This week, the richest business leaders and investors from around the world have gathered in Davos, Switzerland, for the annual meeting of the World Economic Forum. In keeping with tradition, a small portion of the agenda will be devoted to global development and the plight of people living at the other end of the global income distribution.
Philanthropy is one way of linking the fortunes of these disparate communities. What if some of the mega-rich could be persuaded to redistribute their wealth to the extreme poor?
This question may feel hackneyed, but it deserves a fresh hearing in light of a dramatic reduction in the global poverty gap over the past several years. The theoretical cost of transfers required to lift all poor people’s income up to the global poverty line of $1.90 a day stood at approximately $80 billion in 2015, down from over $300 billion in 1980. (Those values are in 2015 dollars, and the size of the global poverty gap in 2015 is an overestimate compared with the World Bank’s tentative poverty estimate for the same year, because the two estimates treat Nigeria differently.)
Official Foreign Aid Now Exceeds the Annual Cost of Closing the Poverty Gap
This reduction can be unpacked into two parts. The first is a steep decline in the number of people living below the global poverty line. This is increasingly recognized as one of the defining features of the era. A United Nations goal to halve the poverty rate in the developing world between 1990 and 2015 was nearly achieved twice over. The second and lesser-known factor is the shrinking average distance of the world’s poor from the poverty line. In 1980, the mean daily income of those living below $1.90 was $1.09. In 2012 it was 25 cents higher, at $1.34 (in 2011 dollars).