Post-2015 Consensus: Poverty Perspective, Datt

Perspective Paper

Summary

This paper offers some reflections on the components of SDG1, dealing with poverty, noting first its huge scope. Ending poverty can justifiably be seen as an overarching aim of all development efforts, and hence one can hardly object to SDG1 as an aspirational goal for “the future we want”. 

The target on eradication of extreme poverty (SDG1.1) is similar to that set by the World Bank. However the latter calls for reduction to a minimal, low target (3%). The conceptual argument has to do with the notion of “frictional” poverty – the idea that at any given point in time, there may always be an irreducible lower bound to poverty given that economic systems are constantly in the process of adjusting to shocks of one kind or another, and even the most comprehensive social protection system is unlikely to guarantee that no one ever falls below the poverty line. This is conceptually sounder, and the post-2015 target should be aligned with this.

However, the 3% is a global target, which raises the uncomfortable possibility that it could be reached with many smaller countries still having much higher levels of extreme poverty. This is a very real possibility, given that there are 17 countries with a projected poverty incidence of 30% or higher (15 in sub-Saharan Africa) in 2030, by which time the global incidence is projected to have reached 4.8%, based on growth data from national accounts.

There is also an issue of Purchasing Power Parities. The $1.25 per day figure is set in terms of 2005 PPPs, but a new set became available in 2011. These are controversial, but there is agreement is that the new PPPs entail a large downward revision relative to the 2005 PPPs if extrapolated to 2011 using relative rates of inflation. This is not a trivial issue, as the use of the new PPPs without a recalibration of the 2005 $1.25 poverty standard could imply a reduction of the incidence of extreme poverty by more than half. There is no agreement on which set of figures should be used, but the debate argues for some flexibility in the post-2015 target. The threshold of extreme poverty should be reviewed with each methodologically-sound revision of purchasing-power parity exchange rates.

SDG1.2 is to halve the incidence of “poverty in all its dimensions”. Rather than seeing poverty purely in terms of income or consumption, this focusses attention on specific capability failures relating to health, education, shelter and access to basic amenities. These may be the result both of market failures and government failures, particularly in relation to public goods and how markets function. This calls for the use of a composite index such as the Multidimensional Poverty Index. However, it is difficult to judge whether halving is an under- or over-ambitious target without settling how what is proposed to be halved is measured.

Regarding the remaining three targets, social protection, social exclusion and resilience against shocks overlap with other goals and are difficult to separate. They should therefore probably not be seen as independent components of the overall poverty goal. Nevertheless, on the issue of resilience to shocks, there is a case for augmenting the targets to include the vulnerable as well as just the poor. The poor are a subset of the vulnerable, but the vulnerable could include many non-poor who are nonetheless vulnerable to poverty in that they could be consigned to the ranks of the poor if hit a by negative shock.