Jomo Kwame Sundaram
According to the World Bank, the MDG target of halving the share of the poor was achieved by 2008, well in advance of 2015, the target year. However, increased unemployment and lower incomes in recent times remind us that poverty is not an unchanging attribute of a shrinking group, but rather, a condition that billions of vulnerable persons risk experiencing.
Despite the various shortcomings of money measures of poverty, they nevertheless reflect the extent of vulnerability. For example, the estimated number of poor globally in 2012 more than doubles from 902 million to 2.1 billion when one raises the poverty line by 63% from $1.90/day to $3.10/day per person, suggesting that a very large number of those not deemed poor by the World Bank are very vulnerable to external economic shocks or changes in personal circumstances, such as income losses or food price increases.
Of the world’s poor, three-quarters live in rural areas where agricultural wage workers suffer the highest incidence of poverty, largely because of low productivity, seasonal unemployment and low wages paid by most rural employers. Vulnerability and economic insecurity have increased in recent decades with rising insecure, casual and precarious jobs involving part-time employment, self-employment, fixed-term work, temporary work, on-call work and home-working – often mainly involving women.
Such trends have grown with labour market liberalization, globalization, and declining union power. To make matters worse, macroeconomic policies in recent decades have focused on low inflation, rather than full employment, while limited social protection has exacerbated economic insecurity and vulnerability.
Additionally, lower economic growth rates, following the global financial crisis, would push 46 million more people into extreme poverty than expected before the crisis. This figure was later revised to 64 million, implying over 200 million people fell into extreme poverty due to food-fuel price hikes and the global financial crisis.
While some of these figures were subsequently revised downward, they suggest widespread vulnerability and economic insecurity, due to the inability of governments to respond with adequate counter-cyclical policies and in the absence of comprehensive universal social protection measures. During the East Asian financial crisis of 1997-1998, the official poverty rate in Indonesia shot up from 11% to 37% in just one year following the massive depreciation of the Indonesian rupiah.