debt crisis of the eighties caused many governments and international financial institutions to shift their near-term priorities to macroeconomic stability and the restoration of economic growth. These are also important for the poor, but why they are important and what they mean for the design of macroeconomic adjustment programmes (a combination of public spending cuts and tax reform) have apparently not received enough attention at first. Although the World Development Report on poverty and human development (World Bank, 1980) was published at the beginning of the 80s, the World Bank largely ignored this. (*4. The World Bank (1986) is an exception, although the focus is primarily on food security and cost-effectiveness. Soon, "Adjustment with a Human Face" was on the agenda, as Cornia et al. (1987) wrote in their work of the same name.
In the late 80s of the 20th century, the problem of global poverty once again attracted attention. On October 17, 1987, more than 100,000 people gathered in Paris's Place de la Trocadero, where the Universal Declaration of Human Rights was signed some 40 years ago. We all come together to support people suffering from poverty around the world. Since then, 17 October has become the International Day for the Eradication of Poverty. Soon after, the World Bank (1990) published a new World Development Report with a two-word title: Poverty. This has implications in the area of development policy, especially within the Bank. It wasn't long before "a world without poverty" became the World Bank's top goal. Poverty reduction is beginning to be seen as a central element of the overall economic reform programme, rather than as an afterthought stabilizer.
In the 90s of the twentieth century, promoting economic growth in poor countries remained the focus, but two major differences emerged. First, growth is no longer an end, but a rational growth as a means of reducing poverty. New attention has been paid to pro-poor technological advances, one of the most typical examples of which is the "Green Revolution" in agriculture in South Asia, which has ensured increased productivity in the agricultural sector, which tends to concentrate the poor, such as small farmers or workers. (*1. While there was evidence that the Green Revolution was reducing poverty, this was also controversial at the time; For further discussion and evidence, see Lipton and Longhurst (1989) and Datt and Ravallion (1998). Second, it was suggested that there is an important complementarity between pro-poor growth and social policies that promote human development and social protection, both of which have been extended in the World Bank's lending programs and policy engagements.
In response to the Johnson administration's "war on poverty," the 1990 World Development Report emphasized economic growth as a way to reduce poverty in developing countries, consolidating the World Bank's broad influence base. In the 90s of the 20th century, the World Bank's more high-profile publications, such as the work of Francisco Ferreira and Branko Milanovic, did not discontinue research, although there was not much to say about "inequality" or "redistribution". Since then, the World Bank has given more prominence to these issues, particularly in the 2006 World Development Report, Equity and Development (World Bank, 2006), although the emphasis is on inequality of opportunity rather than inequality of outcome; The two inequalities are not easily distinguishable, but the emphasis has undoubtedly helped to win wider acceptance across political factions.
As Hollis Chanery (1977, p. v), the first chief economist of the World Bank, put it, the Second Poverty Enlightenment reached a consensus that "growth is a necessary but not sufficient condition for poverty reduction." Strictly speaking, this statement is not true, because income can be redistributed without growth, thus reducing poverty. The real implication of this consensus is that growth creates the potential for poverty reduction if it ensures the participation of the poor in the process of growth and promotes it. (See, e.g., Chenery et al. (1974). This view has attracted a lot of attention. However, even within the World Bank's research department, the emphasis remains divergent and is reflected in the titles of two papers published by its staff in the early 21st century, one "Economic Growth is Good for the Poor" (Dollar and Kraay, 2002) and the other "Inequality is Not Good for the Poor" (Ravallion, 2005).
