Kaushik Basu explains:
Early in 2013, the World Bank Group adopted two overarching goals to guide its work and in April 2013 these were endorsed by the Group’s Board of Governors. The goals, stated briefly, consist of the following: (i) to end extreme, chronic poverty in the world by 2030 and (ii) to promote shared prosperity in every society. To give these goals the concrete shape essential to drive a large organization and gauge success and failure, they had to have measurable forms.
It was decided to define extreme poverty as living on less than $1.25 (ppp adjusted) per person per day. Since the aim is to end chronic poverty and since frictional poverty—stemming from unexpected economic fluctuations in poor countries, political conflict and war—cannot as yet be brought to an end, the first goal is formalized as a target of bringing the number of people living below this ‘poverty line’ to less than 3% of the world’s population.
The second goal, with its oblique reference to growth and distribution, is defined, formally, as the aim of fostering the per capita income growth of the poorest 40% of people in each country.
Since these targets were set not as goal posts to be touched and retreated from, it is implicit that the goals must be pursued in ways that are environmentally, socially and economically sustainable over time. In other words, achieving these goals through a blend of higher economic growth and improved social programs should not create a liability for future generations—through excessive fiscal burden, social strife or environmental damage. In brief, prosperity should be shared not just across space, but also across generations. This sustainability target is not as easy as it may seem at first sight. It has practical and political challenges galore, as documented, for instance, in Stern (2007). In addition, there are some intricate conceptual challenges.