Dashboard map for 2022 SDG Index Goal #1 ratings. Data source: sdgindex.org
Poverty headcount ratio at $1.90/day (%)
The definition of extreme poverty is an international poverty line, as deemed by the World Bank. The World Bank is an international financial institution within the UN System, with the task to provide loans to developing countries with the goal of poverty eradication. The World Bank measures the international poverty line as living on $US1.90 a day or less, which is less than enough to meet the basic needs of safe drinking water, food at or below subsistence, and access to health and education.
Approximately 740 million people met the definition of living in extreme poverty upon the adoption of the SDGs in 2015, the overwhelming majority living in Sub-Saharan Africa and South Asia. Before the industrial era, beginning in the middle of the 19th century, close to all the human population lived in a state of extreme poverty. Since the turn of the millennium, there has been a steady decrease in the number of people living in extreme poverty, as well as a decrease in the percentage of extreme poverty for the global population.
One of the key reasons for this encouraging drop in extreme poverty rates was the power of the Millennium Development Goals. The sister goal of SDG #1 was MDG #1, to halve extreme poverty levels by 2015, again using the international poverty line measure. The world met MDG #1 five years before its due date in 2010, due to the astounding growth rates of China in the period of the MDGs between 2000 and 2015. This meant MDG #1 saw a billion people lifted from extreme poverty compared to 1990, when almost half the population of developing countries lived under the international poverty line. Yet the three-quarters of a billion still left behind at the end of the MDG period in 2015 is an enormous number of people continuing to live in destitution and penury.
How to measure this Goal’s target to eradicate extreme poverty - those living under $1.90 a day - by 2030? The first indicator in use by the SDG Index is the poverty headcount ratio at $1.90/day.
As of June 2022, 682,614,000 people lived in extreme poverty, with a rate of one person per second escaping extreme poverty, an estimated metric you can view in real-time at the World Poverty Clock website. Yet the target rate to be met for those escaping poverty to eradicate extreme poverty by 2030 is 2.5 people per second. In total, this means the world is off-track by 254,758,130 people. Yet, as some escape poverty, others enter it, with the COVID-19 pandemic impacting progress on this target - though there were signs of slowing progress even before, compounded by conflict and climate change.
In 2015, the world’s extreme poverty rate was 10%, dropping to a low of 8.3% in 2019, then back up to 9.2% in 2020, equated with throwing up to 93 million people back into extreme poverty. This means the global extreme poverty rate rose in 2020 for the first time in over 20 years. The above trend projects 262 million people would still be living in extreme poverty in 2030, missing the extreme poverty eradication target - unless we instead accelerate our efforts between now and 2030.
It’s difficult, verging on impossible, to lift oneself from such an extreme poverty trap. Professor Jeffrey Sachs, co-author of the SDG Index, explains why in his magisterial book, The End of Poverty, using the analogy of the ladder of development. The End of Poverty outlines how we can end extreme poverty as though it were procedural, illuminating how achievable and within reach it is.
Those living in extreme poverty live hand-to-mouth, day-to-day. As such, they fail to produce a surplus e.g., from a crop’s harvest for smallholder farmers, thus without anything to sell to the market for a profit. Due to a high proportion of citizens living by such means in a country, a tax base to draw revenues from is missing. Thus, the government is missing the means to provide healthcare, education, or for any services to increase well-being and relieve extreme poverty. The least developed countries need aid to allow them to get their hand on the bottom rung of the development ladder. Then they have the means to lift themselves out of poverty. Without aid, this cycle will proceed mercilessly, compounded by climate change, disease, famine, demography, etc. The aim of development aid is to improve the economic and social development of humans living in countries which have yet to industrialise and are considered ‘developing’ in the parlance of the field of international development.
Aid has been chronically below the amount promised by developed countries to their developing counterparts for a half-century. Thus, the first task of the reader in high-income countries is to act on behalf of the 682 million living in extreme poverty.
The measure of aid used by the high-income OECD countries is known as ‘official development assistance’ (ODA), a concept defined in 1969 by the Development Assistance Committee (DAC) of the OECD. The DAC consists of 30 OECD members, making up the largest aid donors, as a forum to discuss aid and poverty reduction efforts.
