91570 DEVELOPMENT COMMITTEE (Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund On the Transfer of Real Resources to Developing Countries) DC2014-0009/1 September 23, 2014 GLOBAL MONITORING REPORT 2014/2015 ENDING POVERTY AND SHARING PROSPERITY OVERVIEW Attached is a background document entitled “Global Monitoring Report 2014/2015 -- Ending Poverty and Sharing Prosperity -- Overview,” prepared by staff of the World Bank Group and the International Monetary Fund for the October 11, 2014 Development Committee meeting. * * * GMR 2014/2015 • ENDING POVERTY AND SHARING PROSPERITY 1 GROWTH’S CONTRIBUTION HAS BEEN CRUCIAL AND IN IN REDUCING FOSTERING SHARED PROSPERITY EXTREME POVERTY From 2006 to 2011, in 58 86 40 30 36% out of 20 countries, the bottom 10 14.5% 40% fared better than the 0 country average. 1990 2011 4 GOOD JOBS ARE KEY GROWTH NEEDS TO BE MORE INCLUSIVE AND SUSTAINABLE HI LDH OOD ED U The 2014/2015 GMR CT THE VULNE RA TE C CA focuses on the following PRO EARLY BLE TION three essential elements: NITI E S U RE ANAGEM RM RTU TE E FUT AC BU WA NT PO SS SS D CE KI P IL HE S R A LLS TO E Q UA L O AS T S B IS T FOR J O THE P O O S E TS F O R * HUMAN CAPITAL * SOCIAL SAFETY NETS TH IM RE CL GE W G AT E E NIN CHA N G GRO * ENVIRONMENTAL SUSTAINABILITY 2 LIVING STANDARDS OF THE BOTTOM 40% LAG BEHIND THOSE OF THE TOP 60% BOTTOM 40% TOP 60% BOTTOM 40% TOP 60% 100 80 92% 85% 60 68% 66% 40 20 0 COMPLETION OF ACCESS TO SAFE WATER PRIMARY EDUCATION (MDG 2) (MDG 7) 3 GROWTH ALONE IS NOT ENOUGH The World Bank Group’s interim But reaching 3% by 2030 will target of reducing poverty to single not be possible without digits by 2020 seems achievable. special e ort. 9% BY 2020 3% BY 2030 *These three elements are at the core of any country’s development strategy and fundamental to the achievement of the twin goals, the MDGs, or the Sustainable Development Goals expected to succeed them. Overview O ne year ago, the World Bank Group continuing to report on the status of the (WBG) proposed two goals to mea- Millennium Development Goals (MDGs). sure success in promoting sustain- • While the MDGs are focused on the devel- able economic development, and to monitor oping world, the WBG’s goal of shared its own effectiveness in delivering results. The prosperity is universal and signals a shift first goal is to essentially end extreme poverty, toward the post-2015 development goals. by reducing the share of people living on less Shared prosperity is as much a concern in than $1.25 a day to less than 3 percent of the high-income countries as in developing global population by 2030. The second goal economies. This Report extends the cov- is to promote shared prosperity by improving erage of the GMR to include performance the living standards of the bottom 40 percent of the bottom 40 percent in all countries, of the population in every country. Critically, including high-income ones. the goals need to be pursued in ways that sus- • While economic growth requires macro- tainably secure the future of the planet and its economic stability, efficient investments resources, promote social inclusion, and limit in human and physical capital including the economic burdens that future generations infrastructure, and evenhanded regula- inherit. tion of enterprise and well-functioning This Global Monitoring Report (GMR)— financial institutions, GMR 2014 focuses written jointly by the World Bank and the attention on three key elements of eco- International Monetary Fund (IMF) with nomic policy that make economic growth substantive inputs from the Organisation for inclusive and sustainable, within and Economic Co-operation and Development across generations: greater investments in (OECD)—has three novel features: human capital with a focus on the poor, prudent use of safety nets, and policies to • It introduces the WBG’s twin goals and make growth greener. presents the first account of the chal- lenge of ending extreme poverty and pro- The WBG’s twin goals of ending poverty moting globally shared prosperity. The and boosting shared prosperity retain an Report monitors the policies and institu- emphasis on growth and economic dyna- tions important to achieving them, while mism, while underscoring two important 1 2  O V E R V I E W GLOBAL MONITORING REPORT 2014/2015 principles: the world should pay special atten- ambitious goal. 2 In 2011, just over a billion tion to the living standards of the poorer seg- people remained in extreme poverty, around ments of the population, and it should secure 14.5 percent of the world’s population.3 The the future of the planet and its resources so first goal aims to virtually eliminate extreme that current prosperity does not come at the poverty during the next fifteen years, that is, cost of future generations. get to 3 percent by 2030 (figure O.1). Global poverty reduction has been mostly due to The scope of this report progress in the rapidly growing economies of East Asia and to a lesser extent South Asia; Growth has many drivers. There is broad regional patterns signal that there may be consensus that macroeconomic stability, problems in ending poverty by 2030. investments in financial, human, and physical In 1990 the magnitude of extreme pov- capital including infrastructure, good gover- erty was greatest in East Asia; today Sub- nance and evenhanded regulation of enter- Saharan Africa and South Asia account for prises and financial institutions are at the about 80 percent of the global poor. Accord- core of any strategy for enhancing growth. ing to the 2011 estimates, extreme poverty in However, more is needed