Halving Global Poverty

I n September 2000, the world’s leaders met at the Millennium Summit at the United Nations in New York City and set an ambitious agenda for improving human welfare. These goals, which are elaborated at http://www. developmentgoals.org , include achieving universal primary education and gender equity; ensuring environmental sustainability; reversing the spread of HIV/AIDS; and by 2015, reducing under-age-five mortality by two-thirds, maternal mortality by three-quarters and the proportion of people without access to safe drinking water by half, in comparison to the levels prevailing in 1990. The goal of central importance to this paper is to cut in half the proportion of people living below $1 a day from around 30 percent of the developing world’s population in 1990 to 15 percent by 2015. The latest World Bank estimates (for 1998) suggest that 1.2 billion people are below the $1-a-day poverty line. Though the fraction of humanity in poverty is falling, absolute numbers in poverty have shown limited change (Deaton, 2002). This paper begins by discussing poverty trends on a global scale—where the poor are located in the world and how their numbers have changed over time. It then discusses the relationship of economic growth and income distribution to poverty reduction. Finally, it suggests an evidence-based agenda for poverty reduction in the developing world. A recurrent theme of the paper will be that mainstream economic thinking on how to reduce poverty has evolved in the last couple of decades. The traditional economic focus in development thinking focused heavily on a neoclassical model in which growth was achieved by accumulating productive assets in a climate of