Apr 15, 2014

World Bank deliberately underestimates poverty

Dhravi slum in Mumbai -- National Geographic 

The business of poverty actually extends to sweeping the poor under the carpet. Over the years I find that while most governments across the world have failed to stem poverty (except in countries like China), the international financial institutions are bending backwards to demonstrate that economic liberalisation helps in reducing poverty, and often drastically. This is being achieved by tampering with statistics, and often providing social indicators that don't actually measure up. One such classic example is the dollar a day measure adopted by the World Bank to define the percentage of the population living in extreme poverty.

Global empirical evidence is now emerging challenging the World Bank's deliberate underestimation of poverty. Recent studies (ECLAC 2002, 2011) have conclusively shown that in Latin America for instance actual poverty rates are twice than what the World Bank had projected. More recently, on April 11, 2014, a study by the University of Bristol published in the Journal of Sociology concludes that the World Bank is painting a 'rosy' picture by keeping poverty too low due to its narrow definition. Dr Christopher Deeming of the Bristol University's School of Geographical Sciences is quoted as saying: "Our findings suggest that the current international poverty line of a dallar a day seriously underestimates global poverty."

He further states: "If the World Bank had in fact used a poverty line grounded in basic needs, rather in its present artificial one which only looks at one monetary measure, the total number of poor people in the world would increase substantially, perhaps by as much as 30 per cent." (The report can be read here: http://jos.sagepub.com/content/early/2014/04/09/1440783314523867.full.pdf+html).  This is exactly what I have been saying over the years. Take the case of poverty line in India. The stringent poverty measures that the Planning Commission has been adopting for decades actually only estimate the extent of starvation (India's poverty line is actually a starvation line. http://devinder-sharma.blogspot.in/2009/12/indias-poverty-line-is-actually.html).

Following the same prescription, India too has shown that its poverty has come down from 37 per cent to 22 per cent. This shameless demonstration of 'inclusive growth' comes at a time when the Arjun Sengupta committee had in 2007 worked out that 77 per cent of the population or roughly 834 million people were able to spend not more than Rs 20/day (roughly 30 US cents). Even in the United States, poverty is growing with estimates pointing to 1 in 7 living in poverty.  

Unless the World Bank makes an immediate correction, all projections of removing 'extreme poverty' by 2030 would be as farcical as its earlier target set in 1973 to remove 'absolute poverty' in low and middle income countries by the end of the century i.e. the year 2000.  But will the World Bank do this? Your guess is as good as mine. After all, it pays to keep poverty low. Only then you can justify the faulty economic policies.

Further reading: How to keep poverty low

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