The document provides an overview of global poverty and economic development. It discusses that nearly half the world lives in poverty, though some countries have transitioned from poor to rich. Africa continues to lag behind in development. Mobile technology is enabling growth in poor countries. There is debate around how to reduce extreme poverty.

1. A Framework for Understanding the Economics of Global Poverty Jim Donahue 15 th May 2008 [email_address] © 2008 Jim Donahue

5. Most of the world lives in developing countries and nearly half earn less than $2 per day 33 25 41 73 Number of Countries Source: World Bank Development Indicators - GNI/capita, PPP – 2004 Population 1 B .2 B 2.2 B 2.7 B 1 Billion <$1/day 3 Billion <$2/day International Poverty Lines: Developed Countries Developing Countries

6. Extreme poverty has been reduced in recent years, but nearly half of the world still lives in poverty Source: World Bank Development Indicators - % Poverty 1981 - 2004 1981 40% less than $1/day Additional27% on less than $2/day 33% Greater than $2/ day Total Population: 4.5 Billion Less than $1/day 1.5 Billion Less than $2/day: 3.0 Billion 2004 19% less than $1/day Additional29% on less than $2/day 52% Greater than $2/day Total Population: 6.4 Billion Less than $1/day : 1.0 Billion Less than $2/day: 3.0 Billion

8. There of numerous examples of countries moving from being poor to rich Today’s Emerging Markets (% growth 2004-05) Source: World Bank Development Indicators Turkey – 7.4% Venezuela – 9.3% China – 10.2% Estonia– 9.8% Argentina – 9.2% S. Africa – 4.9% Malaysia – 5.9% Philippines – 5.0% Indonesia – 5.6% India – 9.2% Angola – 20.6% Europe Greece 2005 ($23,620) Greece 1950 Spain2005 ($25,820) Spain2000 Ireland 1988 Ireland 2005 ($34,720) Japan and the Asian Tigers Japan 2005 ($31,410) Japan1950 S. Korea, 2005 ($21,850) S. Korea 1970 Taiwan 1960 Taiwan 2005 (25,000)

9. Europe Czech –$20,140 (6.1%) Hungary-$16,940 (4.1%) Estonia -$15,420 (9.8%) Poland -$13,490 (3.4%) UK- $32,690 (1.8%) France - $30,540 (1.2%) Germany -$29,210 (1.0%) Italy -$28,840 (0.0%) Spain -$25,820 (3.4%) Russia -$10,640 (6.4%) Romania-$8,940 (4.1%) Turkey - $8,420 (7.4%) Ukraine-$6,720 (2.6%) GNI per Capita/ Growth Rate (PPP 2005 US$) (%Growth 2004-05) Source: World Bank Development Indicators Years to Double Size of the Economy Developed Countries Newly Emerging Markets

10. Key steps to poverty reduction through growth: 1. Create a good investment climate 2. Create formal economy jobs 3. Empower the poor to participate in the economy Geography People/Culture Governance Infrastructure, Health, Education Indirect factors influencing investment decisions: Informal/ Sustenance Economy Private Sector Formal Economy 3. Health and education levels empower the poor to move into formal economy jobs 2. Private investment and export industries create jobs and help grow the formal economy 1. Key private sector investment decision factors:

12. United Kingdom Economic Performance GNI/capita, PPP: $32,690 (2005) Services: 72% Industry: 27% Agriculture 1% France GNI: $2.169 trillion (2005) Population: 61 million (2005) Economic Output Economic Performance GNI/capita, PPP: $30,540 (2005) Services: 73% Industry: 24% Agriculture 3% Source: World Bank Development Indicators > $2 > $2 Economy Poverty Economy Poverty Growth (Avg. 1990-03) 2.7% Investment (% GDP) 16% Exports (% GDP) 25% Imports (% GDP) 28% Unemployment (00-05) 4.6% Inflation (Avg. 1990-03) 2.7% GNI: $2.273 trillion (2005) Population: 60 million (2005) Economic Output Growth (Avg. 1990-03) 1.9% Investment (% GDP) 19% Exports (% GDP) 26% Imports (% GDP) 25% Unemployment (00-05) 9.9% Inflation (Avg. 1990-03) 1.5%

14. Asia … .but it is improving GNI per Capita/ Growth Rate (PPP 2005 US$) (%Growth 2004-05) Source: World Bank Development Indicators <1$ Between $1 and $2 > $2 <1$ > $2 Between $1 and $2 India China Extreme Poverty reduction since 1980 70 million fewer 400 million fewer Millions are living in poverty….. India (2004) China (2004) Hong Kong-$34,670 (7.3%) Japan -$31,410 (2.6%) Taiwan - $25,400 (5.0%) S. Korea-$21,850 (4.0%) Malaysia - $10,320 (5.2%) Thailand - $8,440 (4.5%) China - $6,600 (10.2%) Philippines - $5,300 (5.0%) Indonesia - $3,720 (5.6%) India - $3,460 (9.2%) Vietnam - $3,010 (8.4%)