to make economic Sub-Saharan Africa was around 47 percent. growth inclusive and sustainable. Almost three-fifths of the world’s extreme This Report focuses on three of the ele- poor are concentrated in just five countries: ments needed to make growth inclusive and Bangladesh, China, the Democratic Repub- sustainable: investments in human capital lic of Congo, India, and Nigeria. Adding that favor the poor, the best use of safety another five countries (Ethiopia, Indonesia, nets, and steps to ensure the environmental Madagascar, Pakistan, and Tanzania) would sustainability of development. These three comprise just over 70 percent of the extreme elements are both at the core of any coun- poor. try’s development strategy and fundamental Growth is the major driver of poverty to the achievement of the WBG’s twin goals, reduction, and was instrumental in halving the MDGs, or any reasonable set of develop- extreme poverty between 1990 and 2010. ment indicators chosen to succeed them. In Unless economic growth patterns change, a nutshell, the main message of this Report however, ending poverty by 2030 is unlikely is that to achieve the development objectives to become a reality. How long would it take set as targets for the next 15 years,1 growth to lift 1 billion people out of extreme pov- will have to be accompanied by consider- erty? Annual per capita consumption growth ably greater investments in human capital, in of 4 percent in every country around the particular that of the poor; be supported by world, combined with no change in income improved social safety nets; and be environ- distribution in each country, would result in mentally sustainable. a reduction of global poverty to about 3 per- cent of the world’s population by 2030. Even Progress toward though this scenario underlines the view that ending global poverty is not impossible, it is development goals achievable only with strong effort and com- Ending extreme poverty mitment from all countries. Even under this scenario, however, poverty in Sub-Saharan The WBG’s twin goals are motivated by the Africa would remain just over 19 percent in experience of the past two decades in mak- 2030, accounting for nearly 80 percent of the ing progress toward the MDGs, as well as global poor in that year. Six countries would emerging development challenges. The suc- still have poverty rates above 30 percent in cess in reaching MDG 1.a—halving extreme 2030: Burundi, the Democratic Republic of poverty—in 2010, five years ahead of sched- Congo, Haiti, Madagascar, Malawi, and ule, has emboldened the WBG to set a more Zambia. GLOBAL MONITORING REPORT 2014/2015 O V E R V I E W   3 FIGURE O.1  Global and regional poverty rate estimates for 1990, 2011, and 2030 Percent 56.6a 58.2 53.2 46.8 36.4 23.6 24.5 14.5 12.0 4.9 5.8 7.9 4.6 3.1 1.7a 2.4 2.1 1.5 0.5 0.1 0.1 World Latin America Middle East Sub-Saharan Europe and South East Asia and the and North Africa Central Asia Asia and Paci c Caribbean Africa Source: PovcalNet is the online tool for poverty measurement developed by the Development Research Group of the World Bank. See http://iresearch.world- bank.org/PovcalNet/index.htm for additional information and data. Note: The 1990 and 2011 estimates are based on Household Budget Surveys, and 2030 is a projection based on a reference scenario. See the discussion on scenarios in the Report Card. a. Refers to the numbers that are provisional because survey coverage is less than 50 percent of population in the region. The reference scenario shown in figure O.1 deadline: gender equality in primary edu- uses growth rate projections from the Global cation (MDG 3.a), access to safe drinking Economic Prospects report (World Bank water (MDG 7.c), and improving the lives 2014a). Global per capita GDP increases by of at least 100 million slum dwellers (MDG 1.7 percent a year, with developing countries 7.d). Except for possibly gender equality in growing at a rate slightly below 4 percent secondary education (MDG 3.b) and com- and developed countries growing at about batting malaria (MDG 6.c), the remaining 0.6 percent. In this scenario, the global pov- MDGs are lagging and are not expected to be erty rate in 2030 would still be just above 2 achieved by the deadline. Indicators, proxy- percentage points above the 3 percent target. ing the socioeconomic status of the bottom 40 percent of the population, have proven difficult to improve, even though income Sharing prosperity growth of the bottom 40 percent of the popu- The world’s Report Card on the socioeco- lation has not been slower than that of the nomic indicators represented by MDGs 1b–7 general population in many countries. This is much less satisfactory, and many of those inequality in basic living standards is worri- basic needs of poor people remain unmet.4 some. These developments have inspired the As the Report Card shows, three other MDG WBG’s goal of shared prosperity.5 This goal targets have been met ahead of the 2015 puts the spotlight on the unfinished MDG 4  O V E R V I E W GLOBAL MONITORING REPORT 2014/2015 agenda, but it goes beyond MDGs 1b–7 by Immediate global growth making a commitment to more equitable liv- prospects ing standards in every country. During the 2000s, the bottom 40 per- The global economy is expected to strengthen cent enjoyed more rapid growth in income modestly between now and the end of (or consumption) than the average growth 2015 after a sluggish patch during the first of the population in many countries. Using half of this year. In 2015—the last year of the period 2006 to 2011 to calculate for each