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More than 700 million people live in extreme poverty, which the World Bank defines as living on less than $2.15 per day. This means 8 out of 100 people survive on less than half the cost of a Big Mac. The world has more than enough resources to end extreme poverty, yet analysts predict that nearly 7% of the world will still be living in extreme poverty in 2030.
While ending extreme poverty might look intractable, there is cause for hope. Three avenues strike us as most promising: specific poverty alleviation programs, growth-oriented development, and direct cash transfers.
This article explores the strengths and drawbacks of each approach. We think that the right combination of targeted interventions, investment in economic growth, and direct support to those in need can end poverty in our lifetimes.
Ending extreme poverty through specific alleviation programs
This approach focuses on delivering targeted interventions to economically disadvantaged people, communities, and populations. Examples include microfinance initiatives, job training programs, education subsidies, and healthcare subsidies. These programs provide resources to people in poverty which they often cannot access.
Pros of specific poverty alleviation programs
- Targeted: These programs are aimed at poverty’s root causes.
- Cost-effectiveness: Experts think that some specific programs are exceptionally effective. For example, GiveWell estimates that $7 can protect one child from malaria, which (given malaria mortality estimates) means that $5000 can save a child’s life in expectation.
- Timeliness: Initiatives such as job placement and healthcare subsidies can target specific deficits and create immediate impact.
- Time-tested: Some programs, such as micro-finance initiatives, have been rigorously tested, evaluated, and benchmarked over a 40-year period to enable evidence-based monitoring and improvement.
Cons of specific poverty alleviation programs
- Limited scalability: What works in one context may not work in another. For instance, micro-finance programs, which have been implemented worldwide, have only modest impacts on average, and critics argue that they leave some recipients trapped in debt.
- Dependence on external funding: These programs typically rely on aid sources like development organizations or diaspora remittances. This dependence poses a threat to their long-term viability.
Ending extreme poverty through growth-oriented development
Growth-oriented development activities find ways to start and sustain broad economic growth. This approach leans heavily on growing the private sector, making investments in infrastructure and human capital, and creating more job opportunities to drive economic growth. As economies grow, wages and living standards will rise, and more people will escape poverty.
Examples of growth-oriented development include investments in roads, power plants, and ports. Developing the private sector could also take the form of improved access to financing, tax incentives, and clearer regulations.
Pros of growth-oriented development programs in ending extreme poverty
- Inclusiveness: growth-oriented development is a public good, benefitting everyone at once. As Jagdish Bhagwati and Arvind Panagariya put it, “there is no substitute for rapid growth as the instrument to eradicate poverty.”
- Long-term impact: The benefits of growth compound over time, like interest.
- Self-sufficiency: Growth leads to local wealth, which means that members of a community can begin their own anti-poverty initiatives that are deeply informed by local context rather than funder imperatives.
Cons of growth-oriented development programs in ending extreme poverty
- Inequality: The returns on economic growth may not be evenly distributed. People who are better integrated into the formal economy may benefit more than others, perpetuating existing inequalities.
- Time and place lags: Economic growth typically takes place in cities, but according to the UN, extreme poverty “overwhelmingly affects rural populations.” So it may be a long time before the benefits of growth reach the very poorest.
- Dependence on favorable macro conditions: Growth-oriented programs rely on favorable economic conditions, such as low inflation, a stable currency, and low socio-political conflict. These conditions are not universal.
Ending extreme poverty with direct transfers
Direct transfers entail giving cash or cash equivalents to the poor. Cash gives people maximum flexibility about how to help themselves. As the cash transfer NGO GiveDirectly argues, “people living in poverty deserve the dignity to choose for themselves how best to improve their lives.”
UNICEF calls direct cash transfers a lifeline, especially when dealing with child poverty, food insecurity, and emergency relief.
Pros of meeting the minimum needs of the poor with direct transfers
- Empowerment: Direct transfers allow the poor to make their own choices and determine how best to use the resources to meet their needs, empowering them and increasing their agency.
- Targeted support: Direct transfers are targeted to vulnerable individuals to provide immediate support to those who need it the most. This focus contrasts with growth-oriented programs that are designed around the needs of the whole community.
- Ease of implementation: Direct transfers are relatively simple to implement and can be delivered quickly to those in need, making them an effective way to address poverty in the short term.
Cons of meeting the minimum needs of the poor with direct transfers
- Potentially expensive: Around 61% of all people live on less than $10 a day, and about 85% live on less than $30/day. These people are poor by Western standards, but not living in extreme poverty. For such folks, cash transfers need to be large, relative to local resources, to have lasting impact.
- Local inequalities: Researchers have found that when some people receive transfers and their neighbors don’t, the neighbors can be negatively impacted.
- Dependence on transfers: Direct transfers may create a dependence on continued support, which may not be sustainable in the long term without additional funding streams.
Here’s how you can get involved in ending extreme poverty today
We created the Glo Dollar, a fully backed stablecoin that is pegged one-to-one with the US dollar. Glo will be backed by a mix of cash and cash equivalents, which provide interest; the Glo Foundation will give away its portion of the interest to GiveDirectly, who will in turn distribute cash to people in extreme poverty.
In essence, holding Glo Dollars lets you generate basic income for people in extreme poverty without making a dent in your savings.
GiveDirectly is a highly regarded charity that distributes cash transfers. It has delivered digital cash across the world in challenging circumstances, from Houston after Hurricane Harvey to the most interior parts of Uganda. Since 2009, GiveDirectly has delivered more than $580 million to people in need, with about 90% of every dollar going directly to beneficiaries.
You can help us do more to contribute toward ending extreme poverty in the world by holding and using the Glo Dollar.
The world needs a comprehensive strategy that can end extreme poverty at scale
Almost one in ten people lives in extreme poverty. For many people in need, basic incomes are feasible and effective, but nothing is a panacea.
Each of the three approaches has its own strengths and weaknesses. We think the best strategy overall will combine direct cash transfers to meet immediate needs, specific poverty alleviation programs to meet community needs, and growth-oriented programs to meet country-wide needs for sustainable development.
If you want to help us achieve our mission, buy Glo Dollars.