In the new millennium, people's perspectives on trade-offs are also shifting. New research questions the notion that there is a necessary trade-off between reducing inequality and increasing economic growth. A typical fact of the process of economic growth in developing countries is that there is a weak correlation between growth rates and changes in inequality. (*1. This was confirmed by Ravallion (2001) and again in Ferreira and Ravallion (2013). During periods of economic growth, inequality increases and decreases almost as often. Implicit in this is another classic fact: poverty rates tend to fall as economic growth increases. But it is also understood that whether inequality rises or falls in the process of growth is critical to the pace of poverty reduction (Ravallion, 2001). Even if inequality does not increase, the difference in initial inequality is related to how much poverty is reduced by growth and how much real growth can be achieved. Higher initial inequality not only hinders growth, but also makes it less pro-poor indeed. (*2. For evidence supporting these claims, see Ravallion (1997, 2005, 2012). ）
One point that is often overlooked in this debate is that the relative importance of the two policy paths may depend on the stage of economic development. Rich countries do seem to have more room for redistribution. In poor countries, poverty eradication may require very high tax rates for the non-poor. This rate can be measured by implementing the Bentham-Friedman version of the concept of income tax, i.e., a marginal tax rate is calculated for the non-poor population at the poverty line in rich countries to fill the poverty gap or to provide a basic income at the poverty line level in developing countries (Ravallion, 2010). It has been found that for most, but not all, countries with annual per capita consumption of less than $2,000 (at 2005 purchasing power parity), the required tax burden is highly prohibitive, often requiring a marginal tax rate of 100 per cent or more. In contrast, all countries that consume more than $4,000 per capita, as well as some poorer countries, require very low tax rates (1% on average). Most countries can be divided into two categories: those with little hope of solving poverty through redistribution; On the other hand, there are countries that seem to have ample space to address the problem. Economic growth tends to push a country from the first to the second. It is not difficult to see that the appropriate trade-off between growth and redistribution strategies depends on the level of economic development and changes over time.
In the eighties of the twentieth century (in the midst of a boom of macroeconomic adjustment), the neglect of human development was resisted, and there was a growing recognition that the control of commodities was by no means the whole story of human well-being. Amartya Sen (Sen, 1985) provides a broader framework for thinking about "well-being", including real income and other factors related to human abilities, which are defined as a range of functions that can be achieved in life that ultimately determine one's freedom (Sen, 1999). Conceptually, this theoretical framework is extremely attractive. Of course, measuring poverty in terms of real income does not mean that real income is the whole of well-being; It also deals with the question of how to set the poverty line, which can reflect other aspects of well-being. However, practices to measure poverty often ignore some key aspects of well-being, including access to non-market goods, inequality within households, and relative deprivation.
Two solutions have emerged to address these "non-income" dimensions of poverty. The first method determines an indicator dashboard to display the indicators of each dimension, and the second method requires the construction of a composite index composed of multiple indicators. (*1. The World Bank's annual development indicators are an illustration of the dashboard approach; Examples of composite index methodologies include the United Nations Development Programme's Human Development Index and the Alkire and Foster Index (Alkire and Foster, 2011). Both recognize the risks of ignoring the "non-income" dimension, but there is also the drawback that the list of indicators is too long. This echoes a question raised by Harold Watts (1968) in the context of Johnson's administration's "war on poverty": if each program had to address the dimensions of a certain long list, it was still possible for individual programs to fail, even if the whole program was successful. Constructing a single composite index seems to solve the problem of too many dimensions, but it usually takes an ad hoc approach, i.e., constructing a "mashup index" when there is no obvious basis for determining relative weights; In fact, there are times when relative weights are not calculated and may show certain anomalous properties (Ravallion, 2016a, Chapter 5). For a government that is underperforming in one dimension, the composite index may have a worrying appeal: by packing the lagging dimensions into others, it can better mask poor performance. Clearly, indicator dashboards are more helpful in guiding policy.
The original "$1 a day" poverty measure was developed based on data from 22 developing countries (Ravallion et al., 1991). In the 30 years since, there has been tremendous progress in primary data collection; In this regard, the work of national statistical offices is crucial and is often supported by international agencies (e.g. the World Bank's Living Standards Measurement Study). The latest global poverty measure draws on more than 1,500 surveys in more than 150 countries. Similar efforts should be applied to monitoring the non-income dimensions of well-being (e.g., USAID's Demographic and Health Survey). In addition, there is an active effort to improve access to data, including access to raw survey data (although some countries are lagging behind in providing open access to data) and the use of data tools, such as PovcalNet, the World Bank's interactive platform for global poverty monitoring.