MDG-monitoring—overall global growth country the latest five-year annual average is expected to be close to 4 percent. Growth of income or consumption growth, the bot- in advanced economies should move above 2 tom 40 percent fared better than the country percent (for the first time since 2010), while average in 58 of 86 countries.6 But variation growth in emerging market and developing across countries is great. In 13 countries7 countries should increase to 5 percent. This the bottom 40 percent experienced annual expansion will take place against the back- growth rates of more than 7 percent, while ground of relatively stable prices, supported in another 18 countries, the income or con- by generally sound macroeconomic policies in sumption of the bottom 40 percent declined most countries. While the outlook is broadly over the period (figure O.2).8 favorable—boding well for the poor—there While gaps in income have been closing are significant downside risks, including from in many countries, the well-being of house- geopolitical developments and the potential holds in the bottom 40 percent remains for a financial market correction. much lower than in households in the top Low-income developing countries have 60 percent. For countries with data available continued to record strong economic growth, for the period 2005–12, young children in on the order of 6 percent per annum, in recent the poorest households are 2–3 times more years, and this favorable trend is expected to likely to be malnourished than those in the continue in 2014–15. That said, these econo- top wealth quintile. Under-five mortality mies remain vulnerable to adverse shocks, rates are significantly higher for the bot- particularly the potential for a protracted tom 40 percent than for the top 60 percent. slowdown in the growth of emerging market Access to an improved water source and to countries. The impact of such a slowdown improved sanitation remain highly unequal would vary greatly across countries, depend- in many low-income countries, although in ing on specific country characteristics such as many middle-income countries, coverage the size of available macroeconomic buffers. is approaching 100 percent for all income groups. More progress has been made in achieving The challenges in high-income full coverage in primary education, although economies coverage remains short of the target. In many countries the richer quintiles have already In high-income countries, the rising con- achieved close to 100 percent enrollment. cern about shared prosperity is a reaction Improvements in primary enrollment have to income inequality that has reached levels generally benefited the poor and girls. How- unprecedented in the post-war period. The ever, enrollment beyond primary school in average income of the richest 10 percent of the the bottom 40 percent remains low. In a sam- population is now about 9.5 times that of the ple of 31 low- and lower middle-income Afri- poorest 10 percent, as opposed to 7 times 25 can and South Asian countries, a child in the years ago. Most strikingly, income inequality top income quintile was 25 times more likely is increasing even in traditionally egalitarian to complete secondary school than a child in high-income stalwarts like Denmark, Ger- the bottom quintile. many, and Sweden. Currently, 11 percent of GLOBAL MONITORING REPORT 2014/2015 O V E R V I E W   5 FIGURE O.2  Growth of per capita income/consumption of the bottom 40 percent exceeded the country average in most economies, 2002–12 (2005 PPP) (% annualized growth for a 5-year period, 2002–12) Annualized growth in mean income per capita For each region, the solid bars ( ) represent growth for the bottom 40 percent of the population while the transparent bars ( ) represent growth for the entire population. EAST ASIA AND P ACIF IC Cambodia Madagascar China Togo Vietnam Malawi IC A and Ethiop FR PDR Nige NA Thail S en ne s A AR Lao tion ria Ma ia AH ega ippi -S Ma urit us era B l Phil lar SU li c ius Na Fed bli Be mi u Ug n sian p bia sta e an an kR kh M ist Rus d va oz a za So jik nia a Ka Slo ut Ta m hA ma bi Rw c qu an fri ca Ro bli e Bo da e pu tsw zR va an rg y ldo Co a Ky Mo ng key o, R e Tur Tan p. e zan ain ia Ukr Ban nia glad esh Esto ASIA Sri La d nk a Polan SOUTH Pakista n Norway India* Montenegro Bhutan Netherlands EUROPE AND CENTRA Nepal –5% 0% 5% 10% Finland A ORTH AFRIC Iraq Czech Republic Israel Slovenia d Gaza ank an Bulga West B AND N ria L ASIA n Lithu Jorda ania AST Geo isia rgia Tun E ala Den E tem ma DL Gua tes rk Sta MID Arm n ited eni a U o La xic r Ge tvi Me do rm a ic lva bl a an pu S y El da Ire Re na lan an Ca d c ini Un m Ita Do Ice ited ly s ura Hu ile lan Ch Kin ng nd d r do gua ary Ho gdo a Gre Ecu ara Rica a m am ece Spai Alba Nic Argentina Colombia Paraguay Pan a Uruguay Cost Bolivia Serbia Brazil n nia Peru ICAS AMER Source: Global Database of Shared Prosperity circa 2006–11, calculated from PovcalNet and the Luxembourg Income Study database. Note: Based on real mean per capita consumption or income measured at 2005 purchasing power parity (ppp) exchange rates. Europe and Central Asia are an exception as their data comes from the WBG’s Europe and Central Asia Team for Statistical Development. PovcalNet is the on-line tool for poverty measurement developed by the Development Research Group of the World Bank. See http://iresearch.worldbank.org/PovcalNet/index.htm for additional information and data. * The National Sample Survey (NSS) reports that the growth of per capita income/consumption of the total population of India was 2 percent between 2002 and 2010 (2005 PPP). According to the National Account Statistics (NAS), however, this figure was much higher. 