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Poverty and inequality: an overview

STWR
19 May 2008

More than 1.4 billion people live in poverty so extreme that they can barely survive, and around 25,000 people die from hunger each day whilst a new billionaire is created every second day. The call for a global safety net has never been so urgent - and compels the international community to transform economic priorities and guarantee the universal securing of basic human needs. Below is a brief overview, some key facts and further resources that relate to global poverty and inequality.

Contents

Overview

The issues of poverty and inequality underpin the polarized debate in justification of or opposition to the current development approach.  Both the measurement of these issues and the methods by which they can be resolved are subject to contentious debate between the business community, economists and humanitarians. Although the international community pledged itself to resolving these issues when signing the Universal Declaration of Human Rights in 1948, still not nearly enough action is being taken to remedy an urgent and dire situation. 

Measuring Poverty and Inequality

According to the World Bank's annual figures, almost half of the world lives on less than $2 a day, including almost a half of all children.  Of these people, 969 million live on less than $1 a day - the official marker of extreme poverty.  Although this figure has now fallen beneath one billion, the statistical measurement of poverty remains controversial.  At the very least, dollar-a-day measures fail to reflect the harsh reality of living in the burgeoning slums of developing countries.  According to a critical mass of opinion, the quality of life for billions of poor people is continuing to deteriorate, making the promised widely-shared prosperity of globalism increasingly irrelevant for the majority world.

The global inequality debate is no less contentious.  Although the fact of both wealth and income inequality is acknowledged as widening by innumerable studies, the structural causes of inequality are disputed. Despite the International Monetary Fund's recent argument that foreign investment and technology (and not trade) are associated with the increase in inequality in developing countries, a wider consensus agrees that the policies of market liberalization are a key contributory factor.  Meanwhile, the gap between rich and poor in both developed and developing countries continues to grow inexorably, with the number of billionaires soaring to record heights.  Overall, the three richest people in the world control more wealth than all 600 million people living in the world's poorest countries.

The Failure of the International Community

For those at the bottom of the development ladder, inequality means the difference between those who benefit from a basic standard of living, versus those who lack even the essential resources needed to survive.  In a world with a huge surplus of food, around 25,000 people continue to die from hunger each day, with one in seven people going to bed hungry.  This gross neglect by the international community is reflected in statistics for undernourishment which recorded a sharp increase in developing countries after 2001. 

Parallel to the globalization of market forces which, over the last 30 years, have evidently failed to supply the urgent demands of those who have little or no income, a globalised system of welfare is sorely needed if the international community is ever to achieve their long standing goals on poverty eradication.  Many NGOs argue that, at the present rate of action, several of the Millennium Development Goals will take another 100 years to be met at current trends, and even if Goal 1 to half extreme poverty is achieved, 900 million people will still live on less than $1 a day in 2015.  It is worth noting that such promises from the richest nations are nothing new: if the original 1970 pledge to provide 0.7 percent of national income in aid had been kept, world leaders would have already celebrated the complete eradication of extreme poverty.  Instead, we would now be six years into a programme to eradicate $2 a day poverty.

A Global Safety Net

A cooperative, international approach is crucially required, one which can go far beyond existing pledges of more aid, debt cancelation and fairer trade. By ensuring that those resources which are essential to life are rapidly mobilized to where they are most urgently needed, governments are not only fulfilling their moral obligations, but attending to their technical duty of creating a global economy in which all citizens can actively participate and contribute.

Evidence shows that all the basic necessities of life - including clean water, adequate housing, energy, food and healthcare - could feasibly be supplied to all world citizens within an immediate time-frame.  The greatest barrier to achieving this monumental reordering of world priorities is the inequitable structures of the global economic system and a lack of political will, thus ensuring that 20 percent of the population in the richest nations continues to consume over 80 percent of the world's resources.

Key facts

Poverty

Almost half of the world lives on less than $2 a day, and for every six people who have enough food to eat, around one man, woman or child is starved of adequate nutrition.[1]
 
The total of those living in basic poverty also rose over most of the period between 1981 to 2004, especially in Africa where the number of poor almost doubled.[2]
 
 
Of those at the bottom of the development ladder, 25,000 people continue to die each day from hunger in a world with a huge surplus of food.[3]
 
As widely quoted during the Make Poverty History campaign, an average of 50,000 people die from poverty each day, or 18 million people each year.[4]
 
The persistence of chronic poverty, defined as those people who remain in extreme destitution for much or all of their lives and normally pass on the same poverty to their children, is an indication of the ingrained inequality that is left untouched by the international development agenda.  These families at the very bottom of the development ladder, who are often driven into destitution by ill-health and a lack of access to medical services, will make up the majority of the 900 million people who will still be in absolute poverty in 2015, even if the Millennium Development Goals are met.[5]
 
According to the Chronic Poverty Report 2004-5, 300-420 million (of the 1.2 billion then living in extreme poverty, as defined by the World Bank) were chronically poor.[6]
 
According to the World Development Indicators 2007, 969 million people live on less than $1-a-day (figures relevant to 2004).  2,548 million people live on less than $2-a-day - a figure that represents 47.5 percent of the world population.[7]
 