The first Millennium Development Goals. The United Nations' Millennium Development Goals (MDGs) were officially launched in 2000. The multi-objective dashboard was born out of repeated discussions. Every international agency has joined the effort, eager to promote its own agenda as one of the Millennium Development Goals. The first Millennium Development Goal (MDG1) is to reduce the "extreme poverty rate" to half of 1990 levels by 2015.
Some critics have enthusiastically welcomed the MDGs (e.g., Sachs, 2005); Some critics have derided them as "utopian" interferences (e.g., Easterly, 2006); It has also been argued that while the intentions of the goals are good, they are taken for granted (e.g., Saith, 2006). As Hulme (2009, p. 4) puts it, they aim to "further galvanize ambition and mobilize political commitment and public support". Subsequently, support poured in. For example, the United Kingdom has formed a new coalition to "make poverty history". (Their famous "click ads" state that every three seconds in the world a child dies from preventable causes.) (*1. In this history, a bizarre situation arose, and in 2005, the UK government's Communications Office banned these advertisements because they were "entirely or primarily of a political nature" (Guardian, 2005). Another example is the Global Call For Action Against Poverty; On the 2009 International Day for the Eradication of Poverty, 173 million people around the world participated in various forms of "Stand Up Against Poverty" activities.
While all is moving forward, developing countries are quietly making progress in eradicating poverty. Figure 1 plots the global poverty rate from 1981 to 2015 using the $1.90 poverty line. The long-term decline is almost exactly 1% per year, although the change is uneven over time. At the end of the 80s of the 20th century, the process slowed down, but after 2000 it accelerated again (this can be seen by comparing the trajectory around 2000). China's achievements in poverty eradication are one of the reasons for this, although poverty rates have declined in all regions since 2000. Based on the 2005 PPP poverty line of $1.25, the first Millennium Development Goal was achieved in 2010 five years ahead of schedule (Chen and Ravallion, 2012).
Theoretically, the poverty rate could be halved while the poorest half of the poor have nothing to gain. The poorest people are the poorest because of the higher costs of helping them, including their participation in the growth process. The poorest people usually have the least political influence, and altruistic motives may be stronger when confronted with those who are not far from their own standard of living (perhaps with some kind of common identity). So it probably wouldn't be surprising to find out that the poorest are often left behind.
These factors raise serious concerns about the framework of the first Millennium Development Goals. In hindsight, we can now find evidence to support this concern. Figure 2 shows the overall average real income of households in developing countries and the estimated level of minimum income, i.e., the expected minimum average consumption level. (*1. Figure 2 uses the lowest estimate proposed by Ravallion (2016b), and I also discuss the robustness of alternative measurement assumptions; These results given by Ravallion (2020d) use only consumer surveys. The poverty rate in Figure 1 has dropped markedly, but there has been little progress for the poorest.
In discussions of development policy, the Galbraith-Lampman debate has recurred. While Lampman did not foresee rising inequality in the United States, his position in the debate is more in line with what we see in the developing world. Figure 3 plots the poverty reduction rate of "$1.90 per day" and GDP growth over the Millennium Development Goals (MDGs) period from 1990 to 2015. Of the 86 countries with positive economic growth (12 had negative growth), 77 countries experienced a decline in poverty rates, and only 9 countries experienced an increase in poverty rates while they were growing. The slope of the regression line is -1.66 (standard error 0.20; n = 98), which can be understood as the average elasticity of poverty reduction to economic growth. (*1.The national accounts data do not exactly match the survey period, and the resulting measurement error is likely to weaken the regression coefficient.) If the survey-derived average consumption or income (which exactly matches the poverty measure) is used, the regression coefficient is -1.84 (standard error 0.20; n=103). The use of this survey means that 82 of the 84 countries with a positive average increase in the survey have seen a decline in poverty rates. The pessimistic view of the (frequent) prospects for poverty reduction in growing economies is inconsistent with Figure 3. Of course, there are still differences in poverty reduction rates at a given growth rate. This includes measurement errors, but also reflects differences across countries in terms of the type of growth (e.g., sectors and geographical patterns) and initial conditions (including inequality).
