http://www.commondreams.org/views03/0506-10.htm
Published on Tuesday,
May 6 2003 in the Guardian/UK
Poor, but Pedicured
It
appears that those at the bottom are getting richer
- but sadly the maths just doesn't add up
by George Monbiot
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
neo-liberal experiment: if, as the world's resources are privatized
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. 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 criticize 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.
Not only does it appear wildly to underestimate the level of
global poverty, but the downward trend it purports to show
appears to be an artifact of the way in which it has 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.
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 3 rupees' worth of services
(such as cleaning, driving or hairdressing), then a purchasing
power parity calculation which averages out these figures
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.
The bank would
derive a far more accurate view of the
purchasing power of the poor if it measured only the
cost of what they buy, rather than what richer people
in the same economies buy. Complete figures do not yet
exist, but Reddy's 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
artifacts 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 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 privatization, deregulation
and reduction in social spending introduced by the neo-liberal
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.
© Guardian Newspapers
Limited 2003
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