6  O V E R V I E W GLOBAL MONITORING REPORT 2014/2015 the OECD population lives in relative pov- most of the low skilled and poor workers will erty.9 The elderly, children, and youth are the have left school before finishing upper-sec- most affected. Evidence indicates that high ondary education. Further, the poor quality inequality dampens economic growth over of education in low-performing schools yields the long run. On average, a one point increase low returns to the learning experience, and in income inequality as measured by the Gini thus requires these low-skilled workers to Index, is estimated to lower annual growth make additional efforts to catch up through of per capita gross domestic product (GDP) supplementary courses. by around 0.2 percentage point in advanced countries; the effect is estimated to be some- More inclusive labor markets what smaller (in the order of 0.14) in empiri- cal analysis for a larger set of countries. The structure of labor markets should be conducive to job creation. Social protection should strike a balance between providing The specter of inequality the flexibility employers need to hire and Inequality in high-income OECD countries fire workers and the need to protect workers arises from the impact of technological prog- against adverse income shocks, by extending ress, which has increased wage dispersion the coverage of unemployment benefits and in favor of higher-skilled workers, such as measures to boost replacement rates as mea- information and communications technol- sured by the percentage of a worker's pre- ogy (ICT) or financial services professionals, retirement income that is paid out by a pen- while the impact of globalization is less pro- sion program upon retirement, and effective nounced than is often thought. Most technol- activation policies. It is important to design ogy-related jobs require tertiary educational policies that make it easier for vulnerable and attainment, especially in the areas of science, less experienced workers to find jobs. technology, engineering and mathematics Social protection systems are inclusive (STEM). Typically, tertiary-educated adults and efficient when they operate in tandem are more likely to find jobs and earn higher with employment policies by focusing on salaries, while workers lacking tertiary skills social benefits that are employment related are excluded. Rising shares of non-wage and accompanied by measures to promote income from capital for richer households the employment of young and older work- has also fueled income inequality. ers. Safety nets can also finance child care or educational reforms, such as the move in Australia and the United Kingdom toward Early and continuous investments provision of early childhood education, and in human capital the provision of subsidies for child care in the Inequality of opportunities due to poor Republic of Korea. human capital holds back the poor from get- ting better paying jobs and increasing inter- More attention to the environment generational social and economic mobility. On average, people with better education live As in developing countries, the poor, young, six years longer than their poorly educated and elderly in high-income economies are peers in 14 OECD countries. The OECD’s particularly vulnerable to environmental Programme for International Student Assess- degradation. People with lower incomes are ment (PISA) shows that children who have more likely to live in environmentally dis- enrolled in pre-school education perform bet- tressed areas and thus be subjected to pollu- ter throughout their life and tend to be better tion and other environmental hazards. integrated socially. Disadvantaged students Environmental policies in high-income coun- tend to have less access to pre-primary educa- tries are important for sustaining shared tion. Even when they attend primary schools, prosperity across generations. However, the GLOBAL MONITORING REPORT 2014/2015 O V E R V I E W   7 distributional implications of these policies for educational attainment and adult earn- vary across countries, regions, sectors, and ings. Immunizations can have a benefit-to- groups in society, and can have either ben- cost ratio up to 20:1, and deworming can eficial or adverse effects on equity and labor have a benefit-to-cost ratio as high as 6:1. earnings of the poor. For example, irrigation Unfortunately, in a large number of low- and subsidies that boost agricultural production middle-income countries with high rates of can impair the efficiency of water use and poverty among children and youth, early exacerbate off-farm pollution, since water childhood development programs are scarce. charges for farmers rarely reflect real scarcity Investments in human capital through or environmental costs. Reducing these sub- lifelong learning that target the most vulner- sidies can thus improve the environment and able can play a pivotal role in breaking the may improve equity, since they typically ben- intergenerational transmission of poverty. efit rich farmers. However, reducing subsidies Educational policies must ensure that kids may also harm poor agricultural workers. can attend, and learn from, primary school. Governments often offset the negative However, a primary education is often not impact of environmental policy actions and sufficient to achieve high levels of labor pro- reinforce their positive impact through recy- ductivity and earnings later in life. In low- cling