Absolute Poverty and Global Justice

Empirical Data - Moral Theories - Initiatives

Michael Schramm, Thomas Pogge, Elke Mack

• Publisher: Routledge
• Year: 2016
• ISBN:
  9781317185970
• Edition: 1
• Topic: Law
• Subtopic: Jurisprudence
• Index: Law

Absolute poverty causes about one third of all human deaths, some 18 million annually, and blights billions of lives with hunger and disease. Developing universalizable norms aimed at tackling absolute poverty and the complex and multilayered problems associated with it, this book considers the levels, trends and determinants of absolute poverty and global inequality. Examining whether much faster progress against absolute poverty is possible through reductions in national and global inequalities that produce economic growth for poor countries and households, this book suggests that diverse moral views imply that international agencies as well as the citizens, corporations and governments of affluent countries bear a moral responsibility to reduce absolute poverty. In considering strategies of eradication through specific policies and structural reforms it is argued that because of its moral importance and requirement for only modest efforts and resources, the goal of overcoming absolute poverty must be given much higher political priority by international agencies and governments of affluent countries. Suggesting that these agencies should be encouraged to facilitate and promote new initiatives, this book concludes with a discussion of how such initiatives might be realized.

PART 1
Poverty Data Under Scrutiny

Chapter 1
Levels and Trends in Absolute Poverty in the World: What We Know and What We Don’t

Stephan Klasen1

Introduction

At the Millennium Summit in 2000, the world community agreed on eight Millennium Development Goals (MDGs) to ensure poverty reduction and sustainable development for all. Poverty was seen in a wider context, encompassing income poverty, hunger, lack of educational opportunities, gender bias, morbidity, and premature mortality which are taken up in the first six of the eight MDGs. The first Millennium Development Goal, agreed to by the world community at the Millennium Summit in 2000, calls for the eradication of extreme poverty and hunger. The targets agreed are somewhat more modest and refer to halving, between 1990 and 2015, the share of the population living on less than $1 a day, and halving the proportion of the population who suffer from hunger. For these two targets, three indicators were chosen. For the first target, the World Bank has been charged to regularly produce the relevant indicator, i.e. the share of the population that is living on less than a $1 a day. For the second target, there are two indicators. The first is to be monitored by UNICEF and WHO and refers to halving the share of children under five years of age who are underweight, and the second is to be monitored by the FAO and refers to halving the share of the population who are below minimum recommended levels of dietary intake.

While all of these targets appear quite clear and the indicators chosen to measure them appropriate, there is in fact a great deal of uncertainty about both levels and trends in absolute poverty and hunger in the developing world. In particular, the two indicators for hunger show a very different distribution of underweight children and populations with calorie deficiencies. Neither indicator, in turn, correlate particularly well with mortality indicators and there appear to be significant regional anomalies, although one would presume a close correlation at the regional level. For example, caloric deficiency appears to be worst in the Caribbean, the share of underweight children appears worst in South Asia, and infant and child mortality would seem to be worst in Sub-Saharan Africa. Standard models to explain these phenomena cannot account for these anomalies. As discussed in detail in Klasen (2008), these problems therefore appear to be due to significant conceptual and empirical problems with both hunger indicators, their underlying data, and the assumptions made to arrive at these aggregate measures. As a result, there remains significant uncertainty about where ‘hunger’ is indeed worst and how the share of hungry people is changing over time. As these issues are dealt with exhaustively in Klasen (2008), this chapter will not dwell further on them here. Instead the focus here will be on the first target and indicator: The share of the population living below $1 a day. The focus on this issue is particularly pertinent, as the World Bank has recently published extensive revisions to this indicator (Chen and Ravallion 2008). In fact, the revision of these numbers has been based on the derivation of a new international poverty line against which to measure levels and trends in poverty, as well as a recalculation of poverty levels and trends for all countries going back to 1981. Thus both the baseline for the first MDG target in 1990 has changed as well as the levels in each subsequent year, thereby also affecting the rate of progress towards this MDG. This chapter will critically review the way the World Bank measures this extreme poverty indicator, present key facts and figures on trends in extreme poverty using data from before and after the revision, and then focus on a critical appraisal of the recent revisions. While there is little reason to believe that these revisions seriously distort trends in extreme poverty in the developing world, it will be argued that the uncertainty about levels in absolute extreme poverty is very high and that the recent revisions have done little to reduce this uncertainty and might have indeed increased it. In fact, given the difficulties to measure poverty using an international poverty line, it will be suggested instead that it might be preferable to abandon the efforts to construct such an international poverty line and focus instead on creating consistent and comparable national poverty lines using a common set of methods that could in turn be used to estimate levels and trends in absolute extreme poverty in the world. The chapter is organised as follows: The next section will discuss the $1 a day poverty indicator, its conceptual underpinning and its empirical derivation. The following section will then critically review the revisions that were introduced in 2005 and present key facts and figures that have been affected by this revision. In the following section the implications of these criticisms and the advantages and disadvantages of an alternative procedure will be discussed with conclusions in the final section.

