Prosperity Requires a Healthy Planet

Axel van Trotsenburg

WASHINGTON DC: Progress on poverty reduction has slowed almost to a standstill in recent years. With nearly 700 million people still living on less than $2.15 per day, the world is far from the goal of eradicating extreme poverty by 2030. At the current pace, it will take at least three decades to reach this target, and more than a century to lift everyone above the poverty line of $6.85 per day used for upper-middle-income countries. Today, 44% of the global population falls below this threshold.

Tepid economic growth, the COVID-19 pandemic, ongoing conflicts, and the escalating climate crisis have disrupted – and even reversed – a quarter-century of extraordinary progress, during which the share of the world’s population living in extreme poverty plunged from around one-third to one-tenth. While high-income countries have largely recovered from these setbacks, extreme poverty in the poorest countries is still higher than in 2019, and their growth is expected to be weaker than in the decade before the pandemic. And as global warming accelerates, nearly one in five people will likely experience an extreme weather event from which they will struggle to recover, exacerbating poverty.

According to the World Bank’s new Poverty, Prosperity, and Planet Report, altering this trajectory requires recognizing that poverty, shared prosperity, and climate risks are interconnected. In response, countries must foster faster and more inclusive growth while also shielding people from the effects of climate change.

Addressing inequality can play an important role in achieving these interconnected goals. In the world’s most unequal countries, economic growth leads to a smaller reduction in poverty. If every country experienced annual per capita income growth of 2%, it would take another 60 years to eliminate extreme poverty. But if the Gini index – a measure of income inequality – in every country were to decrease by 2% annually, that target would be reached in 20 years.

High levels inequality also prevent the less well-off from climbing the socioeconomic ladder, depriving them of opportunities to improve their lives. Delivering better-functioning labor markets, investing in education and health, and strengthening social safety nets would enable poor people to benefit from economic growth.

Each country’s path forward should be tailored to its specific circumstances in order to deliver the best possible outcomes across these dimensions while managing tradeoffs. For low-income countries supported by the World Bank’s International Development Association (IDA), that means promoting faster and more inclusive growth and increasing investment in public services and infrastructure to improve access to education and create jobs. Because these countries are home to 70% of all people living in extreme poverty and produce minimal greenhouse-gas (GHG) emissions, their anti-poverty efforts do not come at a high environmental cost.

The focus in lower-middle-income countries should be on delivering sustained growth and shared prosperity, and improving the efficiency of policies to boost income, build climate resilience, and keep GHG emissions in check. Scaling up investment in climate mitigation is especially important because the emissions of many middle-income countries are projected to rise over the coming decades. Such investments could also lead to better health outcomes – for example, by reducing air pollution.

Lastly, upper-middle-income and high-income countries, which account for four-fifths of global carbon dioxide emissions, must rapidly phase out their dependence on fossil fuels and lead the green transition. Although GHG emissions are projected to decline under current policies, the pace is not nearly fast enough to limit global warming.

Ending poverty and boosting shared prosperity on a livable planet requires bold policy choices, coordinated global action, and a significant increase in financing for sustainable development, which would allow low-income countries to invest in improving the lives and livelihoods of their people.

Today, the world has a historic opportunity to overcome the injustices and mitigate the dangers of entrenched poverty, systemic inequality, and climate change. We must not squander this chance to make meaningful, lasting progress toward broad-based prosperity.

Axel van Trotsenburg is Senior Managing Director of Development Policy and Partnerships at the World Bank.