High-level meeting on poverty eradication convened by the President of the UN General Assembly
29 June 2020
The sustained poverty reduction observed over the last thirty years was driven by an export-driven growth model that has now almost become defunct in the Covid-19 era. This has left policy makers in developing countries racing to understand new pathways to durable poverty reduction and development progress. The global health emergency represents not merely a bump along the road to continued poverty reduction, but rather signals an inflection point in the transformation of international production, which policy makers must pay attention to if we are to make poverty eradication a reality by 2030 or beyond.
Addressing the division of the world into pockets of poverty and plenty has been the aim of our efforts to achieve gainful integration of developing countries into the world economy. But with borders closing, supply chains shortening and economic nationalism on the rise, policy options are now more constrained, meriting out-of-the-box reflection on the changing opportunities afforded by this new landscape.
First, it’s important to realize the limits of the progress that has been registered on average during the last thirty years as extreme poverty was more than cut in half globally. That progress was largely an Asian-led story – it was not distributed evenly and progress towards higher living standards was stalled for many. For example, even before COVID, the number of people living in extreme poverty has risen in several sub-Saharan African countries and in parts of Latin America and the Caribbean and Western Asia.
Taking account of demographic developments, the economic performance of African countries, in their majority Least Developed Countries (LDCs), will determine much of the success of the 2030 Agenda’s poverty eradication overall. It is therefore particularly worrying that even before COVID struck, the persistent output losses and setbacks in poverty reduction that followed the commodity price downturn of 2014–2016 has caused many African economies to experience a decade of near stagnation in per capita income. At the global level, average real incomes in 2019 were lower than in 2014 in one-third of commodity-dependent developing countries – home to 870 million people.
And now with Covid-19 ravaging the developing world’s economic prospects, even before its full health impacts have been felt, a major setback in global poverty reduction is taking shape. As many as 140 million additional people will fall into poverty in 2020 due to the current crisis. And Africa will account for more than half (57%) of the increase in global poor.
But with the Covid crisis only accelerating the realignment of global production towards shorter, more regional, more intangible, & less low-skilled labor-intensive value chains, developing countries now face greater obstacles to achieving high growth, and concomitant poverty reduction success. The onus of poverty reduction will now rest on the backs of Africa and the LDCs and will require broader strategies to economically empower the poorest and most destitute. There’ll be no magic bullet for meeting the new post-Covid poverty challenge: it will take holistic efforts in each country in cooperation with all partners.
From UNCTAD perspective, these efforts should focus on developing productive capacities and transforming production and export structures as the only sustainable and long-term solution to eradicating poverty. Developing productive capacities involves capital accumulation, structural change and technological progress. It requires enhancing productivity and international competitiveness of domestic firms to enhance their survival rates. However, in Africa and the LDCs most workers are in low productivity and low wage jobs in agriculture and services. There is urgent need to transform the structure of these economies reallocating resources from low to high productivity activities, like manufacturing & higher value services.
UNCTAD has developed a Productive Capacities Index (PCI) to assist member States in monitoring and benchmarking their productive capacities. Our index looks at eight core drivers: Energy, Human Capital, Information and Communications Technology, Institutions, Natural Capital, Private Sector, Structural Change and Transport. The index will be launched in Q4 2020 & been finetuned through several seminars and workshops in Botswana, Lao PDR, Namibia, Rwanda. We hope this index will be a potent tool for identifying the critical pathways needed to augment productive capacities for sustained poverty reduction going forward.
