In contrast to vartec's answer, and the comment to that answer which reads:
But anyway, $10,000 to every single Somalian is more than $100bn. Doesn't look good for claim that $175bn can eliminate poverty everywhere, if you'd need $100bn for one small country.`
The world's poorest have approximately $400/year/person:
Instead, a new international
poverty line of $1.25 a day is proposed for 2005 (equivalent to $1.00 a day in
1996 U.S. prices), which is the mean of the lines in the poorest 15 countries in
consumption per capita, based on the new compilation of national poverty
lines. This new poverty line is fairly robust to different estimation methods.
The definition of "extreme poverty" which is used in the OP is slightly smaller than that:
People in extreme poverty are the poorest people in the world. They have a total income that is calculated to be less than around $1 United States Dollars (USD) per day2. The actual meaning of this number and term is that these are people who can at best barely meet their minimal needs for survival. These people often have the ability to feed themselves minimally and have some chance of surviving from year to year. This is termed subsistence living. Those people that earn more than $1 a day are generally able to meet their basic needs and are considered to be in moderate poverty, not extreme poverty.
A mere $2000 (equivalent to 5 year's income) might arguably/plausibly be enough to give everyone food security, and therefore other security: less desperation/need for theft and war.
A problem though is that:
Using the new international poverty line proposed in this article, Chen and
Ravallion (2008b) ﬁnd that 1.4 billion people in 2005—25 percent of
the population of the developing world—lived in poverty. That share was
52 percent 25 years earlier (in 1981) and 42 percent in 1990.
It is good that the number has halved, from 52% to 25%: but naively dividing $175 billion between 1.4 billion people means only $100 per person -- not apparently enough just from figures, i.e. it would have to be spent cleverly.
Noting that the amount is $175 billion per year (not just once), it would (theoretically) increase the amount of money available to the world's poorest by 25%.
I find it plausible that a 25% increase/input might be significant or 'sufficient':
- It allows for some investment where there was none before (potentially, huge gains)
- It could hire a huge amount of local labour (a significant percentage of the national workforce)
In other news, India is hoping to "make food a legal right", which may cost them $23 billion/year:
The bill - which was passed by ordinance but needs to be ratified by parliament - proposes to make food a legal right. It seeks to cover two-thirds of the country's population and provide 5kg of subsidised food grain per person per month.
For one, some critics argue that the scheme could upset the budget with subsidies on food doubling to a whopping $23bn (£15.5bn). This will not help India, they say, to cut its fiscal deficit to 4.1% of GDP by 2012-2013 from an uncomfortable 5.5% expected this fiscal year.
The plans for spending the money are very different -- but the amounts of money, i.e. $23bn for India versus $175bn for the whole world, are the same (given how large the population of India is).
The total assets of the Bill & Melinda Gates Foundation is said to be $32bn total.
Compare that with $175bn/year over perhaps 20 years: it amounts to $3500bn, or 100 times of the amount of money in the Gates Foundation -- which already has a budget comparable to the UN WHO.
This seems to me more evidence is $175bn/year is a relatively large amount of money.
$3500bn divided by 1.4bn people is in fact the $2000/person or the "5 times an annual income in savings" which I guessed might seem enough for food security.
The OP says,
I understand this is just extreme poverty but I am skeptical that this expense would actually be enough to take care of the extremely poor.
To summarize/conclude: there are many confounding factors (changes in money and climate and population and trade), and many ways in which this or any plan could fail -- but the amount of money being talked about seems useful, and if the plan did fail it might not be for lack of money.