Some observers have over-interpreted the correlations in Figure 3. Figure 3 does not tell us that any policy that promotes growth will reduce poverty; This depends in part on the impact of policies on inequality. (As noted earlier, growth rates are only weakly correlated with changes in inequality, but the latter are strongly correlated with changes in poverty rates.) In addition, causality may also go in the opposite direction, i.e., success in poverty reduction contributes to growth (as evidence I gathered in 2012 suggests that credit market failures and undergrowth of children from poor households are both explanatory factors). Similarly, if one focuses only on a shorter period, the correlation in Figure 3 will weaken and there will be more non-reduction growth (Ravallion, 2001). It should also be remembered that higher growth rates after 2000 have not made much progress in raising minimum incomes (Figure 2).
How much did the setting of the first Millennium Development Goal contribute to its own success? Jeffrey Sachs (Sachs, 2005, p. xxix) claims that the first MDG is "a great impetus to accelerate progress and enhance action". The SDG Network lists "more than one billion people lifted out of extreme poverty since 1990" as "a key achievement of the Millennium Development Goals" (1.2 billion fewer people living under $1.90 between 1990 and 2015). Growth rates in developing countries have picked up since 2000 (figure 2), and the rate of global poverty reduction has accelerated (as shown in figure 1). In many countries, aid inflows have increased and domestic policies have improved.
Clearly, it is difficult to believe that the overall reduction in global poverty from 1990 to 2015 was due to external aid supporting the Millennium Development Goals. There have also been changes in other areas, including increased private financial flows to developing countries and rising commodity prices. The impact of external aid has also been mixed. Sachs's (2005) optimism about aid contrasts sharply with Angus Deaton's (2013, Chapter 7) reserved assessment. While it is certain that aid is sometimes squandered on corrupt development projects and illicit financial flows, the best available evidence does show that aid works, even if success depends largely on the institutions and policies of recipient countries. (*1. For an overview of relevant arguments and evidence and more references, see Ravallion (2016a, Chapter 9).) ）
Another reason to question the contribution of post-2000 progress in the fight against poverty to the Millennium Development Goals (MDGs) is that China accounted for about two-thirds of the world's poverty reduction between 1990 and 2015. (*2. This can be easily verified using PovcalNet.) It's hard to imagine that the MDGs have had a big impact in China. (*3. As a personal anecdote, I have never heard my Chinese counterparts mention the Millennium Development Goals (MDGs) during my work in poverty alleviation in China from the mid-90s to around 2010. Moreover, between 1990 and 2015, one-third of China's poverty reduction was achieved before the Millennium Development Goals. Still, goal-setting has always been a common incentive in China. Since the mid-80s of the twentieth century (before the Millennium Development Goals), poverty eradication has been a high-profile goal. The National Poverty Alleviation Plan aims to lift the remaining 80 million rural poor (as measured by the official poverty line) out of poverty by the year 2000. This goal was not achieved, but it stimulated action to focus on rural development in poor areas. In urban China, the goal of the Dibao project is (at least on paper) consistent with the intent of the Spencham Plan: to increase the income of all people in order to meet the prescribed (local) subsistence allowance. [Similar to the Spencham Scheme, the Dibao program does not operate this way in practice, but local officials smooth transfer payments based on changes in income; See Ravallion and Chen (2015). The MDGs may not be of much help to China, but goal-setting may have helped.
