Where do the bottom billion live?

India poverty map

Since its publication a couple of years ago, Paul Collier’s excellent The Bottom Billion has helped to reshape the development debate. Collier argues that although many poor countries have made impressive strides in recent years, a hard core of about 50 countries – home to some of the world’s “bottom billion” poorest people – seem to be trapped, and are being left ever further behind.

Ideas such as these have proved persuasive in development circles, fuelling an increasing focus on what needs to be done to help these 50 or so “bottom billion”  countries (although this hasn’t always been reflected in actual aid disbursements).

Some of the concern is humanitarian, but some also is driven by security worries: In many cases, these are so-called fragile states that are – or risk becoming – breeding grounds for terror and conflict.

Now, however, there are signs of a bit of a backlash, notably in the form of a paper from researcher Andy Sumner. He argues that if we focus on the poorest countries, we’ll actually miss most of the world’s poor.

According to his research, about three-quarters of the world’s 1.3 billion poorest people live today in what the World Bank classes as middle-income countries (MICs), for example India. Against that, only 370 million of them live in the 39 so-called low-income countries (LICs), mostly in sub-Saharan Africa. The contrast with the situation 20 years ago is striking: Back in 1990, Sumner estimates, about 93% of the world’s poorest people lived in low-income countries.

In short: Most of the world’s poor no longer live in what are regarded as poor countries.

Sumner’s paper has been grabbing attention – and generating debate – in development circles. As Duncan Green notes, the findings are “to some extent an artifice of country classification  … poor people live in roughly the same countries as in 1990, but those countries have got a little bit richer.” In effect, most Indians who were poor when India was classed as a low-income country were still poor when India was reclassified as a middle-income country.

Nevertheless, the findings do raise some interesting issues. As Owen Barder suggests, they may lead us to see poverty in a new way – not the result of insufficient development but rather of inequality. “The figures suggest that the biggest causes of poverty are not lack of development in the country as a whole, but political, economic and social marginalisation of particular groups in countries that are otherwise doing quite well,” he writes.

For Jonathan Glennie, that raises questions over who should take the lead in tackling poverty: “It is one thing transferring money to very poor countries,” he writes. “But to transfer cash to countries like China and India that not only have nuclear power and space programmes, but also have their own multi-billion dollar aid programmes, is quite another. Aid money is irrelevant to them – should the traditional donors therefore just leave them to it?”

 Useful links

 OECD work on fragile states and poverty reduction

 OECD Development Centre work on poverty reduction and social development

Perspectives on Global Development from the OECD Development Centre

French pension reform: Unfair and unsustainable

 
 

Today’s post comes from Pierre Habbard of the Trade Union Advisory Committee to the OECD  (TUAC) in reponse to the article by Fiona Stewart of the OECD  Financial Markets, Insurance and Pensions Division on the strikes in France.

 

Fiona Stewart seems to suggest that any reform (i.e. the French government pension reform) is a good one and that anyone who opposes such reform (i.e. the French labour movement) is opposed to any reform whatsoever. The French unions are not opposed to reform as such. They are perfectly aware of “the scale of the challenge of paying for our pensions”. They just happen not to agree with the direction taken by the government.

In fact most of the French unions would be ready to support the current reform process if only there had been some room for negotiation. But negotiation with unions never really happened; instead the French government simply rushed through the parliamentary process.

Based on the two criteria that really count when discussing pension reforms – financial sustainability and fair risk sharing – the French reform isn’t a good one. The goal of the reform is to reach financial balance in the system in 2018. Not only will this deadline be missed, but as a result of the reform, the much valued French pension reserve fund – the Fonds de réserve des retraites (FRR) which was set up in the late 1990s to prepare for the demographic change after 2020 – will be spent completely by then. What will happen after 2018, nobody really knows.

This reform will not make the French PAYG more robust financially in the long run. It is a reform that was prepared in haste to appease the sovereign bond markets and the credit rating agencies in the short term.

It is also an unfair reform. It puts all the burden on the lower income households and on blue collar workers, because it is based almost exclusively on raising the retirement age on full pension from 65 to 67(and not from 60 to 62 as widely reported), which is only one among many pension parameters. At the same time, the reform does little to increase the rate of participation of people aged 55 to 65 in the workforce, which is fundamental to any PAYG scheme’s sustainability. France has one of the lowest participation rates for this age group in the EU, not to speak of the OECD. And yet and the reform does little to “arm twist” the French employers to act decisively in that respect.

In effect, this reform will transfer the financial burden of the inactivity of people aged 55-65 from the pension system to other government welfare programmes, be it unemployment schemes or targeted social safety nets.

Useful links

OECD Employment Outlook 2010: Moving beyond the Jobs Crisis

After the crisis: towards a sustainable growth model from the European Trade Union Institute