"Never before has the goal of abolishing poverty been within our reach: there are no longer any insurmountable technical, resource or logistical obstacles to achieving it. Yet, more than 800 million people suffer from hunger and malnutrition, 1.1 billion people do not have access to clean drinking water and, every hour, 1,200 children die from preventable diseases" - United Nations Development Programme, 2006.[8]
 
According to UNICEF's report in 2005 on State of the World's Children, of the 2.2 billion children in the world, 1 billion live in poverty - almost every second child.  Of the 1.9 billion children from the developing world, 640 million lacked adequate shelter (1 in 3), 400 million lacked access to safe water (1 in 5), and 270 million had no access to health services (1 in 7).[9]
 
Almost 3 billion people - half the world - live in poverty so extreme that they can barely survive (see Christian Aid's ‘Life on the margins' website).
 

Hunger

The Food and Agriculture Organization of the United Nations (FAO) estimates that in 2001-03 there were still 854 million undernourished people worldwide: 820 million in the developing countries, 25 million in the transition countries and 9 million in the industrialized countries.[10]
 
Since 1990-92, the undernourished population in the developing countries has declined by only 3 million people: from 823 million to 820 million. The most recent trends are a cause for concern - a decline of 26 million between 1990-92 and 1995-97 was followed by an increase of 23 million up to 2001-03.[11]
 
In order to attain the World Food Summit (WFS) target (to halve by 2015 the number of undernourished people in the world from the 1990 level), the number of undernourished people must be reduced by 31 million per year between 2001-03 and 2015.[12]
 
Across Africa, the number of undernourished people has risen during the period since 1990. In sub-Saharan Africa, this represents the continuation of a trend that has been apparent over at least the last three decades.[13]
 
One in seven people go to bed hungry every day.[14]
 
If the current trend continues, there will still be around 580 million people going hungry in 2015 (when the Millennium Development Goal - agreed upon by 189 heads of state in 2000 to halve worldwide hunger by 2015 - should be achieved).[15]
 
The country with the lowest Global Hunger Index rating in 2007 (based upon the proportion of undernourished as a percentage of the population, the prevalence of underweight in children under the age of five, and the under-five mortality rate) is Burundi, followed by the Dem. Rep. Congo, then Eritrea.  Cuba had the best rating (out of the 97 developing countries and 21 transitional countries measured).[16]
 

Inequality basics

The most commonly considered are inequalities within each country, often measured in terms of the differences between the average income of 10% of the richest, and 10% of the poorest in the country.  Inequality between countries (or ‘international inequality') is measured in terms of the differences between indicators of average standards of life.  Finally, ‘global' inequality considers the overall population of the world as a whole, normally measured in the same way as inequality within a country - by comparing the top and bottom 10%, or the effective end result of the first two.[17]
 
The poorest 40 percent of the world population - the 2.5 billion people who live on less than $2 a day - account for five percent of global income, while the richest 10 percent account for 54 percent.[18]
 
The three richest people in the world control more wealth than all 600 million people living in the world's poorest countries (see End Poverty 2015 website).
 

Inequality between countries

The richest 50 million people in Europe and North America have the same income as 2.7 billion poor people (according to a World Bank study in 2002).[19]
 
The extent of international inequality, measured in terms of both wealth and income distribution, has been progressively revealed in several of the UN Human Development Reports (HDR) released since 1990.  In the 1998 study on ‘Consumption for Human Development', 20 percent of the population in the developed nations were reported to consume 86 percent of the world's goods.[20]
 
In 1999, the HDR revealed that the top fifth of the world's people in the richest countries benefit from 82 percent of the expanding export trade and 68 percent of foreign direct investment, while the bottom fifth are left with around one percent of both.[21]
 
The income gap between the fifth of the world's people living in the richest countries and the fifth in the poorest was 74 to 1 in 1997, up from 60 to 1 in 1990, and 30 to 1 in 1960.  In the nineteenth century, inequality also grew rapidly in an era of global integration, with the income gap between the top and bottom countries increasing from 3 to 1 in 1820, to 7 to 1 in 1870, and 11 to 1 in 1913.[22]
 
In terms of income distribution between nations, the 20 percent of the world's people in the richest countries had 30 times the income of the poorest 20 percent in 1960, compared with 74 times as much in 1997.[23]
 
Of the richest 25 million Americans, their total income is equal to almost 2 billion people.[24]
 
More than 50 percent of the world's assets are owned by the richest two percent of adults, it showed, while the bottom half of the world adult population own only one percent of wealth.  Altogether, the richest 10% of adults accounted for 85% of the world total.[25]
 
According to the Boston Consulting Group, total world wealth increased between 2001 and 2006 even though households holding less than $100,000 in financial assets saw their total value slightly decline.  The new wealth, it revealed, has settled in the portfolios of millionaire households, accounting for 0.7 percent of the world's total households who now hold over a third of the world's wealth.  Nearly half of these households are situated in North America, with about a quarter from Europe.[26]
 

