Shared prosperity: A goal to reduce inequality

We have made tremendous progress over the last quarter century in the fight against poverty. In 1990, 36 per cent of the world’s population, or 1.9 billion people, earned less than $1.25 a day. By next year, we estimate that this rate will have declined to 12 per cent — a two-thirds reduction in 25 years. This means that, by next year, one billion fewer people will be living in extreme poverty than in 1990. That’s major progress. However, helping the next billion escape poverty will be far more difficult. We have much work to do, especially in sub-Saharan Africa, where an estimated 450 million people wake up in poverty each day.

We, at the World Bank Group, have two goals: ending extreme poverty by 2030, and boosting what we call “shared prosperity” among the poorest 40 per cent in developing countries. Boosting shared prosperity means working to ensure that the growth of the global economy will improve the lives of all members of society, not only a fortunate few. It means raising the income of the lowest 40 per cent of earners in developing countries and improving their access to life’s essentials, including food, shelter, health care, education and jobs.

Fundamentally, increasing individual incomes, while important, is only part of the equation for boosting shared prosperity. We also need economic growth to deliver benefits that create more just societies. So, in addition to changes in income, boosting shared prosperity focuses on improving gender equity and low-income people’s access to food, shelter, clean water, sanitation health care, education and jobs. In essence, this is a goal to reduce global inequality. As the spread of the Ebola virus in West Africa shows, the importance of this objective could not be more clear. The battle against the virus is a fight on many fronts — human lives and health foremost among them. But it is also a fight against inequality. The knowledge and infrastructure to treat the sick and contain the virus exists in high and middle income countries. However, over many years, we have failed to make these things accessible to low-income people in Guinea, Liberia and Sierra Leone. So now, thousands of people in these countries are dying because, in the lottery of birth, they were born in the wrong place.

Boosting shared prosperity is also important in the pursuit of justice. Oxfam International, the poverty fighting organisation, recently reported that the world’s richest 85 people have as much combined wealth as the poorest 3.6 billion. With so many people in sub-Saharan Africa, as well as in Asia and Latin America, living in extreme poverty, this state of affairs is a stain on our collective conscience. Protecting an individual’s ability to reap financial reward for hard work and success is extremely important. It creates motivation; it drives innovation; and it permits people to help others.

So, what does it look like to boost shared prosperity? One important metric is the relative income level of the poorest 40 per cent of a national population. During the 2000s, these earners enjoyed more rapid income growth rates than the general population in 52 out of 78 low-income countries. But, the mixed progress in achieving the United Nations’ Millennium Development Goals shows that the general well-being of households in the bottom 40 per cent remains much lower than in higher-income households. In other words, even though their incomes grew faster, low-income households did not reap the same social benefits as the more affluent, including access to food, clean water and sanitation. Boosting shared prosperity is the World Bank Group’s way of tackling the challenge of inequality. Our experience tells us that four strategies are integral to accomplishing this goal: building human capital; constructing well-designed and implemented social safety nets; offering incentives for the private sector to create good jobs; and implementing fiscally and environmentally sustainable policies to pursue these ends. Shared prosperity is part of our two goals for one simple reason: it is required to end poverty.

Published in The Express Tribune, October 22^nd, 2014.

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