The World Bank’s International Poverty Measure

Measuring poverty is clearly a challenging task. Among the questions to be asked are the domain in which poverty is to be measured, whether a poverty line separating the poor from the non-poor is invariant across space and time, whether one should consider just the incidence or also the depth of poverty, and whether poverty should be measured at the individual or household level.2 These are all complex questions that merit detailed discussions as well as high-quality comparable household survey data. For a poverty indicator that attempts to measure levels and trends in poverty in a comparable manner across all developing countries, data availability and comparability issues will necessarily involve simplifications and short-cuts. In fact, until 1990 it was not possible to generate such poverty figures as the coverage of household surveys in developing countries was simply too sparse. In the 1990 World Development Report (World Bank 1990) the World Bank made a first attempt to measure poverty in a comparable way using an international poverty line and measuring poverty for the year 1985. This was based on an international poverty line of the purchasing power equivalent of $1 per capita in 1985 prices. There have been two major updates of this poverty line, once in the World Development Report 2000/01, where the poverty line was shifted to $1.08 in 1993 prices and recently again in Ravallion, Chen, and Sangraula (2008), when it was shifted again to $1.25 in 2005 prices. The one proposed in 2000 became the basis for the first target of MDG1 at the Millennium Summit. The methods for establishing the poverty lines have largely remained the same in these three versions which will be described below.

Before turning to this point, it is useful to point out a number of implicit choices and simplifications that are inherent in this approach to the measurement of poverty. First, the focus is entirely on the income dimension of poverty. Whether such income poverty is correlated with other forms of deprivation or a multidimensional view of poverty consistent with, for example, Sen’s capability approach is not considered here (e.g. Sen 1985; Klasen 2000). While this is clearly a narrow view, it is defensible in the context of the MDGs where other forms of deprivation are captured in the other MDGs as well as the hunger target of MDG1.

Second, the international poverty line is invariant in space and time3 and thus constitutes an absolute poverty line that tries to capture the share of people who are in extreme poverty where basic physical survival and health is at risk. Relative poverty concepts that are based on claims that poverty depends on socially acceptable standards of living in a given society are also not considered here. Clearly, this is a debatable choice, but may be also defensible if the focus is on developing countries where absolute, life-threatening poverty is still a very serious problem. It would clearly be inappropriate to use such an approach to measure poverty in industrialised countries; indeed one may wonder whether it is appropriate for poverty measurement in upper middle-income countries such as Brazil, Thailand, Mexico, or South Africa where absolute life-threatening poverty is only affecting a relatively small share of the population while many more suffer from relative deprivation.4

Third, poverty depth is not considered in the target for MDG1, but all poor are treated the same and simply added up, regardless of whether their incomes are just below or very far below the poverty line. Considering the depth of poverty would indeed be preferable, but somewhat harder to communicate and also makes greater demands on the precision of the data.5

Fourth, the figures are per capita figures and do not account for differences in household size and composition which is likely to affect the needs of households as well as their ability to economise on resources. This will have the consequence that poverty in regions with large households and many children (such as many countries in Sub-Saharan Africa) is overstated relative to regions where household sizes and the number of children are small (such as China or South-East Asia).6

Lastly, inequality in intra-household resource allocation is not considered in these measures. If the per capita income of a household falls below the poverty line, everyone in the household is considered poor, even though some members might have better resource access than others. As a result, this approach is ill suited to examine the differential in poverty by gender or age group and it might indeed affect accurate poverty measurement (see Haddad and Kanbur 1990; Klasen 2007).7

While these are all shortcomings of this approach to measuring poverty, some of which that could be addressed with available data, some of these choices appear defensible in the context of the MDGs where there was a need for a straightforward comparable poverty indicator that would particularly capture levels and trends in extreme income poverty.

Bearing these methodological choices in mind, the big remaining questions are how this international poverty line is actually derived and how it is then used to measure poverty in each developing country so that poverty levels and trends can then be aggregated and compared. This is described in detail in Ravallion, Chen, and Sangraula (2008) and will be summarised here. Let us first turn to the construction of the international poverty line. In all three versions presented by the World Bank (1990, 2000, and 2008), the starting point was always the national poverty lines of a large sample of developing countries, expressed in their national currencies. In order to render them comparable, the results of the so-called International Price Comparison Project (ICP) were used to turn these national poverty lines into international prices (expressed in international $). The ICP rounds, which take place every 3–10 years, compare prices of a large basket of goods and services in many different countries to generate exchange rates that appropriately reflect purchasing power differences between countries (see below and the contribution by Ward in this volume). These so-called purchasing power parity (PPP) exchange rates are used for the translation of national poverty lines into international $ in the hope that this approach will adequately reflect purchasing power differences and thus make these poverty lines comparable. For the 1990 exercise the 1985 ICP was used; for the 2000 revision, the 1993 ICP was used, and the latest poverty estimates are based on the 2005 ICP.

In a second step the poverty lines are plotted against per capita incomes and it is regularly found that among low income countries, the poverty lines, turned into international $, are very similar. The average of these poverty lines then is used as the international poverty line, which turned out to be $1.02 in 1985 prices in the 1990 World Development Report, $1.08 in 1993 prices in the 2000/01 World Development Report, and $1.25 in 2005 prices in the recent revision.

