Page:Brundtland Report.djvu/61

A/42/427
English
Page 61

BOX 2–1

Growth, Redistribution, and Poverty

1. The poverty line is that level of income below which an individual or household cannot afford on a regular basis the necessities of life. The percentage of the population below that line will depend on per capita national income and the manner in which it is distributed. How quickly can a developing country expect to eliminate absolute poverty? The answer will vary from country to country, but much can be learned from a typical case.
2. Consider a nation in which half the population lives below the poverty line and where the distribution of household incomes is as follows: the top one-fifth of households have 50 per cent of total income, the next fifth have 20 per cent, the next fifth have 14 per cent, the next fifth have 9 per cent, and the bottom fifth have just 7 per cent. This is a fair representation of the situation in many low-income developing countries.
3. In this case, if the income distribution remains unchanged, per capita national income would have to double before the poverty ratio drops from 50 to 10 per cent. If income is redistributed in favour of the poor, this reduction can occur sooner. Consider the case in which 25 per cent of the incremental income of the richest one-fifth of the population is redistributed equally to the others.
4. The assumptions here about redistribution reflect three judgements. First, in most situations redistributive policies can only operate on increases in income. Second, in low-income developing countries the surplus that can be skimmed off for redistribution is available only from the wealthier groups. Third, redistributive policies cannot be so precisely targeted that they deliver benefits only to those who are below the poverty line, so some of the benefits will accrue to those who are just a little above it.
5. The number of years required to bring the poverty ratio down from 50 to 10 per cent ranges from:
   • 18-24 years if per capita income grows at 3 per cent,
   • 26-36 years if it grows at 2 per cent, and
   • 51-70 years if it grows only at 1 per cent,
   In each case, the shorter time is associated with the redistribution of 25 per cent of the incremental income of the richest fifth of the population and the longer period with no redistribution.
6. So with per capita national income growing only at 1 per cent a year, the time required to eliminate absolute poverty would stretch well into the next century. If, however, the aim is to ensure that the world is well on its way towards sustainable development by the beginning of the next century, it is necessary to aim at a minimum of 3 per cent per capita national income growth and to pursue vigorous redistributive policies.

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