The goals of the World Bank Group are to end extreme poverty and promote shared prosperity. Promoting shared prosperity means that we will work to increase the incomes and welfare of the bottom 40 percent of society wherever they are, be it the poorest of nations or thriving middle- or high-income countries. This indicator departs from the traditional focus on growth of the average income of the population — an approach that assumes that economic growth automatically trickles down to the poor.
While living standards of the bottom 40 percent in countries all over the world have improved in the last decade, the latest data show the picture is mixed at best. In 70 of the 91 countries where shared prosperity could be studied, the bottom 40 percent of the income distribution experienced positive income growth between 2010 and 2015. In addition, in 51 of those 91 countries, the incomes of the bottom 40 grew faster than the average. Progress in East and South Asia has been more impressive with the bottom 40 percent growing annually by 4.7 percent and 2.6 percent respectively from 2010 to 2015. Latin America and the Caribbean saw less growth in shared prosperity than in the recent past. High-income countries and several low-income and fragile, conflict, and violence-affected (FCV) economies saw the incomes of the bottom 40 percent stagnating or even declining.
The shared prosperity goal reflects the fact that as developing countries grow their economies and lift millions out of poverty, they may also experience growing inequality. We now know that nations with a widening gap between those who can and cannot access opportunities in life have difficulty sustaining economic growth and social stability over time. To date, no country has managed to transition beyond middle-income status while maintaining high levels of inequality. Inequality reduction today matters for opportunity and mobility tomorrow, and for the next generation.
Without a significant reduction in inequality, especially in countries with high rates of poverty and inequality, the world will not meet its goal to end extreme poverty by 2030. Inequality between all people in the world has declined since 1990, but within-country inequality is still higher today than 25 years ago, which means that an average person today is more likely to live in an economy with higher inequality compared to 25 years ago. Looking at a shorter time horizon, inequality within countries seems to have stopped rising since 2008.
In all economies with available data, the bottom 40 percent received less than 25 percent of the overall income or consumption. In far too many places, the increasing share of income going to the top 1 percent of earners is of great concern. Inequality is not an inevitable consequence of economic growth. In fact, long-term growth and social stability are two important reasons to focus on equity. A stronger focus on faster inequality reduction, especially in countries with high inequality and large numbers of poor people, will further enhance the power of economic growth to translate into poverty reduction and better opportunities for all.
Last Updated: Apr 10, 2020