The first Sustainable Development Goal (SDG1). The success of the first Millennium Development Goal (MDGs) has inspired the idea of a last-ditch effort to end extreme poverty. The first Sustainable Development Goal includes ending poverty by 2030 at the poverty line of $1.90 a day (or $1.25 at 2005 prices). The project is a metamorphosis of the World Bank's own stated goal of reducing poverty to 3 percent by 2030 (Ravallion, 2013). It is not clear how the World Bank's "3%" target became "0%", but it is reasonable to speculate on the basis of the desire to "leave no one behind" (which runs through the SDG documents). It aims to galvanize the process of poverty eradication, not to halve poverty, as was the case with the first Millennium Development Goal, or to meet the World Bank's 3 per cent target. As we will soon see, this makes the first SDG more challenging than the 3% target set by the World Bank.
The desire for economic growth to be at least as pro-poor as Figure 2 is a goal of both the World Bank and the tone of the United Nations' first Sustainable Development Goals. Lavalre (2013) argues that the 3% target is possible if developing countries can sustain high economic growth rates without exacerbating global inequality. This is also consistent with the simple linear extrapolation method (epitaxial extrapolation of the best-fit line) based on Figure 1, which indicates that the first SDG is on track to be achieved.
However, this encouraging vision was accompanied by warnings from the outset. There are concerns about whether the new millennium will be able to sustain a high rate of growth. Falling commodity prices are a risk factor for much of Africa. The pandemic of 2020 has revealed the fragility of the world. Based on the World Bank's growth projections for developing countries in mid-2020, Lakner et al. (2020) estimate that the pandemic will increase the number of people living below the World Bank's $1.9 poverty line by 60 million in 2020. (*1. This is based on the World Bank's country-specific growth projections, with relative distributions unchanged.) The update here gives a higher number: 70 million to 100 million people. Sumner et al. (2020) used the assumed shrinkage and assumed that the distribution curve was constant. Their "low-income scenario" (a 5% decline in income) shows that 80 million more people are living under $1.90 a day as a result of the pandemic. Naturally, the greater the contraction, the more the "new poor"; A 20 per cent contraction would add 420 million people to poverty. There's a worrying uncertainty here: this approach can derive any impact assessment one wants. ）
From an early age, people were anxious about rising inequality. Even before the pandemic, some observers were already worried that the future path for developing countries would be increasingly unfavorable to the poor, perhaps more like what we see in the United States. Rising inequality in many, certainly not all, developing countries is seen as a spectre that threatens progress. The calculation of "60 million people" assumes that the "COVID-contraction" will be distributive-neutral (i.e., affect all income brackets equally), which seems unlikely. Inequality is likely to increase in many countries, given that poorer households have struggled to maintain their incomes and consumption during the pandemic. Rackner et al. (2020) argue that even a small increase in inequality within countries could push the impact of the pandemic on poor to 90 million people or more.
Critics of the first SDG also question the World Bank's choice of $1.90 as too low to match the ambitious goal of poverty eradication, thus "fueling complacency" (Alston, 2020, p. 3). (*1. This involves a broader debate on the World Bank's poverty measures; See Anand et al. (2010). A fundamental problem is that the Bank's main international standards are calculated against the poverty line in poor countries that vary in nutritional needs or allowances for non-food commodities. Allen (2017) provides such a global indicator. Using typical nutritional needs similar to those in low-income countries, Allen's method yielded similar results to those of the World Bank, and trends appear to be similar over time (Ravallion, 2020c). See also the discussion of Atkinson (2019). It's safe to say that this is a low line, explicitly based on the poverty line in the poorest countries. (*2.Ferreira et al. (2016) recommend the $1.90 poverty line as an update of the $1.25 poverty line set by Ravallion et al. (2009) at 2005 prices, which was used to set the first Millennium Development Goals. And people usually use higher standards, including the World Bank. Critics often mistakenly assume that a higher poverty line represents more poverty and therefore means a lower chance of success in beating poverty. However, it is an indisputable fact that, regardless of which poverty line is chosen, the poverty rate and the "high-order" measure of poverty observed worldwide have been declining since the early 80s of the 20th century (Chen and Ravallion, 2010;
The target date can't be too far away. Setting a target date far in (say) 20 years from now weakens the incentive for politicians, government officials and civil society groups to make efforts. Targets that are too far away can actually lead to short-sightedness. The target income level should not be too high. Using (say) the official U.S. poverty line (about $15 per person per day) is unlikely to sustainably mobilize people to take action to eradicate poverty in any reasonable amount of time, as more than 90% of the world's population falls short of it. Similarly, the more common poverty line in middle-income countries is $5.50 a day, a level that 45% of the world's population does not reach, so it is clear that setting such a poverty line does not inspire more motivation. Setting a low poverty line, but setting a nearer target date, will hopefully spur effective action to reach that poverty line for everyone. Then everyone moves on to a higher minimum poverty line (as Lapman proposed in 1971 for America's "war on poverty").
