04 October 2010

More reasons to give aid to Indians…

… and other residents of middle-income countries.
So. We’ve had a bit of a paradigm-shift then.
in 1990 … over 90% of the world’s poor lived in the world’s poorest places. But it looks out of date now. Andy Sumner of Britain’s Institute of Development Studies* reckons that almost three-quarters of the 1.3 billion-odd people existing below the $1.25 a day poverty line now live in middle-income countries. [The Economist]
The implication to be drawn; if these countries are middle-income then they can afford to pay for their own poverty-reduction projects right?
Poverty … may be turning from being an international distribution problem into a national one.
Not so fast Mr. Sumner. Mr. Ravallion crunched the numbers a few months ago:
The capacity for redistribution in India is far more limited than in China or (especially) Brazil. Indeed, it would be impossible to raise enough revenue from a tax on Indian incomes above the US poverty line to fill India’s poverty gap relative to the $1.25 a day line; the required MTR would exceed 100%. Even at a 100% MTR, the revenue generated could fill only 20% of India’s aggregate poverty gap.’
National redistribution projects, such as conditional (and unconditional?) cash transfers are going to become an increasingly important part of the solution to global poverty.
But redistribution (either national or international) is always going to play second fiddle to economic growth.

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