Where Did All the Poor People Go?
October 17, 2012
Senior Advisor, Global Health Policy Center
While the economies of most rich nations have stagnated, many countries – which for decades had been classified as low income and regarded as chronically poor – have experience sustained growth and graduated into middle income status. This is overall a good news story. The bad news is that the emergence of new middle income states has also resulted in a growing disconnect between where international development assistance is focused and where it’s needed.
The problem is that most of the world’s poorest people no longer live in the world’s poorest countries. Or more accurately, most of those living in extreme poverty – less than $2 per day – now reside in countries classified by the World Bank as Middle Income.
The best information I’ve seen on all this comes from work by Andy Sumner, who’s at the University of London and has been visiting our friends at the Center for Global Development. In his latest updates to his report, Where Will the World’s Poor Live?, he paints a clear picture of this new landscape:
- As of 2008, most of the world’s poor (by both $1.25 and $2 per day international poverty lines) live in South Asia and sub-Saharan Africa;
- Nearly 80% of the $2-per-day poor live in Middle-Income Countries (MICs) – about two billion people;
- Half the world’s poor live in India and China (mainly India), a quarter live in other MICs (especially Pakistan, Nigeria, and Indonesia), and the remaining quarter live in Low-Income Countries (LICs).
While poverty continues to expand in Middle-Income Countries, donors with increasingly constrained foreign assistance budgets, are focusing more and more on Low Income Countries. Funding is moving in one direction and poverty is moving in another.
The Global Fund, for example, uses an eligibility and prioritization policy that’s based on World Bank income classification. Under current policy, a country classified as Low Income has to match at least 5% of Global Fund grants whereas a Middle Income Country has to match at least 20%. For a country like Lesotho, which just graduated into Middle Income status (GNI per person is $1,220, which is $195 over the level for LICs), their “reward” is less Global Fund support. Even the World Bank follows this pattern, with access to its International Development Association grants or low-interest loans limited to low income countries. GAVI, which helps support child immunization programs, restricts its funding to countries with GNI per capita below $1,520.
It’s not just the big funders: industry also uses country income levels to determine access to concessionary prices for key health products through “tiered pricing” arrangements. When drug and vaccine manufacturers give deals on their products, they want them to go only to poor people – and that usually means access is limited to poor countries. In a recent report, Médecins Sans Frontières found: “…middle-income countries are no longer offered standardized price discounts by originator [pharmaceutical] companies, forcing them to negotiate ARV price reductions on a case-by-case basis. Some ground has been lost, as middle income countries are once again paying exorbitant prices for the newest drugs.”
This all makes one thing clear: serving poor people living in middle income countries is a big challenge that needs to be addressed quickly. It’s complicated, of course. Funding has stagnated worldwide, and so there’s increasing pressure to shift away from countries that can and should be doing more for their own citizens. That makes sense, but don’t we also want to ensure that all developing countries succeed in helping care for their poorest citizens? For Middle-Income Countries, can we help push for more political leadership? Can we help them lower the costs of delivering treatment and prevention? Lots of interesting questions!
A few smart people have raised the alarm on this; Amanda Glassman from CGD has written about this, noting the need for a more systematic approach. I’m surprised this isn’t a more active conversation in the development community. If we want to continue to focus on helping the poorest people on the planet get a chance to live happy and healthy lives, we need to be a better job of understanding how to work with middle income countries. Period.
I’ll keep following this challenge, and see if we at CSIS can help bring some thoughtful people together to identify potential solutions.