15. China GNI: $2.3 trillion (2005) Population: 1.3 billion (2005) Economic Output Services: 33% Industry: 52% Agriculture 15% India GNI: $804 billion (2005) Population: 1.1 billion (2005) Economic Output Services: 51% Industry: 27% Agriculture 22% Economic Performance GNI/capita, PPP: $6,600 (2005) Economic Performance GNI/capita, PPP: $3,640 (2005) Source: World Bank Development Indicators <1$ > $2 Between $1 and $2 Between $1 and $2 <1$ > $2 Economy Poverty Economy Poverty Growth (Avg. 1990-03) 10.3% Investment (% GDP) 44% Exports (% GDP) 34% Imports (% GDP) 32% Unemployment (00-05) 4.2% Inflation (Avg, 1990-03) 4.9% Growth (Avg. 1990-03) 5.9% (9.2) Investment (% GDP) 24% Exports (% GDP) 14% Imports (% GDP) 16% Unemployment (00-05) 5.0% Inflation (Avg, 1990-03) 6.8%

17. India is struggling to improve its poor infrastructure in an effort to improve its capacity to grow

19. Sub-Saharan Africa is not on track to meet the UN Millennium Development Goals by 2015 √ - goal achieved √ - on-track x – not on-track √ - goal achieved √ - on-track √ - good progress Goal 1: Eradicate Extreme Poverty and Hunger TARGET Halve, between 1990 and 2015, the proportion of people whose income is less than $1 a day Goal 2: Achieve Universal Education TARGET Ensure that, by 2015, all children will be able to complete a full course of primary schooling Goal 4: Reduce Child Mortality TARGET Reduce by two thirds, between 1990 and 2015, the under-five mortality rate Goal 6: Combat HIV/AIDS, Malaria & Other Diseases TARGET Have halted by 2015 and begun to reverse the spread of HIV/AIDS

25. Africa’s economic growth since the mid-1990’s is more promising for poverty reduction, but diversification away from commodities is still a challenge Source: World Bank, African Development Indicators, 2007 Annual GDP Growth (2000-2005) > 5% - 18 countries 3- 5% -16 countries 1-3% - 6 countries < 1% - 6 countries Countries with Average Growth Greater than 5%, 2000-2005 - Sustained, diversified growth - Dependant on oil as major export LIBYA – 5.3% EGYPT 3.7% TUNISIA – 4.5% NIGER 3.7% CHAD 14.5% SUDAN 6.1% ALGERIA 5.1% MOROCCO 4.3% MALI 5.9% WESTERN SAHARA MAURITANIA 4% SENEGAL IVORY COAST -0.1% LIBERIA GHANA 5.1% TOGO BENIN SIERRA LEONE 13.7% BURKINA FASO 5.6% GUINEA NIGERIA 5.9% GUINEA BISSAU THE GAMBIA CAMEROON 3.7% CENTRAL AFRICAN REPUBLIC CONGO GABON EQUATORIAL GUINEA 23.2% DEM REP CONGO 4.4% ANGOLA 9.9% TANZANIA 6.5% ETHIOPIA 4.7% KENYA 3.4% UGANDA 5.6% RWANDA 5.1% BURUNDI 5.6% SOMALIA DJIBOUTI ZIMBABWE (5.7%) ZAMBIA 4.7% MOZAMBIQUE 8.4% MADAGASCAR 2.0% SOUTH AFRICA 3.9 BOTSWANA 5.9% NAMIBIA 4.7% LESOTHO 2.9% SWAZILAND 2.5% MALAWI 3.4% Red Sea

33. The Pessimists: Aid has not been effective Temporary Famine Relief? Where has $2.3 trillion in foreign aid over past 50 years gone? Corrupt and wasteful Bureaucrats? Swiss bank accounts?

34. Paul Collier proposes a more balanced agenda for action to tackle poverty in the poorest countries The Conflict Trap The Natural Resource Trap Landlocked with bad Neighbours Source: The Bottom Billion, Paul Collier, Oxford University Press, 2007 Bad Governance Globalisation reinforces poverty on many poor countries Military support for post-conflict countries Charter for post-conflict governance Aid for reconstruction International laws and norms for resource wealth Substantial aid to develop infrastructure and for basic social services Military support to prevent coups Trade policies encouraging exports Intelligent use of aid to encourage reform Selected use of military intervention (e.g. Sierra Leone) ‘ Big Push’ temporary aid for export infrastructure Temporary trade protection from Asian competitors