Fri 25 Feb 2011
I had the good fortune to be invited to a presentation by Andy Sumner at the Center for Global Development on Thursday – a senior staff lunch presentation, actually. So CGD was very kind in having me along. I really enjoyed the atmosphere – it was nice to be back around a room full of very smart people who spend a lot of time thinking about the issue of development, and who clearly enjoy pushing each other and the ideas in the room. Andy had a small novel’s worth of comments to consider by the end, but it was a really constructive pile of ideas.
Andy has come to a bit of fame recently for pointing out that what Collier called The Bottom Billion, really poor people more or less trapped in a few dozen very poor countries, no longer really works to describe the world (his paper is here). If that bottom billion existed in the late 1990s when Collier was writing, today it seems that there is a new bottom billion, living in middle income countries (MICs) – indeed, the majority of the very poor globally are found in MICs. The discussion around the presentation focused on everything from issues of data and method that led to this conclusion to wider policy concerns about whether or not this shift signals the end of grant-based aid because it will be politically infeasible to give (as opposed to lend) money to middle income countries (some of which have large cash reserves) for poverty alleviation – that aid to the very poor will have to shift to market-based lending.
I walked away from the presentation and discussion struck by something else: the term Middle Income Country is pointless. If Angola is a middle income country, and Ghana is about to be reclassified as such because of its new oil revenues, we might as well just chuck the typology. While GINI data (a measure of income inequality within a country) is tough to come by right now, it seems to me that a lot of the countries that have recently made the jump to middle income, yet still house a tremendous number of the “bottom billion” (i.e. India, China, Nigeria, and Indonesia), are clearly making that jump by enhancing inequality within their borders. This means that the basis for this shift in classification is not widespread through the country or its population – which opens up another question that is analytically crucial to understanding the likely future for aid to the poorest of the poor: on what basis did these countries make the jump to middle income status, what is the current structure of the economy, and to what is that jump, and the current economy, vulnerable. The impetus for aid grants disappears only if we assume that the gains made by these countries are widespread through the population and robust enough to withstand pressures and shocks that might push them back to low income status. I have my serious doubts that many places making the jump and becoming MICs can say either with confidence – climate change and a tightly interlinked global economy will challenge many of these economies in significant ways that will compromise their abilities to address the needs of the poorest within their borders. However, without addressing the needs of this portion of the population these countries will put their social, economic and environmental futures at risk. Now, perhaps more than ever, we need to be focused on fostering safety and certainty for the world’s most vulnerable, to ensure that a country making the jump to MIC status has achieved something meaningful and durable.