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Should we stop talking about middle-income countries?

By Jonathan Glennie, Research Associate, Overseas Development Institut
Source:  The Networker Magazine by Bond

Moving from low- income to middle- income status is not a panacea to end aid, argues Jonathan Glennie, and indeed the very measure of ‘middle-income’ is flawed.

It has become commonplace to assume that as countries cross the bar from low-income to middle- income status, a process should be set in place to bring aid to an end. But this approach demonstrates a misunderstanding of poverty, development and the role of aid for two main reasons.

First, there is the idea that middle- income countries are “no longer poor”, a notion that has been put to me regularly, including in two recent committee meetings in the Houses of Parliament to which I was giving evidence and in media interviews. But this is wrong on so many levels it is hard to know where to start.

Ways of measuring poverty are outdated

Average incomes, the issue around which low-income/middle-income country data is built, is only one of a number of measures of poverty. We all know that, but it is depressing how quickly we resort to it to guide our decisions. Contributors of international public funds should look at multidimensional poverty indicators before they declare countries to be devoid of poverty.

And even if income poverty were the only issue we were measuring, these low-income/middle-income/ high-income lines are entirely arbitrary. We hardly even know how they were calculated decades ago, and few people would defend them analytically. Of course some development institutions will have to set up rules for allocating development finance, but most have the capacity to make decisions based on a thorough analysis of need and effectiveness, rather than a vague proxy. Almost all developing countries are now middle- income countries – a sign of a changing world, yes, but also that the term is close to useless as a means of distinguishing country types.

Perhaps most importantly of all, the level set for countries to be described as middle-income – which has become synonymous with ‘no longer poor’ in many circles – is unjustifiably stingy. Who decided that the international obligations of the world’s wealthiest countries should end when average per capita incomes rise to just under US$3 per day? What a travesty of any notion of solidarity and justice. South Sudan, one of the world’s poorest countries, entered the annals of history as a middle-income country, a status the president’s economic adviser described as a joke.

Which links to the second reason the low-income/middle-income approach needs to be abandoned: the idea that middle-income countries no longer need aid implies that they now have the resources to respond to their problems without international support.

Aid can be a catalyst for change

On the one hand many middle- income countries never really needed aid as such, but it may have been a useful support for poverty reduction and development. India, China, South Africa, North Africa, most of Latin America – these countries and regions have never received very much aid compared with the size of their economies, and their current resurgence has little to do with aid, as some analysts and campaigners sometimes imply when they say that aid has done its job. But aid at its best can accompany the development process and cajole and catalyse change at a number of levels.

On the other hand, apart from the continued existence of poverty in middle-income countries, the range of issues we need to deal with as an international community is increasing fast, with climate change and other environmental challenges the most prominent. The role of international public finance (we will gradually drop the word aid, with its unhelpful implications of largesse) may well increase rather than decrease. Infrastructure requirements, part of the structural transformation required for countries seeking to end poverty, are estimated at close to US$1 trillion per year, while the provision of international public goods like environmental conservation could and should be costly. Development, it turns out, only really begins when extreme poverty is eradicated. Crucially, the role of international civil society remains vital in middle-income countries just as it does in low-income countries and high-income countries.

Aid needs to adapt to an evolving context

Yes, of course, all aid relationships should evolve as circumstances change – thus the interminable strategy discussions taking place in NGOs and government agencies. And, yes, we should be open to the new possibilities emerging as countries appear to be generating more domestic resources – the main lesson of the general shift to middle-income status over the last 10 years – particularly with regard to moving out of a harmful dependence on aid.

But the rhetoric that has led agencies such as DFID to exit from some key countries on account of being middle-income is misguided. The role of international public finance, to all countries, has never been more important, and in this evolving context the low-income/middle-income distinction has acquired a status totally beyond its relevance to global poverty discussions.

subjects Multilateral Aid | Poverty and Hunger | Development | NGOs

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