Laurence Chandy, Fellow, Global Economy and Development, Development Assistance and Governance Initiative

Geoffrey Gertz , Research Analyst, Global Economy and Development

We are living through a period of rapid global poverty reduction. According to recent estimates, high, sustained growth across most of the developing world has helped nearly half a billion people escape $1.25-a-day poverty between 2005 and 2010. Never before have so many people been lifted out of poverty over such a brief period.

While the overall prevalence of poverty is in retreat, the global poverty landscape is changing. This transformation is captured by two distinct trends: poor people are increasingly found in middle-income countries and in fragile states. Both trends – and their intersection – present important new questions for how the international community tackles global poverty reduction.

The increased prevalence of poverty in middle-income countries is in many ways a trend of success. Over the past decade, the number of countries classified as low-income has fallen by two fifths, from 66 to 40, while the number of middle-income countries has ballooned to over 100. This means 26 poor countries have grown sufficiently rich to surpass the middle-income threshold. Among those countries that have recently made the leap into middle-income status are a group of countries - India, Nigeria and Pakistan - containing large populations of poor people. It is their “graduation” which has brought about the apparent shift in poverty from the low-income to middle-income country category.

Yet shouldn’t developing countries have escaped poverty by the time they reach middle-income status? A quick review of past experiences suggests otherwise. Take three very different countries: Guyana, China and the Republic of Congo. Each of these countries graduated out of low-income status between 1995 and 2005. However, they did so with very different rates of poverty: Guyana, 9 percent; China, 36 percent; and Republic of Congo, 54 percent.