Speech at the 2017 Global Poverty Reduction and Development Forum on “Targeted Poverty Alleviation and 2030 Sustainable Development Agenda” - Beijing, China
Ladies and gentlemen.
It is an honor to join you today. I express my appreciation to our national partner, China’s State Council Leading Group Office of Poverty Alleviation and Development for collaborating with the United Nations System in China to organize this event. China has made remarkable progress in reducing poverty since the 1990s, inspiring countries around the world. And recognizing that, despite this progress, there are still millions of people living in poverty, the country is devoting additional resources and policy focus to take even further the poverty alleviation efforts. China is also leveraging its experience internationally. Its expanded south-south cooperation and new global platform -- the Belt and Road initiative -- have the potential to act as Sustainable Development Goals accelerators across many low income and fragile countries, with heavy investment in infrastructure, energy and industrialization as well as social sector needs.
The progress on poverty reduction in China is a big part of the overall global progress in lifting people out of poverty. Globally, extreme poverty rates are at an all-time low. Since 1990, the total number of people in extreme poverty fell by more than 1.1 billion, and MDG 1 (reducing poverty rate by half between 1990 and 2015) was fully met ahead of scheduled.
But, as in China, many people around the world were left behind – in developing countries, 767 million still lived in extreme poverty in 2013. That is why the central pledge of the 2030 Agenda for Sustainable Development is the aspiration of “Leaving no one behind.” Unlike the MDGs, when the target was to reduce poverty by half, the objective now is to eradicate poverty all together by 2030 – as expressed in the Sustainable Development Goal 1.
My central argument today is that, to meet the Sustainable Development Goal 1 to eradicate poverty, we need to conceive of development as a process that depends on economic growth, but in which the nature of economic growth will ultimately determine how successful we will be in eradicating poverty. While the argument that growth alone is not enough, and that it needs to be inclusive to lift people out of poverty is not new, I will point out to some recent developments that make this challenge more central today. I will also argue that it is key to bring people out of poverty, and to keep them there – since many fall into, sometimes back into, poverty as a result of shocks (economic downturns, conflict, natural hazards) that they are ill equipped to deal with.
The Critical Importance of Inclusive Growth
It is unquestionable that rapid reductions in poverty have gone along with improvements in economic performance. We are all pro-growth. For instance, with rapid economic growth in East Asia and the Pacific, the proportion of people living on less than $1.90 a day fell from 60 percent in 1990 to 3.5 percent in 2013.
Yet, over the last decade or so, we have seen a breakdown in the relationship between increases in labor productivity and improvements in the earnings of a median household. Since the late 1990s, the typical family in several developed countries has not shared in the gains of expanding economies. ILO data shows that labor productivity in 36 developed economies rose by 17 percent between 1999 and 2013, but real wages increased by only 6 percent over that period.
This accounts for the dynamics that have led to increasing economic inequality within many countries, or that have kept it high in others. In many developing countries, this was linked to increasing commodity prices, with benefits accumulating at the top. In both developed and developing countries, political processes interacted with economic ones in ways that led to the accumulation of income at the top - including by weakening the bargaining power of trade unions and deregulating the financial sector, weakening social protection where it existed or undertaking fiscal policies (both on the taxation and on the spending sides) that made transfers for those “left behind” more difficult.
The challenge of linking economic performance to poverty reduction is likely to become more challenging in the foreseeable future. In fact, there is no historical precedent in history for sharp reductions in poverty and growth in incomes that is not characterized by an evolution of the economy from agriculture, to manufacturing, to services. Yet, it is becoming more difficult to rely on manufacturing to create jobs. Early industrializers (countries like Italy, Germany, or Japan) had at the peak of their manufacturing phase about 70% of employment in manufacturing. Later industrializers (the “Asian tigers,” China) had about 50% of employment at their peak. In many countries in Africa, there is already an ongoing transition from agriculture straight to services – but mostly low-paying services, often in the informal economy.
Looking ahead, the role of automation may make the generation of labor-intensive economic activity even more difficult – at least in the short run. Technological change, especially in robotics and artificial intelligence, is providing a wide variety of options to automate industrial production and the delivery of a range of services (driverless cars may be around the corner; restaurants and shops increasingly carry the option to order by touchscreen and retail hubs are disappearing due to on-line shopping). One consequence of this is that many people were left behind, or saw the incomes of others, in their own country or abroad, increase while theirs either stagnated or came down, fueling perceptions of exclusion.
Keeping People out of Poverty: Managing Risk
In addition, development progress is not linear. It is vulnerable to shocks and crises, be it economic crises, disasters caused by natural hazards, the impacts of climate change, disease outbreaks, and conflicts. We need only look at the devastating impact of the recent hurricanes in many Caribbean islands to be reminded of the vulnerabilities to shocks that so many around the world still face.
To take another example, in Latin America, while the annual average of people that escaped poverty during the period 2003 to 2008 reached almost 8 million people, following the global economic crisis, this reduction slowed down to an annual average of around 5 million people from 2009 to 2014. For the last two years, with economic conditions deteriorating, in part due to the decrease in commodity prices, it is estimated that the net number of people living in poverty increased by 1.4 million a year.