By comparing Figure 1 and Figure 2, it is possible to think from another perspective about the effectiveness of the incentive argument for using higher standards in the first SDG. Anyone who cares about the poor will surely want to know the situation of the poorest strata. Figure 2 shows that the poorest are indeed left behind. As mentioned earlier, this points to a controversial feature of the first MDG; It has also drawn attention to a more ambitious poverty line. A poverty line above $1.9 means a higher poverty rate, which can be lowered by lifting people close to the poverty line out of poverty, but leaving behind the poorer strata. If we set a target of (say) $5.50 per day, the 40 per cent of the population in sub-Saharan Africa living below $1.90 a day will certainly be ignored for a long time. Some would even go so far as to say that the first Sustainable Development Goal should have used a poverty line below $1.90. It is more important, however, to observe the evolution of income distribution, including that of the poorest, who must be given the highest priority from a moral standpoint.
We should also not forget that in recent decades, many people have earned more than $1.90 a day, but they are still poor by the typical standards of the country in which they live (Ravallion and Chen, 2019). It is a serious problem that any international poverty line with constant purchasing power is only a superficial internationalist demand, which, one might argue, should be a common global level of welfare, but also depends on, especially, relative incomes. The measure of absolute poverty used in Figure 2 maintains the actual value of the poverty line. In practice, the real value of the national poverty line tends to fluctuate upwards as the average value rises; Ravallion and Chen (2019) estimate that the average resilience in developing countries is about 0.5 over the long term. This would halve the resilience of poverty reduction to growth, as shown in Figure 3.
While acknowledging these views, all people will surely aspire to finally live in a world in which no one is as poor as the 40 per cent of the world's population living below $1.90 a day 40 years ago, or the 40 per cent of sub-Saharan Africa living under $1.90 today. It would be indisputable progress, even if other goals were not accomplished.
The last 3%. Keep in mind that the World Bank aims for a poverty rate of 3% by 2030, and the first Sustainable Development Goal is to "end poverty" by 2030. This 3% difference is no small matter. One possible concern is that measurement errors and uninsurable temporary shocks make it impossible for the surveyed poverty rate to fall below a certain threshold. However, since many countries have been able to keep poverty rates below 3 per cent for a period of time, it is reasonable to assume that the relevant threshold is less than 3 per cent.
The deeper problem is that even with good resources and policies, it is difficult to eliminate the poverty rate of the last 3 percent. While Figure 3 convincingly shows that economic growth and poverty reduction go hand in hand over the long term, we also see that essentially the same data show that the poorest people have little to gain from economic growth (Figure 2). Then, even if past growth is fully restored after the pandemic, it may take much longer to raise the income of the poorest people to $1.90 and end poverty, although acknowledging the measurement problem still cloudes the outlook.
In this regard, it would be instructive to take a closer look at countries that have been relatively successful in poverty eradication. Malaysia is probably the most successful country in the fight against poverty, having spent 30 years reducing the poverty rate from 3% to almost zero (Ravallion, 2020b). Even before the pandemic, the growth rate of the poorest people across East Asia had slowed markedly. Lavalre (2020a) studied 18 countries around the world with poverty rates below 3%, which at one point exceeded 10% since the early 80s of the 20th century. For these countries, once the poverty rate reaches the last 3 per cent, progress in poverty alleviation tends to almost stall on average (statistically not significantly different from zero).
Both theory and evidence point to a range of reasons why the poorest are left behind (Ravallion, 2020a); This echoes Galbraith's (1958) distinction between "generalized poverty" (which corresponds to economic growth resulting from an increase in average productivity) and other poverty that is detached from the growth process. The overall experience of relatively successful developing countries also shows that this is a serious concern today.
The cost of poverty eradication. Lampman (1965) presents an example of an early calculation that later became popular: the total poverty gap. This calculation envisages a set of transfers based on household means surveys that can fully fill the gap between the income of the poor and the poverty line, so that everyone can achieve the desired minimum income. Subsequently, this was identified as the cost of using transfers to eradicate poverty. Sachs (2005, p. 290) uses the total poverty gap to study the foreign aid needed to end poverty. Chandy et al. (2016) calculated the global poverty gap to be about $80 billion (using the $1.90 poverty line) and called on global billionaires to commit to closing the poverty gap and ending poverty. Lowrie (2017) draws on the calculations of Chandy et al. to argue that "this year we have the resources to eradicate extreme poverty"; "The global poverty gap is roughly equivalent to the amount of money Americans spend on the lottery each year, and about half of the world's foreign aid spending," he continued. "The calculation of the poverty gap also shows that the cost of poverty eradication has been decreasing. The world per capita poverty gap fell from $0.18 in 1999 to $0.06 in 2015 (both in 2011 PPP dollars/day). As more resources are devoted to poverty eradication, the corresponding "costs" have fallen to a very low level, or at least it seems.
These calculations are deceptive. As with the Spinham Lambland Plan, the incentive effect is a concern. The cost of poverty eradication may be higher when aid recipients (actual or potential) realize that their final income is not related to the work they do. (*1. Perfectly targeted poverty alleviation in the literal sense means imposing a marginal tax rate of 100% on the poor; The tax rate that minimizes poverty is likely to be closer to 50 per cent, taking into account possible incentive effects (Kanbur et al., 1994). There are also concerns about the stigmatization effect of such policies (Walker, 2014) and their politico-economic nature, in which targeted poverty alleviation may undermine their own political support (Korpi and Palme, 1998, Gelbach and Pritchett, 2000). But perhaps the biggest problem is a common one: the government doesn't have enough information to do a good job of targeted poverty alleviation. (*1.Commonly used "proxy-means tests" generate a large number of exclusion errors, leaving a large number of poor people without help; See Brown et al. (2018) for analysis using African data. ）
Instead, let's consider a universal basic income that would be enough to close the gap between the minimum subsistence standard and the poverty line. This is a more realistic policy that can be used to estimate the cost of using transfers to eradicate poverty. It has minimal information requirements, is unlikely to have much of an impact on work incentives, and will have broad political support. According to the minimum consumption level estimates in Figure 2, the cost of eliminating the $1.90 poverty line with universal basic income at a global level of 2015 would be $0.91 per capita per day, equivalent to 2.2 per cent of global GDP. Unlike the poverty gap, this cost has not been reduced; In 1999, it was also $0.91 per day.
The reader can tell whether this is "high" or "low". Of course, consideration must also be given to the modalities of financing universal basic income. Lavalre (2010) shows that the marginal income tax rate that needs to be levied on the non-poor can be prohibitively high in many developing countries if the funding comes from domestically. This funding can be raised through cuts to other public spending, but the scope and impact of the cuts need to be considered.
7. Summary
Goals are often set to motivate people to work towards them. To do this, the chosen goal can neither be too easy nor too daunting. In the context of poverty eradication, it must be recognized that this is an achievable goal and that it requires nothing more than redoubling efforts. The targets chosen will depend on a number of factors, including the redistributive preferences prevailing among those in power, the resources available, the breadth and depth of poverty, and whether the poor have a political voice.