the revenue streams raised by environ- and middle-income countries, the transition mental levies, or saved by the removal of from primary school into secondary school harmful subsidies, toward ends that target or technical or vocational school is becom- social equity. Inadequate urban drainage is ing increasingly important for people to stay a major problem in many OECD countries; out of poverty and improve their standard of and it leads to high volumes of polluted run- living. off that floods streets and contaminates the Investments in education and skills train- environment. ing are needed that better match workers’ abilities with the demand for labor. Enter- prise surveys show that employer complaints The challenges facing about skills are more often voiced by firms developing economies that are newer, faster-growing, more out- wardly oriented, and more eager to move up Investing in human capital has a profound the technology ladder. Investments in edu- effect through its potential to lift or keep an cation that foster marketable skills can thus individual out of poverty and spur robust attract more dynamic firms and contribute economic growth, and is thus critical to directly to economic growth. In developing achieving the twin goals. Because invest- countries where a large share of the poor ments in human capital are cumulative and rely on agriculture, the test of marketable portable, they facilitate social and economic skills is reflected in higher yields in farm- mobility. Inclusive growth requires the gen- ing, increased access to off-farm small enter- eration of jobs, initially in low-skilled, labor- prises, migration to urban areas or countries intensive sectors, since labor earnings are the with higher incomes, and transition to formal largest source of income for the poor and sector employment. those in the bottom 40 percent of the income distribution. Better social safety nets As extreme poverty declines, growth on Earlier and greater investments its own lifts fewer and fewer people out of in educating the young poverty because the remaining poor face Early investments in human capital are the significant barriers to raising their income. most effective, as poor nutrition and disease Members of disadvantaged groups who are at a young age can have life-long implications excluded from labor or credit markets or 8  O V E R V I E W GLOBAL MONITORING REPORT 2014/2015 who reside in remote, or fragile and conflict- judicious use of these subsidies would allow affected areas, are typically unable to benefit greater resources to be directed to enhancing enough from the growth process to escape growth or assisting the poor, either through poverty and deprivation. Thus achieving improving their ability to participate in eco- the twin goals will require devoting more nomic activities or through income support. resources to safety nets to reach the remain- For example, in 2005 Indonesia devoted ing extreme poor. part of the $4.5 billion saved by reducing Safety nets in low- and middle-income fuel subsidies to increasing cash transfers to countries provide rudimentary benefits dur- low-income individuals and improving health ing economic crises such as spikes in food services. and fuel prices, droughts, earthquakes, Identifying and efficiently reaching the and floods, and can remove barriers to eco- poor is a formidable challenge in many coun- nomic opportunity for the poor and, even tries. Many of those who remain in extreme more importantly, for their children. Well- poverty are harder to reach, so that the designed social safety nets can also raise administrative costs of safety net programs growth through many channels: they pro- tend to rise as poverty declines. However, tect the productive assets of the poor, for recent developments in ICT, such as India’s example, by enabling households to avoid new program to provide all of its citizens and selling livestock following a sudden decline residences a unique official identity, have the in income; they help build human capital by potential to reduce these administrative costs encouraging school attendance and take-up significantly and improve targeting. of health services through conditional cash transfer programs; they provide infrastruc- ture and services to poor communities; they More emphasis on green may make growth-enhancing reforms politi- growth policies cally feasible; and they can increase profitable investment by improving access to credit and Without action to ensure green growth, inputs, by changing incentives and reducing the sustainability of ending poverty and information asymmetries, and by improving boosting shared prosperity is clearly at risk. households’ ability to manage risk. Green growth aligns economic growth with Efficient social safety nets in low-income environmental sustainability by addressing settings redistribute some of the gains from the global or national challenges of natural growth while contributing to higher growth. resource depletion, ecosystem degradation Conditional cash transfer programs like and pollution, and climate change. Brazil’s Bolsa Familia have increased school Many developing countries face the deple- attendance by compensating poor households tion of natural resources, water stress, natural for the direct costs (such as school fees, uni- disasters, and climatic changes as challenges forms) and indirect costs (forgone income for poverty reduction and economic growth. because children go to school rather than Natural resource depletion can constrain work) involved. On the other hand, poorly future economic growth