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The World Bank--which has to be applauded
for having made the first such attempt started making international
comparisons of poverty only about two decades back. For obvious
reasons of convenience it developed two simple notions of poverty.
The US Treasury being the power behind the institution, and the
dollar being the reserve currency by design, the lower poverty
line was set at $1 a day per capita. Those below it were considered
to be "the poorest of the poor". The upper poverty
line was set at $2 a day. Those living on $1-2 a day were still
poor, but not as badly off. The updated numbers today, corrected
for inflation, are $1.08 and $2.15.
The vagaries
of purchasing power (dis)parities
However, there was a problem.
It was realized that $1 goes much farther in purchasing necessary
items of consumption in a poor country compared to a rich one.
(Moreover, exchange rates do not take into account non-traded
goods.) Using prevailing exchange rates, Rs.45 can buy more in
India than $1 can in America. So unless it was corrected for
the lower cost of living in poor countries--enabling access to
a bigger amount of real goods for the same amount of money--this
measure of poverty was likely to give an overestimate of the
number of poor people living in absolute poverty. To make purchasing
power across countries comparable, economists developed what
is known as the PPP (purchasing power parity) index. Taking into
account the lower cost of living in impoverished countries, a
conversion factor is now applied to market exchange rates to
calculate what is minimally necessary to survive there.
Using widely quoted World Bank
numbers on GDP, this conversion factor for a country like India
(2005) can be computed to be approximately 5.3. This means that
$1.08 a day in India should effectively imply a purchasing power
of about 20 cents a day to an American--or indeed anyone--unacquainted
with the nuances of PPP calculations. However, given how the
numbers are quoted everywhere, the dominant impression that is
conveyed is that the poor are living on less than $1 or $2 a
day when, in fact, it would be enormously more accurate, as far
as everyday English is concerned, to say that the poor are living
on less than $0.20 or $0.40 a day. The reason why this is not
done is obvious: it would give an even more alarming picture
of the scale and depth of poverty across this enormously wealthy
world. Most decent people are shocked enough by the understated
numbers in the form they are widely quoted. More reality would
numb and paralyze even the grittiest of activists. "Humanity",
T.S.Eliot wrote, "cannot bear much reality." He had
the privileged in mind.
The most recent World Bank
estimates for India are based on household surveys carried out
in 1999-2000. It was found that almost 80% of purported superpower
India's population was surviving on less than $2.15 a day (in
PPP terms). That is, about 800 million people were living on
$0.40 a day or less. Nearly 35% (350 million) were found to be
living on $0.20 a day or less. Even if the proportion of poor
people has fallen somewhat during the past 5-6 years, the absolute
numbers would not look too different today.
I have asked several non-experts
abroad who have traveled to India, and are thus somewhat familiar
with market exchange rates, how they interpret the $1 a day or
$2 a day figure. The answer is: literally. In other words, they
think that really poor Indians (35% of the population) live on
less than Rs.45 and less poor Indians (another 45% of the population)
live on between Rs.45-90 a day. In their imagination that is
bad enough for Western countries to send aid to poor countries.
However, if their belief was
in fact correct then (assuming Rs.20 a day to be the minimum
needed to supply the 2200 calories of food intake--and minimal
nutrition--that agricultural economists and the UN take to be
the survival norm appropriately averaged across age groups, locations
and kinds of labor) at least the additional 450-500 million who
would be living in the Rs.45-90 a day range would be well out
of poverty. In fact, a substantial proportion of the people living
under the lower poverty line would be out of poverty too. There
might perhaps remain some 50 to 100 million poor, malnourished
Indians whose long-term welfare could easily be looked after
by the prosperity all around.
Not only would Indian politicians,
government officials, businessmen and heir consultants be jumping
out of their seats in sheer disbelief that their superpower fantasies
may actually be realized, but if this state of affairs was representative
of the impoverished world as a whole, the World Bank would be
out of business, their achieved goal of a "world free of
poverty" having ironically led them there!
Sadly, the reality is closer
to "a world free of the poor". Thanks to the subtleties
of PPP calculations it may quite possibly be the case that the
number of people across the world who are not able to meet the
minimum standards for adequate nutrition is anywhere from 3 to
4 billion, rather than the officially estimated 2.7 billion who
are estimated to be living under $2 a day. No one really knows.
In other words, we could all be off by a whole continent!
Some experts in the field,
such as Sanjay Reddy of Columbia University or Robert Wade of
the London School of Economics advise deep skepticism about prevailing
official estimates, especially of alleged changes thereof on
account of globalization. Wade advocates that "the political
economy of statistics" is crucial and argues for greater
competition in the market for the generation of international
poverty data, so far a de facto monopoly of the World Bank. No
free market there! There is intense debate among economists and
policy-makers as to just how much poverty there is in the world
and whether it is going up or down with globalization. According
to one expert Angus Deaton, "it seems impossible to make
statements about changes in world poverty when the ground underneath
one's feet is changing in this way."
Where do the World Bank experts
go wrong? A few of them are even known to this writer, and are
reliable people of otherwise unimpeachable integrity. Being a
drop-out economist myself I appreciate the trials and tribulations
of the economists and statisticians at the World Bank who compute
the numbers on poverty. It is a harrowing mine-field of data
they must negotiate on a daily basis in order to arrive at the
sort of numbers the world and its policy-makers are interested
in. The challenge of measuring poverty and the (changes thereof)
accurately, in a world as diverse, complex and dynamic as ours,
is immense. But after decades of effort by trained statisticians
it should have become possible by now to arrive at somewhat reliable
numbers.
