An economic catastrophe occurred on August 26th 2008 that was quickly forgotten across the media: an extra 430 million people were classified overnight as absolutely poor. The cause was no tsunami or natural disaster, but simply the revisions of World Bank statisticians who adjusted the international poverty line from $1.08 to $1.25 a day.
Contradicting the Bank’s celebrated decline in extreme poverty figures last year which fell to less than a billion for the first time, the new measurements revealed a far less optimistic outlook — a total of 1.4 billion poor people in 2005, up from 986 million people in 2004. A margin of error, in other words, of 42 percent, defining a quarter of the developing world as living without sufficient means for human survival.
Despite this, the World Bank keenly stressed that poverty eradication continues to improve. It does not mean that the plight of the poor has worsened, we are told, only that the plight is now better understood. The lack of almost any critical news coverage implied that the rest of the world was inclined to agree. Does it really matter, after all, where the line is drawn in the sand, or how the number crunchers add up their figures? Is the question of poverty measurement not merely academic?
In fact, the revised figures are of crucial importance to not only the cause for global justice, but also our understanding of the world over the past quarter century of globalization. The World Bank, as the near exclusive provider of global poverty figures, uses the statistics to defend its policies of deregulation, privatization, market liberalization, and increased economic growth through free trade as the overruling means to combating poverty. Despite a long history of controversy, the figures still hold an almost uncontested authority with governments, NGOs and the popular media who frequently cite the estimates as evidence that neoliberal policies and globalization have reduced global poverty. This makes it doubly surprising that the Bank’s spin on the new figures have been so readily accepted and hardly questioned.
The figures for 2005 at the $1.25 baseline, no matter how the statistics are tailored, paint a dismal picture of mass destitution; 1.4 billion people living in extreme poverty is equivalent to roughly four times the entire population of the U.S., an inconceivable number to envisage. In Africa, the number of poor people has near doubled since figures began in 1981, with still half the population of sub-Saharan Africa living below the poverty line. In India, 200 million people in extreme poverty effectively fell through the cracks of the World Bank’s headcount whilst the statisticians learned how to ‘improve’ their tallies. Revisions to China’s figures were similarly dramatic, up to 207 million from a previous 130 million people in extreme poverty.
When considering that China did not follow neoliberal policies, it is doubtful that the Bank can take any credit for China’s remarkable success in reducing poverty during the 1990s. As the Bank states, China’s success still accounts for nearly all the world’s reduction in extreme poverty. If China is therefore removed from the equation, the most damning conclusion from the new figures becomes clear: the number of poor in the developing world has remained almost the same, at about 1.2 billion, over the period of globalization between 1981 and 2005.
This fact alone places the Bank’s hailing of a dramatic percentage reduction in poverty over 25 years into a different light. At the very least, it calls into question their confidence in declaring that “there has been strong — if regionally uneven — progress toward reducing overall poverty.” At most, it underlines the fact that globalization has been largely ineffective at either reducing the burgeoning ranks of the world’s poor, or including this vast swathe of the global population into the mainstream economy.
The Colombia University economist Sanjay Reddy, one of the Bank’s foremost critics on this topic, has stated his view that the individuals directly involved have approached the exercise in a sincere fashion, and are persons of the utmost integrity. That said, the Bank has already undertaken two previous revisions of the base year for calculating purchasing power rates, wreaking havoc to its poverty estimates each time. When employing the aggregate headcount, previous development indicators revealed that global poverty increased between 1990 and 2001 in the number of $2 a day poor, from 2.65 billion to 2.74 billion.
The Bank’s assumption that the Millennium Development Goals on poverty and hunger will still be reached are now starkly contradicted. According to a separate study by the Bank, an extra 100 million people could fall into extreme poverty due to soaring food and energy prices. This means that an extra half a billion people in total are now thought to be struggling for survival compared to previous estimates. On current trends, at least a billion people will still live below the $1.25 a day line in 2015, including a third of the world’s poor who will live in Africa. Only China is currently on target to achieve the goals, reports the Bank, while most other countries are not. As shown by other independent studies, this is an understatement: without urgent action the world could see hunger doubling instead of halving by 2015.
This cursory analysis of the Bank’s statistics is meant only to emphasize an obvious and, since the release of the widely uncriticized new data, a remarkably neglected point: that the World Bank’s poverty figures are no longer indicative of any real improvement in the plight of the poor — even by their own measures. As the latest figures graphically illustrate, almost half the world — over three billion people — live on less than $2.50 a day. Altogether, the Bank reports no change in the number of people living below $2 a day, at around 2.5 billion between 1981 and 2005. And it is unlikely, they warned, that the number of extremely poor will drop below one billion again before 2015. The distinction between the haves and have-nots could not get any clearer.
The World Bank’s disregard of its basic deficiencies in analyzing poverty is ultimately not surprising. After all, the Bank makes no disguise of its uncompromising belief in economic growth through unfettered markets as the strongest antidote to poverty, ignoring all signs since the 1980s that wealth has failed to trickle down to the poorest of the poor. More surprising, however, is the lack of external scrutiny of the Bretton Woods institutions in the formulation and usage of global poverty figures, and the lack of criticism on what those figures reveal.