Ending extreme poverty worldwide by 2030

World Bank President Jim Kim opened up in a candid conversation with Ali Velshi on Wednesday about the institution’s campaign to end extreme poverty in the world by 2030.

The World Bank defines people living in extreme poverty as surviving on less than $1.25 a day. Currently, about 17.7 percent of the world’s population falls in that category; the World Bank aims to reduce that to about 3 percent.

“We’re very focused on lifting the billion or so people living in extreme poverty out of that condition so that they can have those things that everybody in the world wants,” said Kim. “It’s a state that almost goes beyond human imagination…and it’s a condition we should not tolerate any more on earth.”

To achieve the goal, Kim said that the World Bank aims to lift 50 million people out of poverty each year by investing in health, education, roads, energy, infrastructure and more.

We’ve excerpted parts of the conversation in the transcript below. It has been edited for clarity.

Based on current global growth, the number of people in extreme poverty is being reduced on an ongoing basis. But here in America, we are consumed by the idea that we’re hollowing out our middle class. We're bifurcating an economy into haves and have-nots, and in fact that's happening in a lot of the world.  What's perspective on the middle class in the world? Is it growing? Is it healthy?

The World Bank is actually tracking the income growth of the bottom 40%. There's a lot of really good data that suggests that the higher levels of inequality is actually a drag on economic growth. So even if all you care about is economic growth then you've really got to be focused on inequality.

One thing we learned most clearly from the Arab spring is that if you have GDP growth but you ignore a large proportion of your population, you are building political instability into your country.

So we're onto this issue, and I think many, many political leaders are beginning to understand that they cannot afford, even for their own political lives, they cannot afford to ignore that bottom 40%.

We struggle with this when we report for instance, on GDP growth. And people get very frustrated because we say, "Oh, GDP growth is up. We're in this sort of fair to middling level." And people say, "But I still feel like I'm in a recession. I still feel like things are really badly off." Are we in danger of measuring the wrong thing when we talk about economic growth in countries, if inequality is as big a problem as it is?

Well, I think measuring GDP growth is still very important, but we need to now measure other things. So, for example, if you want to grow your economy, a healthier population is really important for you. There was just the study in The Lancet that suggested that between 2000 and 2011, fully a quarter of the economic growth of the emerging market of the developing countries was due to better health.

So we've never had this kind of powerful evidence that says that investing in your people (so that they can have health care, they can have education) is actually critical to growing your economy. Now that we have all this evidence, we at the World Bank are going to move very, very aggressively in saying, "Look, you know, we now know inequality is bad for growth. We now know that, unless you invest in your people, you're not going to see the economic growth in the medium and the long term, move even the short term."

First of all, when you say eliminate extreme poverty by the year 2030, what are we talking about, when we mean extreme poverty?  I that there are more people than we would think who live on less than $1.25 a day, or even more. When you get to about $2 a day, you're talking about 80% of the world's population.

Yep. In the case of extreme poverty-- when the concept was first introduced by Robert McNamara-- in the 1970s, it was $1 a day, and now it's increased to $1.25 a day. But he described that condition as a state of depravity that almost goes beyond human imagination. And it still almost goes beyond human imagination.

I've worked with many people living on less than that, and it's a condition that we should not tolerate anymore on this earth. And so in setting that target, what we mean is we want to lift everybody out of that condition of living on less than $1.25 a day, and bring that level to below 3% of the global population.

Now, the reason we say 3% is because there are always going to be disasters, and people are going to be going in and out of poverty. We don't think we can get it much lower than 3%. But right now, 17.7% is the last number we have globally. And to get there, we're going to have to lift almost 50 million people a year out of extreme poverty [between now and] 2030, a million a week. So if the global growth happens in just the same way that it’s happened in the previous 20 or 30 years, we’re not going to get to 3%, we’re going to get to about 7 to 7.5%. We have work to do. Economies have to grow, but also we have to think about how to invest in people. How to bring in programs that will actually lift more people. Seven and a half percent is assuming that the same level of distribution of wealth is going to persist. If that distribution of wealth changes, and more is invested in the bottom 40%, then we're going be able to reach that target.

We’ve been recruiting questions from social media. Arnaud from the Netherlands says, "I see the enormous debt of the United States as a major threat to the future economic stability of the world." The issue of US interest rates creates problems for a lot of developing nations. Give me your take on this.