The problem is, at bottom,
be political, rather than one of expertise. The very fact that
when making comparisons between enriched and impoverished countries,
all monetary magnitudes have to be inflated significantly to
get a sense of real values in the poor world should have been
a matter of great ethical concern to economists, something to
make them wonder as to how things got to this point. In a world
of markets stretched across mountainously uneven playing fields,
pricing is determined not so much by the real costs (to human
labor and to nature) incurred but by historically determined
economic forces like the willingness and ability to pay. Typically,
the latter are shaped in profound ways by legacies of inequalities
in wealth and power which mainstream economists are trained to
avoid taking into account while preparing their advocacy of "free"
markets. In the real world, as against the general equilibrium
models microeconomists are schooled in, few things are as politically
shaped and formed as the structure of relative prices. In particular,
the price of labor--wages--is almost entirely a matter of bargaining,
as also, we are realizing, the price of utilizing nature.
Moreover, in our increasingly
packaged consumerist world even global poverty figures must ultimately
arrive in a wrapping that is not unpalatably unattractive to
the public. Trickle-down will ultimately work, we are repeatedly
assured by growth economists. But like the late John Kenneth
Galbraith is said to have remarked acerbically, faith in trickle-down
is a bit like feeding race horses superior oats so that starving
sparrows can forage in their dung. All indications, especially
in parts of the world like rural India, are that a decade and
a half of corporate globalization has left undernutrition and
malnutrition all but intact, and might quite possibly have worsened
the predicament for many millions.
Numbed (by
the numbers)
In a world which has been brought
up to regard numerical precision as a sign of scientific rigor,
it easily gets forgotten (especially by mainstream economists)
that poverty is not merely a matter of numbers. Numbers can only
tell us about what the experts call "income poverty".
Modern standards of living involve large amounts of intangibles
and social consumption, known to economists as "public goods":
drinking water, public sanitation, health and education are only
some of the services which people in rich countries take for
granted because they have been traditionally guaranteed by the
state (though in recent years private corporations have queued
up, often successfully--especially in impoverished countries--to
take control and possession of these services). When these are
taken into account it becomes clear that what the experts call
the "poverty line" is actually more accurately labeled
"starvation line", as some people will have it. Many
Indian economists have been advocating a serious upward revision
of the poverty line in order to get a better grasp of the economic
reality.
Economists have tried to remedy
the situation by evolving during the last few decades the Human
Development Index (HDI), calculated and issued by the UNDP every
year. It tries to take into account life expectancy (as an indicator
of health) and levels of adult literacy and enrolment (as indicators
of education), apart from considering per capita incomes. It
is certainly an improvement over raw numbers for poverty. And
yet, if India's HDI is 0.63 and Norway's is 0.96, busy eyes will
be tempted to conclude that Norwegians live only one and a half
times as well as Indians! The crushing quality of human poverty
in a cruel world simply cannot be captured by numbers like this.
Nor can the enormity of the environmental damage from deregulated
industrial growth be captured, as the World Bank tries to do,
in its Little Green Data Book, by just offering estimates
of greenhouse gas emissions, depletion of forest cover and a
few other measurable magnitudes. The ecosystemic effects of runaway
industrial growth--the damage done to climatic balances for instance--are
possible to observe now, but not as easily quantified. There
are exponential and synergetic changes taking place--for the
worse--which might take the best informed experts by surprise.
Perhaps, we would do well to
remember Einstein's counsel: "Everything that can be counted
does not necessarily count; everything that counts cannot necessarily
be counted." The poverty measurement industry loses much
sleep and sweat over details that do not matter much. The big
picture, perhaps unsurprisingly, is inaccurately reported. The
propaganda efforts of governments and corporations succeed in
the end in keeping some of the more terrible effects of prevailing
economic policies from clear public view, undermining democratic
transparency and potential accountability.
Rather than get drowned in
swirling oceans of data, we might look for the prominent ridges
on the gyrating currents of the monetized economy. However, it
is then important to locate them precisely and, crucially, label
and flag them accurately. Busy readers don't have time to interpret
the fine print. And public patience with economists wears thin.
We only count and measure what
is useful, important or interesting. By measuring we indicate
that we care about what is measured. The score on poverty, especially
if it is shameful, is worth keeping, if only to remind us of
the extent of the failure of globalization not merely to change
the lives of the poor but perhaps in turning them for the worse.
(If China has lifted tens of millions of families out of poverty,
the secret of their success lies in the years and decades preceding
globalization--in the early 1980s rural reforms were carried
out, among other things, granting access to land to the rural
poor. Besides, the strong foundations of the social infrastructure--education
and health--were laid down in the era of communism. Globalization
has only allowed the country to reap the harvest of pre-existing
investments better.)
If global poverty statistics
are not disseminated accurately, the facts on the ground will
only get worse--thanks to misinformed policy-making among other
things--and will one day command dreadful obedience from one
and all. The rulers of the day risk the implications of Colin
Powell's faux pas a few years back--of boasting that the number
of dead Iraqi civilians did not interest him very much. And the
potential consequences across the globe could be as catastrophic
as what Iraq is experiencing today.
Aseem Shrivastava is an independent writer. He can be
reached at aseem62@yahoo.com
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