Are we really reducing global poverty?

Some of the global norms, facts and findings on poverty have l ed to two incorrect conclusions: that good progress is being made towards the target of halving global poverty by 2015, and that aggregate economic growth is the best way for reducing it further. The paper questions whether $1 per day is a valid poverty norm, whether poverty trends for China are an enigma; and whether statistical validity can be mistaken for truth. It draws the attention to the risk of 'misplaced concreteness' in economic analyses. It emphasises that equity matters for poverty reduction, based on the argument that if growth is good for the poor but if high inequality inhibits growth—as most analysts now agree—then equity must be good for the poor. Indeed, equity does matter for poverty reduction. It would be incorrect to assume that more growth will automatically translate into less poverty. Equity concerns are not about charity, but about laying the foundation for a strong economy and a just society. The fact that the poor do not gain from economic stagnation and recession does not prove—regrettably—that the opposite will be true. The fact that macroeconomic instability hurts the poor does not necessarily mean that macroeconomic stability will benefit the poor. Much will depend on how stability is achieved. More nuanced positions and conclusions are warranted, given the many complexities that govern the relationship between growth and poverty. The paper also argues that if robust economic growth in places as far apart as South Asia and Latin America does not significantly reduce income-poverty, then there is a strong case for social policy to ensure that growth leads to rapid poverty reduction. Social safety nets allow for a rapid response to crises but they are not sufficient as social shock absorber. They claim to be efficient, which does not necessarily imply they are effective. There is no doubt that public spending on social services includes wastage; but those who argue that existing budgets have to be used more efficiently before investing more public money miss the important point that insufficiencies often create inefficiencies. The dichotomy between more money versus more efficiency is a false one. Most policy-makers do not face a choice between either improving efficiency or increasing budget allocations; both have to be addressed simultaneously. Indeed, inefficiencies and insufficiencies are not independent, but very much interdependent. A social shock absorber should not be dismissed on the …