Poverty in Middle-Income Countries

This paper describes a shift in the global distribution of poverty from low-income countries (LICs) to middle-income countries (MICs) and how the role of external development actors (such as ‘traditional donors’ – meaning OECD DAC donors and philanthropic foundations and international NGOs) – might have to change to meet the challenges that this new distribution of poverty represents. The paper argues that, if we accept the proposition that most of the world’s extreme poor already live in largely non-poor countries, in order to meet their own objectives of reducing poverty, external actors will need to find new configurations of relationships (or they could decide poverty in MICs is not their problem and focus on LICs). If they do remain concerned with extreme poverty, external actors will need to continue work in the new MICs, because most of the world’s poor people live in such countries, but they will need a greater focus on issues of equity/inclusion/exclusion; working with advocacy groups and civil society on issues such as public spending priorities but with great sensitivity to the politics of doing so and recognising that development is very much ‘beyond traditional aid’ (meaning beyond international resource transfers). Global Public Goods (GPGs), innovative finance mechanisms and other ‘beyond traditional aid’ modalities will be areas where MIC governments, traditional donors and philanthropic foundations can work together, and the policy coherence, in areas such as trade, of traditional donors will be more important to MIC governments than aid flows. All of this will place far more importance on external actors understanding the political dimensions of development.