in resource-depen- targeted general subsidy programs, such as dent countries if resource rents are not rein- energy subsidies, decrease economic effi- vested in building productive capital. Alarm- ciency and equity. In low- and middle-income ingly, about half of the developing countries countries on average, blanket subsidies for have experienced a decline in per capita energy, except for kerosene in low-income wealth (where wealth includes produced, countries, benefit the richest 20 percent of human, and natural capital)—also driven households six times more than the poorest by the depletion of natural resources. Local 20 percent. Annual global energy subsidies forms of ecosystem degradation and pollu- (including estimates for the costs of nega- tion, such as land degradation, water stress, tive externalities) are about $2 trillion. The and air pollution, tend to particularly harm GLOBAL MONITORING REPORT 2014/2015 O V E R V I E W   9 the poor, because many live in ecologically hand, green growth policies may also hurt the fragile areas and depend on environmental poor by affecting industries that provide jobs goods and services for their livelihoods. Cli- to the poor or prices of consumption goods mate change is likely to further exacerbate such as for food and energy. In these cases, these challenges and undermine economic green industrial policies can provide tempo- growth and poverty reduction. The increased rary support to declining sectors and indus- exposure to natural disasters and the steady tries, while safety nets and distributional poli- increases in carbon dioxide concentrations cies can protect the poor. Strategies for green highlight the challenge of achieving climate- growth need to carefully consider the impacts resilient and low-carbon development. on the poor and on shared prosperity Urgent action for green growth is needed, and making the wrong decisions today could More, better, and timely data needed lock economies onto unsustainable path- to inform policy ways. Those actions that avoid investments in high-emitting or polluting infrastructure All these policy actions require better and with large time horizons (such as transport more timely data. The 2013 report of the systems, buildings, urban forms) or the High-Level Panel on the Post-2015 Devel- irreversible loss of ecosystems and natural opment Agenda, convened by the United resource (such as deforestation) are most Nations Secretary-General, calls for a “data urgent. Although green growth measures revolution for sustainable development, with can bring enormous national and global ben- a new international initiative to improve the efits in the long run, they can involve trad- quality of statistics and information available eoffs with immediate, local benefits. Priority to citizens.” The development community should be to implement those options with urgently needs to improve the availability of the greatest urgency and the greatest local, data for analysis of the twin goals, and of the immediate benefits. In many developing MDGs and their successors beyond 2015. countries these could be actions that increase Increasing the timeliness and frequency of energy efficiency, provide low-carbon energy data collection will require more resources supply, improve health, increase agricultural and improvements in the capacity of statis- productivity, secure access to basic services, tical agencies. Technology that can improve and reduce disaster and climate risks. Each data collection and well-designed survey-to- and every country’s growth strategy should survey analysis should be scaled up. Greater include tailored actions to promote green frequency should not, however, come at the growth. These strategies can look very differ- cost of quality. The guidelines for measuring ent in each country, depending on its needs, poverty need to be standardized, and more priorities, and capacities. emphasis placed on maintaining comparable While some green growth measures help measures of consumption and income. the poor, others may require compensatory policies to limit any adverse impact. Green growth policies can directly benefit the poor. Main messages For example, poor households can be paid for The 2014 GMR reaffirms the centrality efforts to protect the environment, as in the of economic growth, and the importance Brazilian Bolsa Floresta program that rewards of inclusive and sustainable growth, for poor families for stopping deforestation on achieving the twin goals of ending poverty the condition that children are enrolled in and improving the living standards of the school. Environmental protection activities bottom 40 percent in every country—devel- such as land restoration, selective logging for oped and developing. The policy areas are sustainable forest management, and guards in very similar for both groups of countries, protected areas can generate low-skill employ- although the policies themselves differ sig- ment opportunities for the poor. On the other nificantly between the two groups in some 10  O V E R V I E W GLOBAL MONITORING REPORT 2014/2015 areas. Recommended policies also differ some middle-income countries is stalling within the two groups, and do not depend because of unemployment driven by tech- only on income levels, as can be seen in the nological change that favors high-skilled particular challenges facing fragile and post- workers while economic adjustments conflict situations, as well as small states. In attributed to globalization have been less general, the most useful policy lessons for pronounced than is often thought. achieving the twin goals are provided by • Macroeconomic stability, adequate invest- countries with comparable characteristics, ments in infrastructure, and evenhanded initial conditions, and constraints to growth. regulation of enterprise are necessary The Report has seven main messages: conditions for economic growth and improved living standards in all coun- • Global growth prospects for the imme- tries—developing, newly industrialized, diate future are encouraging, with the and high income. But to make this growth world’s economy expected to g row inclusive, countries at all stages of devel- between 3 and 4 percent in 2014 –15.  