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Rich
in Imagination
Figures
Purporting to Show World’s Poor
Emerging
from Poverty Don’t Add Up
by
George Monbiot
May
7, 2003
The
global economy is working. The rich may be acquiring an ever greater share of
the world's wealth, the ecosystem may be collapsing, but, or so we believe, the
poor are emerging from poverty. This is portrayed as the ultimate test of the
great neoliberal experiment: if, as the world's resources are privatised and
its corporations deregulated, the war against poverty is being won, then the
accompanying inequality and destruction can be accounted as little more than
collateral damage.
There
is only one set of figures which provides a global view of whether the incomes
of the poor are rising or falling, and it is cited everywhere. The trend, it
suggests, is slow but significant: between 1990 and 1999, the percentage of the
world's people living in absolute poverty fell from 29 to 23. Ugly as some of
its characteristics may be, the existing economic model is helping the poor.
The
figures are compiled by the World Bank. [1] It claims to
know, to within the nearest 10,000, how many of the world's people are living
below the international poverty line. The response of those who criticise the
way the global economy works is to accept the Bank's calculations, but to argue
that there are more equitable and less destructive means of achieving the same
results. But the figures are without foundation.
A
new paper by the economist Sanjay Reddy and the philosopher Thomas Pogge
demonstrates that the World Bank's methodology is so flawed that its
calculations cannot possibly be correct. [2] Not only do
they appear wildly to underestimate the level of global poverty, but the
downward trend they purport to show seems to be an artifact of the way in which
they have been compiled. The World Bank's figures, against which the success or
failure of the entire global economy is measured, are useless.
Most
of the world's people do not use US dollars to purchase what they need, and a
dollar's worth of currency in one part of the world can buy more than a
dollar's worth in another place. So to try to discover how many people live on
less than the equivalent of $1.08 per day (deemed to be the absolute poverty
line), the World Bank employs a method called "purchasing power
parity". This measures the amount of goods or services which the
equivalent of a dollar can buy in different countries.
The
Bank's calculations suffer, the paper suggests, from several fatal
deficiencies. The most obvious of these is that its estimate of the purchasing
power of the poor is based on the measure of their ability to buy any of the
goods and services an economy has to offer: not only food, water and shelter,
but also airline tickets, pedicures and personal fitness training. The problem
is that while basic goods are often more expensive in poor nations than they
are in rich ones, services tend to be much cheaper, as the wages of the people
providing them are lower.
If,
for example, one dollar in the US can purchase either the same amount of staple
foods that 30 rupees can buy in India, or the equivalent of three rupees' worth
of services (such as cleaning, driving or hairdressing), then a purchasing
power parity calculation which averages these figures out will suggest that someone
in possession of 10 rupees in India has the same purchasing power as someone in
possession of one dollar in America. But the extremely poor, of course, do not
purchase the services of cleaners, drivers or hairdressers. A figure averaged
across all the goods and services an economy can provide, rather than just
those bought by the poor, makes the people at the bottom of the heap in this
example appear to be three times richer than they are. [3]
The
Bank would derive a far more accurate view of the purchasing power of the poor
if it measured only the costs of what they buy, rather than those of what
richer people in the same economies buy. Complete figures do not yet exist, but
Reddy and Pogge's initial calculations, based on the cost of bread and cereals,
suggest that the Bank's analysis might have underestimated the number of the
world's people living in absolute poverty by some 30-40%.
As
the service sector expands in poor nations, the Bank's figures will create the
impression that the purchasing power of the poor is increasing, whether or not
their real economic circumstances have changed. The same false trend is
established by a shift to the service sector in rich nations, as one dollar
there will then buy a smaller proportion of the total of available goods and
services. The RELATIVE purchasing power per dollar of the people of poor
nations is increased by this measure, even though their absolute cost of living
remains unchanged. When house prices boom in New York, the shanty-dwellers of
Lusaka appear to get richer.
These
statistical artefacts create a downward trend in the poverty figures where no
real trend exists. The Bank has exacerbated it by recalibrating the
international poverty line to reflect the pattern of total global consumption.
As the world economy migrates towards the service sector, the poorest people in
the poorest nations appear to require less money than they might otherwise have
needed to maintain their standard of living.
Perhaps
more gravely still, the figures which appear to be so precise that we can tell
to within the nearest 10,000 how many of the world's 6 billion people are
suffering from extreme poverty are, in reality, based on a mixture of guesswork
and wild extrapolation. The first of the Bank's two principal surveys measured
price levels in only 63 countries. Embarrassingly, China was not among them,
and neither that nation nor India figured in the second survey (from which the
trend has been established). A set of global poverty figures, presented with
six-digit precision, which contains no useful comparative data from the two
largest nations on earth could be described as imaginative.
The
Bank's statistics, moreover, do not account for changes in inequality. If a
nation's total consumption is rising only because the rich have become richer,
the Bank's figures will not show this: they will suggest, instead, that
everyone has prospered. Yet we know that in many countries, especially those in
which the privatisation, deregulation and reduction in social spending
introduced by the neoliberal model have been most extensive, the rich are
becoming richer at the expense of the poor.
That
the key global economic statistic has for so long been derived by means which
are patently useless is a telling indication of how little the men who run the
world care about the impact of their policies. If they cannot be bothered even
to produce a meaningful measure of global poverty, we have no reason to believe
their claim that they wish to address it. Development on earth proceeds at
present without any reliable means of determining whether or not it is making
the poorest people poorer.
George Monbiot is Honorary
Professor at the Department of Politics in Keele and Visiting Professor at the
Department of Environmental Science at the University of East London. He writes
a weekly column for the Guardian newspaper of London. The Age of Consent, George Monbiot's proposals
for global democratic governance, will be published in June. His articles and
contact info can be found at his website: www.monbiot.com
References:
1.
World Bank, 2002. Global Economic Prospects and the Developing Countries:
Making Trade Work for the Poor.
2.
Sanjay G. Reddy and Thomas W. Pogge, March 2003. How Not To Count The Poor. http://www.columbia.edu/~sr793/
3.
This example is cited in the summary report by Pogge and Reddy: Unknown: The
Extent, Distribution, and Trend of Global Income Poverty. http://www.columbia.edu/~sr793/