Inequality in the industrial nations

As potentially the richest and most unequal society in history, the income gap in the US is growing faster than in any other developed nation, with severe poverty levels at their highest since 1972.[27]
 
To make the Forbes list of the 400 richest Americans in 2007 no longer required a multi-million dollar fortune, but a minimum of $1.3 billion, up by $300 million within one year.[28]
 
Even amongst the rich there is growing inequality, shown by the top one percent of households in the United States who receive about half of the income of the top 10 percent, and the top 0.1 percent of households actually receiving nearly half of the share going to the top one percent.[29]
 
The gap between rich and poor in the United Kingdom has reached its highest level for more than 40 years.[30]
 
After 10 years with Brown as Chancellor of the Exchequer, inequality in the UK is at the same level as under Thatcher and continuing to rise, while the poorest fifth of society pay the highest proportion of their income in taxes.[31]
 
As acknowledged by the International Monetary Fund (IMF), income inequality has increased in most regions and most countries worldwide in the last two decades.[32]
 
Prior to 1986, the number of American billionaires averaged around 13.  In 1986 the number of billionaires doubled, then virtually quadrupled by 1987, reaching a worldwide total of 793 by 2006.  A year later in 2007, the figure included a further 178 newcomers to a total of 946 billionaires.  Over half of the current billionaires (523 in total) come from just three countries: the US (415), Germany (55) and Russia (53).[33]
 

Further resources

Organisations
Campaigns
Reports 
Books

References

[1] State of Food Insecurity in the World 2006 (Food and Agriculture Organization of the United Nations, 2006)

[2] "World Development Indicators 2007" (The World Bank, March 2007)
 
[3] Jakob Skoet & Kostas Stamoulis. "The State of Food Insecurity in the World, 2006: Eradicating world hunger - taking stock ten years after the World Food Summit" (Food and Agriculture Organization of the United Nations, 2006)
 

[4] Reality of Aid 2004 (Canada's Coalition to End Poverty - CCIC, 2004) / World Health Organisation 2004

[5] Chronic Poverty Report 2004-5 (The Chronic Poverty Research Centre, 2005)

[6] Ibid.

[7] "World Development Indicators 2007" (The World Bank, March 2007)

[8] Emmanuel Kattan. "2006 Annual Report: Global partnership for development" (United Nations Development Programme, June 2006) p. 8

[9] The State of the World's Children 2005: Children Under Threat (The United Nations Children's Fund  - UNICEF, 2005)

[10] The State of Food Insecurity in the World 2006: Eradicating world hunger - taking stock ten years after the World Food Summit (Food and Agriculture Organization of the United Nations, 2006)

[11] Ibid, p 8.

[12] Ibid.

[13] Ibid, p 9.

[14] The Challenge of Hunger 2007 (International Food Policy Research Institute, October 2007) p 4.

[15] Ibid.

[16] Ibid p 9.

[17] Definition from Pierre-Noël Giraud. Inequalities: facts and debates (Cerna: Centre d'économie industrielle Ecole Nationale Supérieure des Mines de Paris, January 2002)

[18] Emmanuel Kattan. "2006 Annual Report: Global partnership for development" (United Nations Development Programme, June 2006) p. 8

[19] Branko Milanovic. "True World Income Distribution, 1988 and 1993: First Calculation Based on Household Surveys Alone" (The Economic Journal published for the World Bank, January 2002)

[20] "Human Development Report 1998: Consumption for Human Development" (United Nations Development Programme (UNDP), New York 1998)

[21] "Human Development Report 1999: Globalization with a Human Face" (United Nations Development Programme (UNDP), New York 1999) p 38

[22] Ibid.

[23] Ibid.

[24] Branko Milanovic. True world income distribution, 1988 and 1993: First calculation based on household surveys alone (World Bank report printed in The Economic Journal, Volume 112 Issue 476, January 2002) p 51

[25] "The World Distribution of Household Wealth report" (United Nations University's World Institute for Development Economics Research (UN-WIDER), New York, February 2008)

[26] ‘Global Wealth 2007: Tapping Human Assets to Sustain Growth' (Boston Consulting Group, September 2007)

[27] See Paul Buchheit. "The Income Gap: Profits Up 93%, CEO Pay Up 571% -- Worker Salaries Stagnant." (Counterpunch.org, February 28 2007). See also Tony Pugh. "U.S Economy Leaving Record Numbers in Severe Poverty." (McClatchy Newspapers, 22 February 2007)

[28] Matthew Miller (ed). "The Forbes 400" (Forbes Magazine, 20th September 2007)

[29] Teresa Tritch. "The Rise of the Super-Rich" (New York Times, July 19th 2006)

[30] "Gap between rich and poor in UK 'widest in 40 years'" (The Independent, 17th July 07)

[31] Larry Elliot. "Inequality at same level as under Thatcher" (The Guardian, May 18th 2007)

[32] Thomas Harjes. Globalization and Income Inequality: A European Perspective (International Monetary Fund, Working Paper, July 2007)

[33] Luisa Kroll & Allison Fass (eds). "The World's Billionaires" (Forbes Magazine, 8th March 2007)

Filed under: 
Poverty and hunger, Inequality