Facing the poverty tsunami
From a paper from Business fights Poverty
Business fights Poverty is a global community of people, companies and organisations passionate about building an equitable and resilient future. They believe in the power of business to help improve the lives, livelihoods and learning opportunities of the most vulnerable people and communities. They curate purposeful collaboration to help companies and their partners access the insights and relationships they need to unlock new opportunities for business and social impact.
In advance of a recent conference, they published a briefing paper on poverty trends worldwide. Here are some extracts:
COVID, conflict, and climate change are part of a confluence of challenges driving a tsunami of poverty that is already crashing into the lives of vulnerable people and communities around the world.
The COVID-19 pandemic has led to 711m people entering poverty and halted a steady 25 year decline in the number of people living in extreme poverty. Adding in inflationary pressures and the impact of the war in Ukraine, the World Bank is now estimating an “additional 75 million to 95 million people living in extreme poverty in 2022. Overlay on this the added risks from climate change. According to the World Bank, climate change could drive 130 million people into poverty over the next decade.
We first need to understand what poverty is. At one level, of course, poverty is a lack of enough resources to afford basic needs, such as food, water, and shelter - in absolute terms or relative to others in society. 'Extreme poverty' is defined by the World Bank (in absolute terms) as people living below the International Poverty Line of $1.90 per day, with those living on $1.90 to $3.10 defined as the 'moderate poor'. 'Relative poverty' is typically seen as less than 50–60% of a country’s median income.
However, in practice, poverty has many dimensions. When asked, poor people describe poverty as more than simply not having enough money. The Global Multidimensional Poverty Index (MPI) includes health (nutrition and child mortality), education (years of schooling, school attendance) and standard of living (type of cooking fuel as well as access to sanitation, drinking water, electricity, and housing). The 2021 MPI found that across 5.9 billion people living in 109 countries studied, 1.3 billion - one in five - live in multidimensional poverty.
The level of inequality in a country can reduce the positive impact of growth on poverty. The effect of a 1% increase in income levels can vary from a 4.3% to 0.6% decline in poverty, depending on how unequal the country is. Equality of access to the assets - by an individual or group - is essential in shaping opportunities. However, equality (having the same resources or opportunities) is not enough. The key is equity, each individual or group having access to the resources and opportunities they need, given their circumstances, to reach an equal outcome.
The 2021 MPI, which focused on “unmasking disparities by ethnicity, caste, and gender”, found that in some cases, “disparities in multidimensional poverty across ethnic and racial groups are greater than disparities across geographical and subnational regions”. For example, in India, five out of six people living in multidimensional poverty are from lower tribes or castes. Globally, around two-thirds of multidimensionally poor people live in households where no woman or girl completed at least six years of schooling.
At its heart, poverty reflects the lack of voice for particular groups. Putting people at the heart of fighting poverty must include listening to the voices of previously marginalised groups: strengthening their ability to take action, be listened to, and participate. We cannot understand poverty outside the vulnerable context in which poor people live. This context includes trends (such as shifts towards mechanisation), shocks (such as the three challenges of COVID, conflict, and climate change) and seasonality (of prices and employment opportunities, for example).
Poor people do not have sufficient assets to provide them with the resilience to bounce back and recover after setbacks now and in the future. How far below the poverty line they are matters. Even if they are not currently living in poverty, many households are vulnerable to being pushed into poverty; one event - such as the loss of a job or the death of a family member - can be enough to push them into poverty. Poverty lines measure poverty at a moment in time and do not capture this dynamic element of vulnerability. For this reason, some argue that we need to quantify vulnerability to poverty. For example, the Vulnerable Poverty Line defines a household as vulnerable if they have a 50-50 chance of experiencing one episode of poverty in the near future. Applied to Indonesia in the late 1990s, it was found that in addition to the 20% of the population that was poor, a further 10% to 30% was at substantial risk of poverty.
Economic growth is the most powerful way of lifting people out of poverty across its multiple dimensions. Data shows how, over 200 years, as incomes have grown, extreme poverty has fallen. The weak global growth outlook is therefore particularly worrying. Above all, then, businesses can fight poverty by helping drive growth. However, the extent to which growth in a country reduces poverty depends on how poor people can participate in and benefit from the growth process and the opportunities it creates. One key opportunity generated by growth is jobs. While employment can be a key route out of poverty, having a job does not guarantee a decent standard of living. There is a robust moral and business case for living wages.
While contributing to growth is important, there is more that businesses can and should do alongside government and civil society. The Sustainable Livelihoods Framework is helpful here. It recognises that people’s access to five assets shapes their livelihood opportunities (and ability to participate in growth): human capital (e.g. knowledge and health), social capital (e.g. networks and relationships), natural capital (e.g. land and water), physical capital (e.g. housing and energy), and financial capital (e.g. savings and money). The economic, social (e.g. gender norms), policy, and political environment shape people’s access to assets and what they can achieve with them. Businesses can help tackle poverty by building one or more of these assets or tackling the broader systemic-level constraints through crosssector partnerships. The nature of economic growth matters too; growth or business investment that undermines natural capital is not sustainable.
Given the complex nature of poverty and the systemic barriers people face, our view is that we need to collaborate across business, government, and civil society with a new sense of urgency and purpose. COVID together with conflict and climate change means the world faces a poverty tsunami - a huge wave of poverty on a scale that we haven’t seen in a generation. Driving equity and building resilience are crucial to fighting this new wave of poverty, and business must play its full part.
Download the paper from here.
Watch a 21 min fireside chat with Lisa Manley, Vice President, Sustainability, Mars Inc., and Japheth Muli, Head of Programmes, Hand in Hand East Africa here.
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