We also see increasing vulnerabilities in certain groups of countries (Least Development Countries, Land Locked Developing Countries and Small Island Developing States). These groups of countries are vulnerable in part because of their narrow and shallow productive capacities, limited trade products and partners, economic concentration on a few sectors, and vulnerability to the effects of climate change.
Climate change and environmental degradation add to the challenges. UNDP examined the impact of different environmental scenarios on the number of people living in extreme poverty. Under a severe “environmental disaster” scenario, which envisions vast deforestation and land degradation, dramatic declines in biodiversity and accelerated extreme weather events, some 2.7 billion more people would live in extreme poverty than under the “base case” scenario – basically, a linear projection of current poverty reduction trends. This would be the consequence of two interrelated factors. First, environmental degradation would increase the number of people in extreme poverty by 1.9 billion. Second, environmental calamities would keep some 800 million poor people from rising out of extreme poverty, as they would otherwise have done under the base case scenario.
Another source of shocks and instability is violent conflict. Clearly, no poverty reduction is possible without peace. And when violent armed conflict breaks, that is poverty reduction in reverse. The costs of conflict are staggering, paid in lives lost, in absence of growth, and increases in forced displacement. That is why the UN Secretary-General has put conflict prevention at the core of his priorities.
Reaching the Last Mile of Exclusion
Poverty is not reflected in low levels of income alone but it is, rather, multifaceted. According to the Multidimensional Poverty Index, which measures the nature and magnitude of deprivations in health, education and living standards at the household level, 1.6 billion people were living in multidimensional poverty in 2016, which is nearly twice the number of people living in extreme poverty measured by income alone.
Addressing multidimensional poverty, implies reaching the last mile of exclusion, those living in remote communities, largely disconnected from society or belong to marginalized groups facing multiple, compounding sources of social and economic discrimination, plunging them in a vicious cycle that perpetuates exclusions over generations.
Most dramatically, virtually everywhere, are the persistent gender disparities. Just to give examples from gender gaps in labour markets, in some regions, the unemployment rate of women is more than double that of men. In sub-Saharan Africa, UNDP estimates that gender gaps in the labour market cost on average US$95 billion per year in GDP losses between 2010 and 2014. According to the latest Human Development Report, in around one hundred countries women are denied access to some jobs because of their gender, and in eighteen countries, women need their husband’s approval to work.
Pursuing the 2030 Agenda: The Pathway for Poverty Eradication
To sum up, eradicating and ensuing that no one is left behind demands that we consider three key aspects. First, as important as the rate of economic growth, is the way in which the benefits of growth are shared across society. Second, we cannot assume that development and the path towards poverty eradication is steady – it will be beset by volatility, by bumps, by shocks, which call for sustained attention to risk-informed approaches to poverty reduction. And, third, active policies of inclusion are needed for segments of the population that have been systematically excluded, with a special focus on reducing gender gaps.
The pursuit of the 2030 Agenda, on the whole, will ensure that these three aspects are considered. For instance, the centrality of peace to sustainable development and poverty reduction is one of hallmarks of the Sustainable Development Goals, and it marks a sharp contrast to the MDGs. The priority attributed to prevention by the UN Secretary-General reflects the spirit of the 2030 Agenda for Sustainable Development, which reads, in part: “[w]e are determined to foster peaceful, just and inclusive societies which are free from fear and violence. There can be no sustainable development without peace and no peace without sustainable development.”
To take another dimension, the 2030 Agenda includes Sustainable Development Goals linked with structural transformation and industrialization, both critical to eliminate poverty. This can only be achieved with a combination of effective social protection and improved creation of decent jobs, especially for the large and growing segment of young people. The labor market channel, in particular, will be critical to generate sustained income to bring people out, and to keep them out, of poverty. In fact, today almost four in five workers in developing countries are in vulnerable forms of employment and have little or no access to social protection, low and volatile income, and high levels of job insecurity. The ILO estimates that this year 1.4 billion people worldwide (42 per cent of total employment) face vulnerable employment conditions. Southern Asia and sub-Saharan Africa are the regions most affected by vulnerable employment. Therefore, it is especially critical is the need to create decent jobs and opportunities for the world’s largest ever generation of young people. Globally in 2014, 73.3 million youth were unemployed. Even amongst those working, 169 million youth were living in poverty.
And finally, the 2030 Agenda includes ambitious Sustainable Development Goals on environmental sustainability and climate change mitigation. Patterns of growth around the world, in many developing countries today, are still resource-intensive, be it by exploring minerals and hydrocarbons, or agriculture. Without structural transformation and a transition towards labor-intensive manufacturing, extensive resource use is bound to continue and will not enable countries to chart sustainable development pathways
So, to conclude, the 2030 Agenda for Sustainable Development contains the central aspiration of “leaving no on behind and reaching those furthest behind first.” The targets under Sustainable Development Goal 1 are defined in eradicating extreme poverty by 2030. The 2030 Agenda, however, not only sets forth this objective, but also provides us the roadmap to achieve it. As long as we are committed to respect their integrated and indivisible nature, the pursuit of the Sustainable Development Goals will “transform our world” and should enable us, for the first time in history, to eradicate poverty.