Map of OECD DAC members
The predominant means of measuring donor amounts is as a percentage of the donor country's gross national income (GNI), a concept like GDP (gross domestic product). Whereas GDP is the value of all goods and services produced in a period, by contrast GNI includes the economic output of foreign residents of the country. The OECD DAC has an official List of ODA Recipients, all the developing countries and territories eligible to receive ODA. Included are dollar flows made via so-called ‘multilateral institutions’ e.g., the World Bank, International Monetary Fund, and UN agencies like UNICEF and the WHO. To count as ODA, donor flows must come from government agencies, and the aim of the flows must be economic development and the welfare of developing countries. They must either be free of the obligation to be repaid, or otherwise loans with much more generous repayment terms than available in the commercial market.
The spending counted toward poverty reduction for ODA includes food aid; basic health; education; water and sanitation; population programmes and reproductive health. Separate, though entwined, to development aid, is humanitarian aid - synonymous with logistical help in the face of disaster or conflict.
The 30 high-income country donors of the DAC spend 0.33% of their collective GNI on ODA - far below the 0.7% of GNI committed by these countries across decades, though reneged upon.
The only 2021 exceptions among the DAC members to meet or exceed the 0.7% commitment were Denmark, Sweden, Norway, Luxembourg, and Germany.
The international agreement whereby high-income OECD countries were supposed to give 0.7% of GNI as ODA goes back to 1970, affirmed in repeated agreements since. This means for every $10 made in high-income countries, for around 50 years now, they’ve committed, yet failed to produce, 7 cents of every $10 for the world's destitute. 7 cents which would otherwise solve extreme poverty by 2030. Instead, like my country Australia, our government, out of our tax revenue, for every $10 of GNI, produces 2 cents for ODA - a 5-cent differential from its pledge. Yet my country, and all other developed countries except five, withhold upon the opportunity to end extreme poverty in a decade. Why dither over 7¢ on every $10?
According to the principles of the poverty trap, 700 million are unable to escape from extreme poverty without this ODA. Their only lifeline from being an orphan of famine or infectious disease is foreign aid. For indicators related to living under the poverty line, it would be insensitive to set the task to readers to try to live above the poverty line. Who is the responsibility falling to? This book, rather than being about the government’s responsibility, is about your responsibility. There’s a solution to this, which is where OECD/DAC country readers come in. The affirmed commitment of 0.7% of GNI represents what the government is to offer in ODA. Whatever the gap between 0.7% and what your country’s government is providing in ODA, your opportunity is to step in to bridge the gap. Of course, as with every action in this book, it requires a scale of near ubiquity to have the desired impact, but the behaviours and attitudes of several million of your compatriots are outside your immediate control. Again, the focus of this book is you, and what change you can affect.
This is to achieve the Goals globally - in a sense, on behalf of the low-income countries, which barring a miracle, appear to be unable to meet the Goals. I’m imploring a mechanism pinning the burden on readers from high-income countries. If you're a reader from one of these countries, in this book, you'll shoulder the burden of your own developed country, as well as of the least developed countries. It will cost you seven cents upon every $10 you make. I’ll come back to this repeatedly, with good reason, as a mechanism to lift the least developed countries to a fighting chance, as their wherewithal makes it an impossibility to do so of their own accord.
Let's say the shortfall of ODA is approximately 0.48% of GNI, as it is as an Australian at the time of writing. Then for every $10 I earn, I should donate 48 cents - put another way, 0.48% of my gross income. I say gross, in contrast to after-tax net income, because in all high-income countries, you’ll be able to deduct the donation from your taxable income.
When you’re taxed by your home country, it’s to affect the greater well-being of the broad populace. Depending on the outlook of the population, it could be to provide a social safety net, or distribute income to the less fortunate, or fund the infrastructure we enjoy. Our ability to earn income benefits from this ecosystem of infrastructure, health care, education, laws, and monetary systems. Yet charitable donations allow you to be your treasurer. You can appropriate what the government was going to otherwise spend, and instead send it as aid abroad to a country teetering on famine.
