$37,000,000,000,000! That's $37 trillion — the amount of spending power increase the global economy will need cumulatively by 2030 if people are to be empowered. So says a McKinsey Global Institute report titled "From Poverty To Empowerment: Raising The Bar For Sustainable And Inclusive Growth", as it argues that the priorities in the new world we live in have changed from what was traditionally considered crucial.

The report argues that the traditional definition of basic essentials has changed from just "food, clothing and shelter" to "nutrition, housing, healthcare & education"; so poverty alleviation, while still crucial, is not as critical as economic empowerment, which must be gauged in conjunction with an environmentally conscious approach.

"Beyond ending poverty, the next challenge is progressing toward economic empowerment, which enables people to realise more of their potential," it says, adding "the $2.15 per day extreme poverty line needs a complementary benchmark to gauge progress beyond that point. We frame this higher bar as the empowerment line. It is the level at which people can afford to meet essential needs such as nutrition, housing, healthcare, and education; they also gain a modest sense of security and have reduced risk of slipping back into poverty. The empowerment line starts at $12 per day in purchasing power parity (PPP) terms globally, with regional variations to account for different norms and costs."

The report argues that as of 2020, while 730 million people across the world fall below the extreme poverty line, over 4.7 billion people live below the empowerment line.

"The largest relative increases

Just for some context, the United Nations Development Programme's (UNDP) website, which highlights the most recent data from its report on poverty released last month, states that as many as 25 countries in the world have halved multidimensional poverty within the last 15 years.

However, of the 6.1 billion people covered in this report, 1.1 billion people remain poor. Of these, 534 million poor people live in Sub-Saharan Africa. In all, 485 million poor people are in severe poverty. Of the 1.1 billion people, 566 million are children.

Economic empowerment alone, however, will not answer the whole. The report goes on to say that growth, inclusion, and sustainability will need equal and concerted focus to accelerate growth aimed at furthering "the two defining aspirations of our time: raising minimum living standards and limiting global warming."

This means not just meeting net-zero commitments already made by various countries, but incrementally scaling up these commitments in the coming years. However, even meeting existing commitments will need a lot more investment than is currently visible, or earmarked, the report argues.

"The carbon budget is trending toward being exhausted by 2030. Achieving net-zero emissions, as many countries have pledged to do, would require a major increase in investment and in the capacity of energy and resource systems," it says and pegs this need at an additional $47 trillion.

So adding these two requirements — economic empowerment and a net-zero trajectory — would mean a global additional investment of $84 trillion through 2030. That's a mammoth 8 percent of global GDP annually, over the decade.

The number may be large, but the road to that may not be completely rocky. The McKinsey report says that businesses and the market economy can generate half the combined resources through growth and innovation, even under current policies.

"Accelerated growth and better-paying jobs could close almost two-thirds of the global empowerment gap. On the climate transition, even with current policies, we see potential for almost $10 trillion of low-emissions alternatives to become viable for private actors, especially in power and mobility," the report says.

Bridging the rest of the gap, however, will not be so easy, warns the report. New policies and incentives aimed at bridging this gap will be crucial.

"We estimate the unfilled economic gap at 4 percent of GDP per year globally, or $40 trillion, cumulatively through the decade," McKinsey says. It believes developing countries will account for nearly two-thirds of this.

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First Published:Aug 26, 2023 12:14 PM IST