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The Low Cost of Ending Poverty

For the first time ever, eradicating poverty worldwide is within humanity’s financial reach. So why do our political leaders repeatedly adopt expensive policies that achieve much less – and why do these poor choices go unchallenged?

CHICAGO – Poverty is humanity’s cruelest affliction. If you are extremely poor, you can’t afford to avoid even the easily curable diseases that cause every sixth human death. Your lungs are likely to be filled with indoor air pollution, because, like 2.7 billion others, you cook and keep warm with fuels like dung and wood – with the same effect as smoking two packs of cigarettes every day. An inadequate diet makes your children grow up physically stunted and impairs their cognitive development, costing 4-8 IQ points on average. Such deprivation leads to profound stress and despair, making it difficult to act in ways that improve your life.

Of course, the world has made great progress in the fight against poverty. In 1820, nine out of ten people lived in extreme poverty. The World Bank estimates that for the first time in human history, the global poverty rate dropped to single digits in 2015. Today 9.1% of the world’s population, or almost 700 million people, live on less than $1.90 per day (or what used to be one dollar in 1985).

This $1.90 threshold for extreme poverty is a really tight limit: it is not what a wealthy tourist could buy in a low-cost, developing country. It is what an American could buy in the United States for $1.90. The level is adjusted to the equivalent purchasing power in the local currency.

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