Ending extreme poverty

The “Our World in Data” team has a great blog post on the cost of ending extreme poverty. It is highly recommended. Here are 5 things I took away from the post.

1. Simplifying the economics, the post asks one question – How much money would we need then to lift the incomes of all poor people up to the global poverty line of $1.90 a day?  

The answer is $90B US dollars. To put that number in perspective, the US defence spending is $600B. This number is probably the lower bound as the process will be inefficient. But, even at close to 2x, we’re looking at around a quarter of the defence budget.

I think the comparison to the defence budget is useful because I wonder how much lesser terrorism (30%?) we might have if some parts of the world were better off.

2. It is also less than all of global foreign aid flows. I’m guessing foreign aid goes to fight numerous other problems.

3. The good news is that the yearly cost of closing the poverty gap has gone down. This is because, despite the polarization of incomes, the world has become a less poor place overall.

4. This is true even in rich countries.

5. What can we take away from this? I love this paragraph –

90 billion market dollars is also not a huge number when compared to the net worth of billionaires. Chandy et al. compare the value of national poverty gaps to the net worth of billionaires in each country, and conclude that “In each of three countries – Colombia, Georgia, and Swaziland – a single individual’s act of philanthropy could be sufficient to end extreme poverty with immediate effect.”

We may not be billionaires ourselves but small efforts from many of us can go a long way in helping reduce extreme poverty. In economic terms, these acts have huge positive “externalities.” Areas with lesser poverty have better health, better sanitation and lesser crime.

Of course, if you know a billionaire friend or two, do send them this blog post. :)

3 thoughts on “Ending extreme poverty”

  1. It really does beg the question: Why can’t we have a world that works for everyone?

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