Trillions of dollars have been spent on the global response to the COVID-19 pandemic and no one knows what the final bill is to be. Is it possible to respond to a much longer crisis — global poverty — with even a fraction of these resources?
Richer countries are committed to spending 0.7 percent of their gross national income (GNI) on international development aid. This target was established by the Pearson Commission in 1969, and approved in a UN General Assembly resolution the following year. Countries reached this agreement a half-century ago in a world in which global poverty was at very high levels. At the time, the world was justifiably perceived in binary terms: The North was wealthy, and the South was poor.
Much has changed in the intervening 50 years. Some countries have met the 0.7 percent target, but many others have yet to do so. Many developing countries experienced rapid economic growth in the 2000s — not only China and India, but also a number of African countries.
Although all gains are in jeopardy, the world had prior to the pandemic entered a new era, with fewer low-income countries. At the same time, the higher global ambitions set out in the UN’s Sustainable Development Goals (SDGs), committed countries to end poverty in all of its forms by 2030.
A new era needs a new approach. The COVID-19 pandemic makes this need even more urgent. My colleagues and I propose a scaled financial commitment to development, with a twist: It should be universal across all countries, rich and poor.
Before describing the proposal, it is necessary to ask what has changed since the target of 0.7 percent of GNI was adopted. During this period, two “new middles” emerged. The first is an increase in the number of middle-income countries — home to much of the developing world’s population. In many of these countries, aid levels are low relative to domestic resources and non-public international flows.
At the other end of the spectrum, about 30 countries remain “stuck” in terms of growth. These highly aid-dependent states are home to about 10 percent of the population of developing countries — not a “bottom billion,” but a bottom half-billion.
The other “new middle” comprises those who have escaped poverty, but remain vulnerable to falling back into it. This group represents more than two-thirds of the developing world’s people.
If measured using the World Bank’s definition of extreme poverty — living on US$1.90 or less per day — global poverty has fallen (although the decline is more modest when China is excluded), and income has grown among many of the world’s poorest. Extreme poverty affects only about 10 percent of the population in developing countries, down from about 50 percent 40 years ago.
However, poverty remains at startling levels when measured at the World Bank’s poverty thresholds of US$3.20 and US$5.50 per day. It is sobering to note that every US$0.10 added to the poverty line increases the global headcount of the poor by 100 million.
Moreover, the poverty count at US$1.90 doubles when one considers multidimensional poverty, which includes health, education and nutrition. When using a threshold that is associated with a permanent escape from the risk of future poverty — US$13 per day in terms of 2011 purchasing-power parity — about 80 percent of the population in developing countries remains poor.
Poverty is widespread, not just occurring in sub-Saharan Africa, and in fragile or conflict-affected states. In short, the second “new middle” is composed of those in developing countries living above the US$1.90 poverty line, but below the US$13 vulnerability threshold.
Against this backdrop, and amid the global pandemic, our proposal calls for a “universal development commitment” (UDC) from all countries — rich and poor alike. Given their aim of poverty eradication, the SDGs would inevitably be the core focus of any such UDC.
One option for a UDC would be to institute a sliding scale. For example, high-income countries could keep their commitment at 0.7 percent of GNI, while upper-middle-income countries would contribute 0.35 percent. Lower-middle-income countries would earmark 0.2 percent of their GNI, with lower-income countries contributing just 0.1 percent.
These are gross contributions, not net. In this scenario, the total funding available for development would amount to almost US$500 billion per year.
In principle, these additional resources could lift the remaining about 750 million people above the US$1.90 poverty line, end hunger and malnutrition for an estimated 1.5 billion people, end preventable child mortality, make primary and secondary schooling possible for all children, and provide access to safe and affordable drinking water for more than 1 billion people, as well as providing adequate sanitation for more than 2 billion people.
In this scaled-contribution scenario, US$200 billion would still remain available to support the achievement of other SDGs.
Developing countries would gain by contributing, because a UDC would lead to more resources for those countries overall. Equally important, contributing would ensure that poorer countries have a voice in the governance of the funds, whether symbolically, as a sign of their moral right to be heard, or physically, as members of the board deciding on priorities and policies.
Our proposal undoubtedly raises numerous other questions, but the principle remains simple: Every country pays into the system and the money is spent on ending global poverty. Amid a global pandemic, and with the SDG deadline a decade away, the world needs a UDC sooner rather than later.
Andy Sumner is Professor of International Development at King’s College London and a non-resident senior research fellow at the UN University’s World Institute for Development Economics Research.
Copyright: Project Syndicate
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