Targeted policies to eradicate poverty
Today’s post is from Erik Solheim, Chair of the OECD Development Assistance Committee (DAC)
Poverty has been halved in less than 25 years worldwide. The enormous progress over the past few decades is mainly due to rapid economic growth in the South. China’s economy grew by 10% for decades and 600 million people were consequently brought out of poverty.
Economic growth in poor nations is crucial. But it will not be possible to end extreme poverty by 2030 through economic growth alone, even if African countries grow at 10% for the next 15 years. Poverty eradication will require specific policies targeting the most vulnerable groups. The remaining poor tend to be women, minorities, indigenous peoples and the disabled. Poor people are increasingly living in the countryside and in countries in conflict.
More development finance and good policies will be required to end poverty by 2030. The latest OECD peer review of UK development policies (pdf) concludes that the UK can continue to lead a global push for more and better development assistance. The UK reached the international target of 0.7% of national income for aid last year, the first major economy to do so. If the UK can do it, others can follow. The UK Department for International Development (DFID) is also one of the best in the world at measuring success and evaluating what policies work on the ground. We need to learn from success and implement right policies on a global scale. Here are some success stories.
Brazil reduced poverty and inequality while growing the economy. Key to the success was the Bolsa Familia cash transfer program to poor families given in exchange for enrolling children in school and ensuring vaccinations. Similar conditional cash transfer schemes have worked well across Latin America. DFID has found convincing evidence that cash transfers can reduce both inequality and poverty. The challenge for governments in Africa and South Asia will be to mobilize the finances and to put in place systems and safeguards to implement such cash transfer schemes. Can we think of a Bolsa Familia Global?
The microcredit revolution has spread across the world and given millions of poor people, in particular women, the chance to start small businesses and get out of poverty. Bill Gates has made a bet that mobile banking will be the next big microfinance revolution. The UK was instrumental in setting up Kenya’s M-PESA, the most successful mobile banking company in the world. The challenge will be to identify and channel investments to other successful microfinance initiatives.
No country has reached a high state of development without industrialization. Chinese people in the Zhejiang province are now 200 times richer than in the 1970s due to rapid development and manufacturing. Chinese companies are now moving and investing in manufacturing in Ethiopia and Rwanda, helping provide some of the 1 million new jobs required every month across Africa. Development assistance can help mobilize more investments into manufacturing and industrial development. Development aid is also successfully used to provide skills training to minorities and other vulnerable groups. The UK supports Camfed, the Campaign for Female Education that helps girls finish school and get a job and the Employment Fund Programme in Nepal providing skills training to women and people considered low-caste.
Three-quarters of the world’s poorest depend on agriculture. Good policies can transform the sector. Vietnam went from a big rice importer to the second biggest exporter in the world by implementing property rights, building roads to markets and introducing better rice varieties. The UK has among other things funded OECD Innovation Prize winner Katalyst, an organisation providing mini-packs of high quality seeds to poor farmers. The simple innovation has benefitted over 2 million farmers in Bangladesh and increased farm incomes by almost £200 million. Africa needs a green agricultural revolution. Grow Africa is a coalition of companies, civil society, governments and aid donors coming together to improve agriculture. More such coalitions for action are needed!
Soon half of the world’s poor will live in fragile states and countries in conflict. Conflict can reverse national development by as much as 30 years. Minorities are often targeted and the poorest suffer the most in war. The international community must do more to prevent and stop conflicts. The UK has made progress in coordinating peace and conflict prevention issues across government through the National Security Council. The UK is also committed to direct 30% its aid to support fragile and conflict affected states. The Conflict, Stability and Security fund, a £1 billion venture capital fund for peace, poverty reduction, state-building and security objectives is an admirable way to support peace entrepreneurs and peace processes.
Rapid sustainable economic growth combined with targeted policies for vulnerable groups will make it possible to eradicate extreme poverty by 2030. The challenge will be to identify and implement the most effective policies. Then to mobilize the finances and political will to get the job done!