Charles Kenney and Andy Sumner – WNN MDG Stories
(WNN) Global: Remember the poverty trap? Countries stuck in destitution because of weak institutions put in place by colonial overlords, or because of climates that foster disease, or geographies that limit access to global markets, or simply by the fact that poverty is overwhelmingly self-perpetuating. Apparently the trap can be escaped. New data coming from some African regions is showing defined progress as investors move in.
And there are only 35 of them remaining out of the countries and economies that the World Bank tracks. That’s down from 63 in 2000.
New middle-income countries this year include Ghana and Zambia. Lower middle-income countries are those with per capita GNIs of between $1,006 and $3,975 per year; while upper middle-income countries are those with per capita GNIs between $3,976 and $12,275.
The remaining 35 low-income countries have a combined population of about 800 million. Tanzania, Burma, the Democratic Republic of the Congo, Ethiopia and Bangladesh account for about half of that total, and there are about 350 million people living on under $1.25 a day in the remaining low-income countries.
So what’s behind all of this sudden income growth? Is it a story about aid? One prominent Zambian, Dambisa Moyo, has written of her country that “a direct consequence of the aid-driven interventions has been a dramatic descent into poverty. Whereas prior to the 1970s, most economic indicators had been on an upward trajectory, a decade later Zambia lay in economic ruin”. In the 1980s, aid to Zambia averaged about 14% of the country’s GNI. In the 2000s, a decade of strong growth, the same proportion was 17%. If Zambia’s ruin in the 1980s was the result of aid, is Zambia’s graduation to middle-income status in the new millennium a sign that aid now works really well?
Of course both the ideas that previous stagnation was all the fault of aid, or current growth was all the result, are ridiculous. The price of copper (Zambia’s major export) was depressed in the 1980s and saw its price rocket in the middle of the last decade as China and India’s economies grew and demand for the metal soared.
But growth among low-income countries in Africa and elsewhere isn’t just limited to big mineral exporters. And the continent is fast drawing in more investment. Foreign direct investment to Africa is projected to rise to $150bn by 2015, reports the Africa Attractiveness Survey (that’s more than the total global aid budget) – and domestic resources are being mobilised at a faster rate, too, as the Commission for Africa 2010 report discussed.
Even gold and diamond-producing Ghana, which declared itself 63% richer at the end of last year than previously thought, didn’t suggest the newfound riches were the result of mineral exports. Instead, the recalculation was driven by the fact the country’s services sector was a lot bigger than previously calculated. Part of that will reflect the incredible success of the telecoms sector – 75% of the country’s population are mobile subscribers. And, of course, the expansion of telecoms is a worldwide phenomenon. So a lot of the growth we are seeing in poor countries is broad-based, not just reliant on the current commodity boom – which is good news for the future.
Of course there’s much to do to translate this growth into better and faster poverty reduction. Looking at the progress data for the millennium development goals (MDGs) for Ghana and Zambia there’s nowhere near the kind of progress you would hope to see on income poverty. Twenty years of growth in Ghana has reduced the number of people living on $1.25 or less from just over 7 million to just under 7 million – and inequality (as measured by the Gini coefficient) rose significantly. However, in both Ghana and Zambia, the number of children in primary school has climbed along with literacy rates, and infant mortality has fallen. Even if they’re not on track to meet the MDGs, quality of life is getting much better.
What shall we take from this? Three things. First, consider the good news that there are fewer poor countries around. Not least, it suggests that public and private investment (including aid) can help even the poorest countries get rich(er). This is one more reason why optimism should come back into fashion.
Second, the World Bank country classifications – which are used to help determine types and levels of support provided by many aid agencies – may need a rethink. They are based on a decades old formula, and on the idea that most poor people live in poor countries. But we know that middle-income countries now account for most of the world’s population living in absolute poverty. And the data suggests these aren’t just poor countries by another name – they really are better off than low-income countries, not only in terms of average income but by human development and other development indicators too. We need aid allocation models to take account of poor people and of deprivations beyond income – not just poor countries with a low GNI. And fewer poor countries and poor people in time also suggests greater aid funds for global public goods – be these for climate adaptation, vaccines or other shared global issues that will shape the next 25 years.
Third, as countries develop their own resources, fighting poverty becomes increasingly about domestic politics. Not surprisingly, this means inequality is rising up the agenda. New research shows that the emerging middle classes may have a big role to play. Who they side with – the poorest or the economic elite – will determine what kind of development emerges in the new middle income countries.
In short, even the poorest countries can get richer – and that’s a good news story.
©2011 Women News Network – WNN
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