We’re very optimistic about growth in the US economy. We think that the numbers look good. We think that this will be sustained and the growth in the US economy is going to be very good for everybody.

Now the issue for us is, as the US Fed begins to taper the unconventional monetary policies, the question is what will happen to interest rates? Now, there are two forces going on. So the growth of the US economy is great for exports, for many of the emerging market countries.

But then the increased interest rates is going to make it difficult to get capital. So as long as the taper is smooth, and every indication suggests that it will be, the overall capital flows into the developing countries. Right now, it's about 4.6% of GDP.

We think that over the next couple of years, that will go down gradually to about 4%, as long as the tapering is smooth. So if the tapering is smooth, we're fine, because the growth in the first world economy is going to offset the rising interest rates in a very reasonable way. You know, what we're all hoping for is there's not some sort of spike that will throw everything off, because if there is, then we could be in trouble in the developing world.

You’ve seen the Oxfam report that says that the 85 richest people in the world have more wealth than the bottom three and a half billion. And I've seen something that says that the 400 richest Americans have the same wealth as the bottom half of the entire American population. Are we seeing the hollowing out of the global middle class? 

One has to step back, Ali, and one has to say-- so for the wealthiest people in the world, what kind of world do they want to see? Do they want to see a world in which the economy's growing, and in which there are more consumers to buy their products if they make products?

Do they want to see a world in which there is less conflict? Do they want to see a world in which more people get to participate? Or do they want to see a world in which economies are shrinking, but they're maintaining their piece of it. Now, for the people who say, "We don't care if the economy grows or shrinks, we just want to keep our piece of it," you know, we at the World Bank Group would say, "Fundamentally we disagree with you."

So if the wealthiest people in the world want to see a world that's both growing and also at same time, including more people, then I think we have a lot of ideas about what we need to do. First of all, we need to figure out a way to stop conflicts before they happen.

Marco from Slovenia asks, "How is climate change going to affect the World Bank's goal of ending extreme poverty by 2030?"

It could stop it completely, right?  So what we know is that if the current levels of carbon emission continue, and if we don't invest in both mitigation and adaptation, this is going to be one of, if not the major, impediment to our reaching the goal.  So this is why we're working so hard on climate change.

Another question from social media: "What are the top five drivers of inequality or poverty in the world?"

I think still the most devastating is conflict. I mean, conflict is a huge driver of poverty. But then, you know, all the things I've talked about already: a lack of access to electricity, infrastructure. This is a really, really important one.  Investing in human beings. You know, this is really a critical aspect of it.

But then at the end of the day, all those things, the investments in infrastructure and human beings, have to lead to growth. And so, you know, what are the ways for us to spur the kind of inclusive growth, as we talk about it? 

When you talk about inclusive growth, and you talk about inequality and ending extreme poverty by 2030, I suppose if your threshold is $1.25, it's not going to cost the world all that much to do, but does this involve some sort of wealth distribution? And Ronald has asked this question on Facebook, "The main obstacle to ending poverty is the inequality of wealth distribution. What do you do to address that?"

In the poorest countries, we've had very specific projects--both Brazil and Mexico-- showed us that-- something that we call conditional cash transfers have had a huge impact. Not only have they lessened the poverty of the household, but they've increased attendance in schools.

So these programs have been shown to work. And-- and so simply moving cash, literally, to the some of the poorest households, and in the countries who can manage the bureaucracy of measuring-- putting conditions on it-- has had a huge impact.

And countries that are so poor that they can't even manage tracking whether they go to the public health institute, whether they go to school, just giving unconditional cash transfers, have also been very effective. So we would say that that kind of redistribution, the evidence is overwhelming, these are good programs.

These actually help societies to grow. You know, there's no simple answer here. So, you know the answer in France is different from the answer in Lesotho or Malawi. And you have to look at relatively speaking, what kind of programs you put in place, and which you don't.

Now, one of the things that we're very good at is assessing the quality of public expenditures. So you go into a country and for example, one like Egypt where 8% of GDP was devoted to subsidies, right? And this is not a good way of spending money. So in that case, we would say, "Stop spending money on subsidies, and invest it elsewhere." That's really the issue. It's the return on the investment. And every country in the world can get better at it, including the richest countries.

Watch the interview in its entirety here: