Saturday, September 17, 2011

What if the world’s poor live in non-poor countries?

Until now, poverty has been viewed as a poor country issue, but now that most of the world's poor live in middle-income countries, donors will need to rethink their approaches and strategies.

Two decades ago, almost all of the world’s poor lived in countries officially classified as Low Income. Now, 72% of the world’s poor live in Middle Income Countries. This “new geography of global poverty” with the mass of the poor living in stable, non-poor countries—raises important questions for the current model of development assistance, where national per capita income is a key determinant of the volume and composition of aid flows.

Should aid allocation be targeted equally to poor people in poor and non-poor countries, or should special weight be given to poor countries? How, if at all, should international agencies with a focus on poverty reduction re-calibrate their engagement with MICs?

The spectacular growth of a number of populous countries over the last two decades has changed the global map of poverty. On the one hand, growth in countries such as China has contributed to dramatic reductions in the incidence of global poverty—indeed the first Millennium Development Goal (MDG), of halving the incidence of poverty between 1990 and 2015, will be met at the global level. However, two decades of this process has led to another feature of the global map of poverty—more and more of the remaining poor now live in MICs.

The poor haven’t physically moved of course. What has largely happened is that the countries in which many of the world’s poor live in have got richer in average per capita terms and have been reclassified as middle-income countries.

The new geography of global poverty throws into sharp relief development assistance policy towards MICs.

There is no justification for a blanket exclusion of MICs from development assistance. We would argue that the policy has to be crafted on a country specific basis, taking into account the detailed nature of poverty in each MIC, and the specific institutional and implementation context of development assistance.

However, looking further ahead, there will be fewer and fewer poor countries - maybe just 20 in 2025 according to one estimate - and most countries will need and want aid as resource transfers less and less. What does this mean for aid and development cooperation? Is this the end of 'traditional' aid and the birth of something new in terms of development cooperation and global public policy?

We hope that the coming DSA conference will be able to consider some of these dilemmas.

Andy Sumner is a cross-disciplinary Economist based at IDS

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