History confirms the intuitive belief that "eradicating poverty" as a near-term goal will lack political momentum when pervasive chronic poverty is seen as the norm and poor citizens have little political clout. When these conditions no longer hold, the political goal of "eradicating poverty" can galvanize public action. However, while political constraints are important, they are not decisive. Social and economic thought, as well as data, often play a role. Poverty eradication can only be seriously addressed when there is a consensus that poverty reduction is a good thing; In this regard, Adam Smith had a profound impact on the mercantilist idea of poverty as a necessary condition for the creation of wealth. Descriptions of the lives of the poor (both qualitative and quantitative) also stir up waves, often leaving non-poor groups disgraced and engaged in helping the poor.
Setting the poverty line is always controversial, especially when it comes to setting poverty reduction targets. A poverty line that is too high can lead to an impasse in mobilization, and a poverty line that is too low may not make any difference. The first Millennium Development Goals (MDGs) and the first Sustainable Development Goal (SDGs) set a low global poverty line and are intended to maintain constant purchasing power across borders and time. The time cycle is similar, about 15 years from now, which makes sense for the current motivating effort. The biggest difference is that the first Millennium Development Goal seeks to halve poverty even if the poorest half of the population is left behind. Some observers have suggested that the achievement of the first Millennium Development Goal means that it has a huge impetus, although some claims about the impact of the first Millennium Development Goal are clearly exaggerated. Others may think that the first Millennium Development Goal is not ambitious enough, but you can see that it was achieved ahead of schedule. More worryingly, while the goal of halving the number of poor people as measured by the 1990 poverty line has been achieved, the poorest people have benefited only marginally.
The first SDG is clearly more ambitious and instructive. It targets the poorest 10 per cent of the world's population, with a clear emphasis on regional priorities, as 40 per cent of people in sub-Saharan Africa still live below the poverty line. Importantly, if the poorest are left behind, the first Sustainable Development Goal will not be achieved, as we saw during the first Millennium Development Goals. Achieving the first Sustainable Development Goal (SDG) is clearly not the "end of poverty" (as the UN's inspiring goals proclaim). With a global poverty line of $1.90, many people are no longer poor, but if you change to the (reasonable) poverty line of their country of residence, they are still poor. Nonetheless, it would be a great achievement for everyone to exceed the global poverty line, which 10 per cent of the population did not meet today, and 40 per cent of the population 40 years ago.
The path to achieving the first Sustainable Development Goal needs to be combined with economic growth, in particular through pro-poor technological progress and pro-poor redistribution. The political environment clearly influences the relative importance of growth and redistribution, but the level of economic development is also key. When poverty is so widespread that redistribution is politically and economically challenging, if not impossible, economic growth may be the politically viable response we can hope for. While it is true that poverty has increased as the economy grows, it is rare in the long run. The dilemma, however, is that poverty often makes economic growth more difficult.
The dynamics of poverty reduction can sometimes synergize with the political economy, thereby accelerating progress; The burden of raising incomes can be done through economic growth, but then redistribution needs to be done. Over the course of development, this virtuous cycle can sometimes work well, but sometimes it can fail, especially when the poorest people are difficult to reach; One can put forward all sorts of arguments and evidence to explain why. Admittedly, the good news is that fewer and fewer people are living near the minimum standard of living, but we also need to be soberly aware that this minimum standard has not been raised.
The first SDG will not be achieved without a return to "normalcy" in the wake of the pandemic. It is almost certain that the revival of economic growth in poor countries is necessary. There is still room for more effective redistributive policies, even more efficient ones, even if it remains a challenge to ensure that they reach the poorest. There is also a greater recognition that economic growth can go a long way toward reducing aggregate poverty measures, but it also comes with environmental costs, including global warming. Striking a balance between social and environmental sustainability goals is a huge challenge ahead of us. (Translated by Yan Chaofan)
(The author is a professor of economics at Georgetown University and director of research at the World Bank; Rural discovery transferred from: "Comparison" 2020 No. 6)