Summary

This chapter offers some reflections on the components of SDG1, dealing with poverty, noting first its huge scope. Ending poverty can justifiably be seen as an overarching aim of all development efforts, and hence one can hardly object to SDG1 as an aspirational goal for “the future we want.”

The target on eradication of extreme poverty (SDG1.1) is similar to that set by the World Bank. However, the latter calls for reduction to a minimal, low target (3 percent). The conceptual argument has to do with the notion of “frictional” poverty – the idea that at any given point in time, there may always be an irreducible lower bound to poverty given that economic systems are constantly in the process of adjusting to shocks of one kind or another, and even the most comprehensive social protection system is unlikely to guarantee that no one ever falls below the poverty line. This is conceptually sounder, and the post-2015 target should be aligned with this.

However, the 3 percent is a global target, which raises the uncomfortable possibility that it could be reached with many smaller countries still having much higher levels of extreme poverty. This is a very real possibility, given that there are 17 countries with a projected poverty incidence of 30 percent or higher (15 in sub-Saharan Africa) in 2030, by which time the global incidence is projected to have reached 4.8 percent, based on growth data from national accounts.

There is also an issue of Purchasing Power Parities. The $1.25 per day figure is set in terms of 2005 PPPs, but a new set became available in 2011. These are controversial, but there is agreement is that the new PPPs entail a large downward revision relative to the 2005 PPPs if extrapolated to 2011 using relative rates of inflation. This is not a trivial issue, as the use of the new PPPs without a recalibration of the 2005 $1.25 poverty standard could imply a reduction of the incidence of extreme poverty by more than half. There is no agreement on which set of figures should be used, but the debate argues for some flexibility in the post-2015 target. The threshold of extreme poverty should be reviewed with each methodologicallysound revision of purchasing-power parity exchange rates.