If everyone in the developed world made up the shortfall from what their country is withholding from aid commitments, extreme poverty will go close to evaporating by 2030. What could be better? People die every day in parching heat, flies all over them, days since they’ve eaten, except some mud and roots of meagre nutritional value - all their siblings already dead from a treatable disease. Those described live so remotely - their only salvation being aid from someone in the developed world preoccupied by Netflix, porn, and Instagram. Dear reader, if you live in a high-income country, you are the only way out for someone in this situation.
Listed below are the least developed countries (LDCs), an official UN designation - countries which readers of the high-income countries will be working on behalf of in much of the pages of this book.
Map of least developed countries (LDCs). Source: https://unctad.org/topic/least-developed-countries/list
The DAC divides the List of ODA Recipients into four categories. Though I’ll continue to emphasise the LDCs, who are the priority by need, the other developing country categories outside of the LDCs category are:
To reinforce, if you live in an LDC, you’re exempt from Goal #1 for this book, though one imagines in your circumstances you’re industrious to better your lot in life. The status quo is unfair. You’re in a sea of a global community who have the ready means to help, but do not, yet you experience the burden. I view it as unjust that a part of the world could live in plenty, with tools available to mitigate others from suffering and dying of preventable disease.
Can extreme poverty prevail in developed countries? Yes, in instances of the homeless, or those living in an isolated indigenous community, where daily income may be less than $US 1.90. Both examples have access to income help in countries with social safety nets. For all these reasons, developed countries have fractional populations living in extreme poverty. If readers from a developed country are out of work for a few weeks or months, and are without income for this period, they have access to a social safety net offered by their government to provide unemployment income assistance. Readers able to access such protections live above the measure of extreme poverty, better characterised by countries without such a safety net.
Who should OECD/DAC country readers be giving 0.7% of their gross income to? I propose a similar list to that used by the DAC, both available on their website:
List of eligible international organisations, including international charities, UN agencies, and a bunch of other options from the private sector, academia, and international organisations.
List of ODA recipients, corresponding to the governments of LDCs, and other low and middle-income countries.
However, any charity operating in the developing world focused on eradicating poverty ought to be suitable, whether focused on health, education, water, and sanitation, etc.
Summary: For OECD country readers, annually give 0.7% of your gross income as aid, aiming to end poverty by 2030.
Poverty headcount ratio at $3.20/day (%)
Another measure of poverty in use is poverty at the rate of US$3.20 a day. Alas, poverty continues once crossing the $1.90 international poverty line. Yet this meagre difference of a threshold of $3.20 is common in lower-middle-income countries, as well as low-income countries who've surpassed the $1.90 a day threshold. This $3.20 poverty line is the subject of our second indicator, aiming again to eliminate the prevalence of those living below it.
23% of the world’s population live under $3.20 a day, in contrast to less than a tenth living under the extreme poverty line of $1.90. This proportion is just less than at the adoption of the SDGs in 2015, when 27% lived under $3.20 a day, down from more than half the global population in 1990. The number of people living under $3.20 is comparable now to the number of people living on $1.90 a day in 1990.
We now know countries with a high prevalence living in extreme poverty are stuck in the poverty trap and require ODA to get out. But countries with a high prevalence of its population living under $3.20 may be a middle-income country. In this instance, whilst foreign aid is certainly welcome, and would accelerate lifting its people from poverty, the country may have the capacity to improve its lot without aid being a prerequisite.
The 0.7% of gross personal income donated as aid from high-income readers will go toward those living under $3.20 a day. But what can readers from middle-income countries off-track for SDG #1 do? For those living below $3.20, the same applies as for those living under $1.90 i.e., the responsibility of achieving these first two indicators is for others on your behalf. Though you experience its burden, it’s instead the responsibility of the high-income countries to care for you.
If you’re a citizen of a middle-income country scoring red for this indicator, earning above what’s equal to $US3.20 a day in your local currency, then I encourage you to donate 0.7% of your gross income toward a charity operating within your country’s borders focused on poverty reduction. For example, if you live in South Africa (a middle-income country), and make $US5,000 a year, find a charity you trust focused on poverty in South Africa and donate $35.
For OECD/DAC readers, you pay 0.7% once, covering all indicators related to poverty. Across the developing world, 0.7% of GNI of the developed world is enough to cover the costs to achieve poverty reduction, hunger elimination, health improvements, and much more, as we’ll come to see. It may become tiresome to hear this refrain, but it will illustrate the bang for our buck, and an incredible bargain.
