Solving the Quandary of How Poverty Is Reduced


SEATTLE — Determining how poverty is reduced around the world has been a cornerstone of controversy in the political arenas of developed nations across the planet for decades, with the U.S. being no exception. The political notion of whether wealthy, developed countries should provide resources to countries in poverty is one that varies from country to country.

The good news is that poverty rates around the globe have been nearly cut in half between 1990 and 2010, decreasing from 43 percent to 21 percent, or about one billion people. This was notably impressive considering this was a United Nations Millennium Development Goal set to be accomplished from 1990-2015.

This was accomplished in part through the success of the Chinese economy, which pulled about 680 million people out of poverty. In addition to this, between 1981 and 2010, China lowered its extreme poverty rate from 84 percent to 10 percent.

This achievement for China, by nearly all standards, was an economic anomaly. That said, while it was great for China, India and many nations in sub-Saharan Africa are experiencing poor governance and constant instability. It is unlikely that China’s successes will be easily repeated, leaving roughly a billion people across the world impoverished.

All of this considered, attempting to discover how poverty is reduced is something that has been studied by scholars, governments and humanitarian organizations for years. Many experts have found that due to the geographic extent of the problem, more success may come from combining both macro and micro level approaches when deciding how poverty is reduced long-term.

In this context, “micro” equates to the provision of aid to nations in poverty, either from individuals, governments or charities. In contrast, “macro” can be understood as efforts made to fundamentally alter certain societal flaws that could be causing the problem, such as working to remove trade barriers or improving transparency and accountability in government. According to a 2016 World Bank Report, escaping poverty is directly correlated with good governance. For the World Bank, figuring out how poverty is reduced when working with governments worldwide include two key methods listed below.

  1. Establishing institutions
    In order for any government to operate efficiently, maintain social order and adequately provide for citizens, having effective and well-maintained institutions is critical.

    Aside from the idea that having a well-functioning public sector is specifically pertinent to the poor, establishing institutions pertaining to public administration allows countries to create regulated economies that allow for private sector growth, increased employment and ensure that monetary resources are properly accounted for and spent.

    This tactic has had success too. By working with developing countries to strengthen government institutions, between 2011 and 2015, the World Bank enabled a total of 413 million people in these countries to receive critical healthcare, 50 million to receive increased access to clean water and also helped to foster the construction or maintenance of 102,000 kilometers of roads.

  2. Improving tax systems
    A lack of effective taxation systems in developing nations is a commonly seen trend among them. Approximately 50 percent of low-income countries raise less than 15 percent of their GDP from taxation, while the OECD’s global average is 34 percent. The reasons for this are numerous, but can be summarized as both foreign and domestically owned businesses avoiding paying taxes through loopholes, bribery, corruption or a lack of international pressure to prevent it.

    That is why one way of how poverty is reduced is for organizations like the World Bank to help governments to not only raise taxes, but to create a taxation system that will catalyze economic growth and quality of life. Organizations like the World Bank recognize the importance of utilizing untapped domestic resources like taxes, and have had already had success in helping countries to do so.

    For example, The World Bank proposed tax reform solutions to Pakistan that increased tax revenue by 24 percent in the Sindh province in one year alone. Furthermore, it provided similar advice to Mauritania which resulted in the government’s ability to increase tax collections by almost 50 percent between 2012 and 2014.

While these types of large-scale approaches certainly are effective, they are gradual processes and still do not negate the importance of the continued provision of humanitarian aid in the form of many things such as clothing, cash assistance or food.

A vast amount of U.S. citizens are unaware of how much funding is directed to foreign aid. According to a 2016 report from the Kaiser Family Foundation, on average, Americans think that 31 percent of their tax dollars are spent on foreign aid, and more than half of the population thinks this number is 15 percent. This is notable because the percentage of the GDP devoted toward foreign aid is actually below 1 percent.

This widespread level of misinformation often occurs inadvertently but results in the some members of the public failing to take action, or even be aware of dire issues. This can then hinder the public’s likelihood to urge Congress to address the problem. By recognizing that simply taking the time to become more educated about things we may otherwise not, U.S. voters can become a valuable asset in the fight against global poverty.

Hunter McFerrin
Photo: Flickr


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