To measure poverty using these poverty lines, the following three steps are then undertaken. First, the international poverty line is turned into a poverty line in national currencies at the benchmark year using the PPP exchange rates from the particular ICP round (1985, 1993, and 2005, respectively). Second, this poverty line is adjusted using national inflation rates to generate poverty lines in national currencies backwards and forwards in time for all years since 1990 (or even since 1981). Third, the share of the population living below this poverty line is then determined using national household income or expenditure surveys.

It is important to emphasise that in each three rounds of calculation (1990, 2000, and 2008), poverty rates were recalculated not only for the most recent years, but for all years since the beginning of measurement of poverty at the global level (where the first data point is 1981). Thus we have three sets of poverty estimates for 1985, one based on the 1985 ICP round published in 1990, one for the 1993 ICP round published in 2000, and another one based on the 2005 ICP round published in 2008. The resulting numbers for the same year are, in some cases dramatically different and it is not obvious to say which estimate is the most accurate one, an issue that will be discussed in more detail below.

Poverty Levels and Trends Using the 2005 ICP Round

In late 2007, the World Bank made available the new PPP exchange rates from the 2005 ICP survey (World Bank 2007). Not only do they represent a more up-to-date set of price comparisons, but this round of the ICP was more comprehensive than all previous rounds, and particularly included China for the first time. In August of 2008, it then published new poverty estimates for developing countries going back to 1981 based on these figures. Table 1.1 compares the share of the population below $1.08 a day in 1993 prices by region and from 1990 to 2005 with the new figures which are based on the $1.25 poverty line in 2005 prices. As can be readily seen from the table, there are dramatic differences in levels of poverty in many regions of the developing world using these two methodologies. Changes are particularly extreme in East Asia and the Pacific, but also quite large in Sub-Saharan Africa, the Middle East, and South Asia. In China, using the 2005 ICP suggests that 60 per cent of the population lived in extreme poverty based on the ICP published in 1990, compared to ‘only’ 33 per cent using the previous ICP. This largely drives the results for all of East Asia. In India and in Sub-Saharan Africa, extreme poverty is now believed to have been much higher in 1990 than was previously thought. This, of course, has direct implications for the first target of MDG1 where the halving of poverty uses 1990 as a baseline. When the goal was agreed in 2000, based on the 1993 ICP, it implied that the share of the extremely poor should fall from about 29 per cent of the population in developing countries in 1990 to half that, i.e. 14.5 per cent in 2015. Using the 2005 ICP for this goal implies that now extreme poverty, expressed in 2005 international prices, needs to fall from nearly 42 per cent in 1990 to 21 per cent in 2015. Thus halving poverty is now based on a much larger share of poor people.

But also the most recent observations show large discrepancies. Poverty in 2005 is believed to be about ten percentage points higher in South Asia and Sub-Saharan Africa using the 2005 ICP rather than the 1993 ICP suggested. In all of the developing world, the 2005 ICP suggests that some 26 per cent of the population suffer from extreme poverty in 2005, compared to only 19 per cent when the 1993 ICP was used.

This not only affects poverty rates, but correspondingly the absolute number of people who live in extreme poverty. While the 1993 ICP round suggested that 1.5 billion people lived in extreme poverty in 1990 and this figure dropped to 930 million in 2005; the 2005 ICP implies that the number of extremely poor was 1.9 billion in 1990 and about 1.4 billion in 2005 (Chen and Ravallion 2008). These are large differences, suggesting that we have about 50 per cent more extremely poor people in the world.

While the differences in poverty levels introduced by the new revision based on the 2005 ICP are very large, the differences in poverty trends since 1990 are remarkably small, a point also emphasised by the World Bank (Chen and Ravallion 2008). The recent revision does not change the direction of poverty trends in any region or for the developing world as a whole. Also the size of poverty reduction in the different regions, and the developing world as a whole, changes remarkably little. Poverty reduction in China, and East Asia as a whole, remains very rapid, poverty reduction in South Asia also remains sizable, and continues to be the case that poverty reduction in Latin America, Eastern Europe and Central Asia, and Sub-Saharan Africa was very small, and mostly concentrated in the period after 2000. As a whole, the figures thus suggest relatively little change to the assessment of overall progress in the first target of MDG1. Regardless of whether we use the old or the revised figures, the developing world as a whole seems ...

Table of contents

• Cover Page
• Half Title Page
• Law, Ethics and Economics
• Title Page
• Copyright Page
• Contents
• List of Figures
• List of Tables
• Dedication
• Notes on Contributors
• The Erfurt Manifesto: Common Stance of all Contributors
• Commentary on the Erfurt Manifesto
• Introduction Justice for the Poor – A Global Paradigm in Progress and Dispute
• Part 1 Poverty Data Under Scrutiny
• Part 2 Christian Ethics on Justice and the Poor
• Part 3 Global Theories of Justice and Responsibility
• Part 4 Policies and Actions
• Index