Summary: For OECD country readers, annually give 0.7% of your gross income as aid, aiming to end poverty by 2030.
Poverty rate after taxes and transfers *
Quite separate from the severe plight of the low and middle-income countries is relative poverty, synonymous with the poverty line of an individual country. The definition of this indicator is the share of the population whose disposable incomes fall below half the median income. Disposable income in this sense means gross income minus income tax. It addresses taxing individuals who have taxable income, then transferring those revenues to the needy in the same country living below the poverty line - a test for the affluent countries to see whether they’re covering their own people living in poverty. Someone in an OECD country may well be living above the international poverty line of $1.90, or $3.20, and a great many multiples of these amounts. But due to their meagre income relative to their compatriots, they’re excluded from full participation in society. The long-term goal for this indicator is 6.1% or less of the population living in relative poverty within the ranks of the respective OECD countries.
I’ll compare the US (scoring red in 2022 for this indicator) with Finland (green). The US poverty rate after taxes and transfers was 18% for 2019, 11.9% above the long-term aim for the indicator. Let's say the US federal and state governments have collected all their taxes for the year. They've done their budget, and made transfers to the budgeted poverty reduction programs, whether welfare in the form of food stamps or cash help. Still, after these transfers, 17.8% of Americans live under half the median.
This suggests a lot of people live in poverty relative to the median of their counterparts, and the government's tax and transfer system is failing to redistribute tax revenue to the poor to lift them above the poverty line. The poor in the developed world have malnourished themselves in a separate way, characteristic of obesity borne of cheap, convenient junk food, rather than emaciation.
Finland has a relative poverty rate of 6.5% as of 2018, on track to achieve the indicator by 2030. Why the gap between the two countries? Remember, whatever the respective income levels are in each country, the measure is half the median income, whatever the income level between countries. The culprit lies within the relative rates of taxation and transfer between the two countries. The Nordic countries are world leaders in taxation and redistribution, with high rates of tax, as well as high rates of those tax takings apportioned to social welfare. Finland’s tax revenue as a percentage of GDP was 42% in 2020, compared to the US’ 25%. For the broad measure of social spending as a percentage of GDP, Finland spends 29.1% compared to the US’ expenditure of 18.7%. So, Finland's government taxes the Finns greater, and their government spends a greater part of the tax revenue than the US on social policies. The effect is a lower relative poverty rate, on par with the long-term goal of this indicator.
Different developed countries have diverse cultures and attitudes towards taxation, differing on how much to transfer such proceeds to the poor. These ingrained cultural attitudes can be tough to shake, despite looking in the face of the obvious benefits of the Nordic countries’ tax rates and social security net.
What to do? The suggested remedy is like the prescription for the first two indicators, calling for a private redistribution of income at your own hands, but within your country’s borders. For our first indicator on extreme poverty, I asked high-income country citizens to give foreign aid abroad, equal to 0.7% of their gross income. My suggestion for those with a high priority of relative poverty rates in their high-income country is to donate to domestic charities focused on poverty reduction. Again, find a tax-deductible charity which has your confidence, and donate. The percentage can be at your own discretion, but a suggestion could be the shortfall percentage between your country’s poverty rate and the long-term objective of 6.1%.
You will have ended up paying this amount in tax anyway, and will get to deduct this donation from your taxable income, but instead hand-pick to where it goes. If you’re living in a country with a red score for this indicator, and you live on less than half the median income, you’re exempt. Donations from your fellow citizens are intended to benefit you, to help you on your way to bringing your income above the threshold of half the median i.e., above your country’s poverty line.
The task of the individual for this indicator is to do the job the government was unable to, whether due to insufficient taxing of the populace, or insufficient transferring of tax revenue to reduce poverty for its citizens, despite the means to do so.
Also, advocate with your government representative to raise the tax rate and apportion more of the government revenue to poverty alleviation.
Summary: For OECD country readers off-track, who are living above your country’s poverty line, donate a percentage of your gross income. A suggestion is an amount equivalent to the shortfall percentage of your country's relative poverty rate and the long-term objective of 6.1%. You will be able to find your country’s relative poverty rate on the SDG Index website, and the median disposable income on the OECD Statistics website.