opment require greater investments in Although conflicts in Eastern Europe and human capital—especially in the educa- the Middle East are clouding these pros- tion and health of the less well-off seg- pects, emerging and developing countries ments of the population. are expected to grow about 5 percent   While the priorities for investments in in 2015.  Most encouragingly, the three education and health differ across coun- regions with almost 95 percent of world’s tries, developing countries will require poor—East Asia, South Asia, and Sub- more attention to early childhood devel- Saharan Africa—are expected to grow at opment of disadvantaged children, espe- an annual average of 5–6 percent over the cially girls, to break the intergenerational next two years. transmission of poverty. In high- and • The medium-term prospects of the world some middle-income economies, the pri- economy provide reason to be optimistic orities are completion of secondary educa- about meeting the World Bank Group's tion that leads to academic or vocational interim target of reducing extreme pov- education and training qualification. Edu- erty to single digits by 2020. However, cational systems should have adequate even if extreme poverty continues to fall financing and good teachers to achieve as projected in East and South Asia, the clear learning standards that deliver job- prospects of reducing global poverty to relevant skills necessary for better-paying below 3 percent by 2030 are not good. jobs in all countries. Ending extreme poverty by 2030 will • Well-designed safety nets can play a piv- require sustained high growth globally otal role in fostering inclusive human and accelerated poverty reduction in Sub- development. In some middle- and low- Saharan Africa and fragile and conflict- income countries, safety nets assist the affected states over the next 15 years. poor and vulnerable, redistribute the   The prospects for boosting shared pros- gains from growth, and contribute to perity are more complex. While gaps in growth by enhancing the ability of the income levels of the bottom 40 percent poor and ultimately their children to have been closing in many countries, other benefit from economic development. In aspects of their living standards as mea- high- and many middle-income countries, sured by the MDGs 1b–7 remain much safety nets complement sophisticated lower than for the top 60 percent. In low social protection systems supported by and middle-income countries, shared pros- tax-benefit systems. In developing coun- perity is constrained by slow and uneven tries, (conditional) cash transfer programs progress in MDGs 1b through 7, especially are efficient instruments for reaching the in employment, education, health, and poor. Replacing energy subsidies, which sanitation. Shared prosperity in high- and are estimated globally at $2.0 trillion GLOBAL MONITORING REPORT 2014/2015 O V E R V I E W   11 (about 2.9 percent of world GDP) for as the growing disparities between the upper 2001, with well-targeted safety nets can and lower segments of the income distribu- benefit the poor at a much lower cost to tion in high-income countries. An MDG-spe- the government. cific appendix (appendix A) supplements the • Ensuring environmental sustainability is Report Card. vital to the robustness over time of eco- The second part has four chapters that nomic growth. Basically all countries discuss policies and institutions that can face challenges from natural resource help to address the opportunities and chal- depletion, ecosystem degradation and lenges related to human capital accumulation pollution, and climate change. When and the environment so that they enhance carefully designed, green growth strat- growth, end poverty, and promote shared egies can tackle these challenges by prosperity. improving the management of natural resources, reducing pollution and emis- • Chapter 1 centers on economic growth, sions, increasing resource efficiency, and together with the inclusiveness and sus- strengthening resilience. For example, tainability that are the rudimentary ele- increasing environment-related taxes or ments of any conceptual framework used removing subsidies can ensure that prices to achieve the WBG’s twin goals. Not- better reflect the full environmental and ing that growth may not be adequate to social costs of resource usage. Because achieve the twin goals, the chapter focuses these policies may also hurt the poor, on two ingredients of the inclusiveness of they should be offset with targeted sup- growth: jobs and a social contract that port. While developing countries most provides for the equality of opportunity likely should focus on energy efficiency, and safety nets. Human capital can play developed countries face the challenge of a pivotal role in enhancing the equality switching to cleaner sources of energy. of opportunity of the less well-off. The • It is time for a data revolution to improve implications of environmental sustainabil- the availability and quality of statistics. ity for the twin goals are also introduced Immediate action is needed to produce in chapter 1. more comprehensive, reliable, and timely • The immediate growth prospects in devel- data to monitor progress in achieving oping and high-income countries are out- development goals, and to inform the pol- lined in chapter 2. The chapter provides a icies required for economic growth to be reminder that the economic growth pros- adequate, inclusive, and sustainable. pects of developing countries still hinge on the robustness of economic growth in the high-income economies. A roadmap to the report • Chapter 3, with contributions from the GMR 2014 has two parts. The first consists staff of the OECD, examines the debates of a Report Card on the status of the MDGs on growth and inequality in the high- and the WBG twin goals. The Report Card income OECD countries. It highlights presents a global assessment of progress to the challenge posed by structural factors, date, including data on the WGB twin goals productivity, and labor utilization as well and the MDGs at the global, regional, and as the potential of human capital, espe- country levels. It also assesses the prospects cially education and skills, and the role of for achieving the poverty target and various safety nets in addressing these challenges. indicators that can be valuable in monitoring It also discusses the case for green growth the world’s endeavor to improve the lives of in high-income countries. the less well-off in society in the future. In • Finally, chapter 4 addresses the policy particular, the Report Card records the dis- agenda for increasing the inclusiveness appointing performance related to MDGs and sustainability of growth in develop- 1b–7 in most developing countries, as well ing countries. Given their large deficits 12  O V E R V I E W GLOBAL MONITORING REPORT 2014/2015 in health and education, as documented indicators of the post-2015 development by the unsatisfactory progress in most agenda. developing countries toward MDGs 1b 2. In 1990, about 43.5 percent of the devel- through 7, the chapter presents a compel- oping world’s population (about 1.9 bil- ling case for policies and institutions that lion people) lived below the extreme pov- boost human capital. Early childhood erty line defined as $1.25 a day. MDG development programs and investments 1a aimed to halve this number by 2015. that address the largest gaps between the It was achieved in 2010. Today, approxi- poor and the rich are priorities. The chap- mately 1 billion people still reside below ter examines how social safety nets can the extreme poverty line. enhance growth and redistribute some of 3. MDG 1a refers to the developing world’s the gains from growth. It also discusses the population, whereas the WBG’s poverty challenges and opportunities developing target is related to the entire world’s countries face for greening their growth. population. 4. The MDG Annex provides a detailed The structure and the contents of the report on the world’s MDG achievements. Report illustrate how the relationships 5. The shared prosperity goal is defined by between enhancing growth, ending extreme the WBG as income growth of the bot- poverty, and promoting shared prosperity tom 40 percent of the population. It is are even more complicated in developing important to be mindful of the fact that economies than they are in the high-income while real income is an overarching con- countries. Resources are often more con- cept, poverty has multiple dimensions strained and opportunities for mobilizing that the world needs to be concerned them can be more limited. Large variations with. Fortunately, the shared prosperity in institutional capacity, along with the pos- measure has significant overlap with the sibility of significant governance challenges, non-income dimensions of welfare cov- can make implementation of policies that ered by MDGs 1b–7. ensure the adequacy, inclusiveness, and sus- 6. The source of the data for the 86 coun- tainability of economic growth difficult. But tries is Global Database of Shared Pros- the Report also shows that policies to pro- perity circa 2006–11 calculated from mote shared prosperity have more than a few PovcalNet, except for the following high- common prerequisites—a focus on invest- income countries: Canada, Denmark, ments in human capital, the judicious use of Finland, Germany, Greece, Iceland, Ire- social safety nets, and a mindfulness of the land, Italy, Israel, the Netherlands, Nor- environmental consequences of economic way, Spain, the United Kingdom, and the growth. United States, for which the source is the Luxembourg Income Study database. 7. These countries are: Belarus, Bolivia, Notes Cambodia, China, Colombia, Rep. of 1. The current consensus is to brand the Congo, Nepal, Peru, Paraguay,the Rus- next generation of MDGs the “Sus- sian Federation, Slovak Republic, Tanza- tainable Development Goals” (SDGs) nia, and Uruguay. with another 15-year horizon. See out- 8. These countries are: Albania, Ethiopia, come document of the Open Working Greece, Guatemala, Hungary, Iceland, Group on Sustainable Development Ireland, Italy, Madagascar, Malawi, Goals (http://sustainabledevelopment. Mauritius, Nigeria, Senegal, Serbia, un.org/owg.html) and the High-level Spain, Togo, the United Kingdom, and Panel report (http://www.post2015hlp. the United States. org/) for a more in-depth discussion on 9. Measured by the median household dis- the potential new goals, its targets, and posable income.