Date: Tue, 12 Jan 1999 17:26:52 -0500
From: The Golem <[EMAIL PROTECTED]>
Subject: [PNEWS] Global Falsehoods
To: [EMAIL PROTECTED]
From: [EMAIL PROTECTED]
GLOBAL FALSEHOODS: HOW THE WORLD BANK AND
THE UNDP DISTORT THE FIGURES ON GLOBAL POVERTY
by
Michel Chossudovsky
Professor of Economics, University of Ottawa, author of The Globalisation
of Poverty, Impacts of IMF and World Bank Reforms, Zed Books, London, 1997.
C copyright by Michel Chossudovsky, Ottawa, 1999. To publish this text
contact the author at [EMAIL PROTECTED]
Until the 1998 financial meltdown ("black September" 1998), the World
economy was said to be booming under the impetus of the "free market"
reforms.
Without debate or discussion, so-called "sound macro-economic policies"
(meaning the gamut of budgetary austerity, deregulation, downsizing and
privatisation) continue to be heralded as the key to economic success and
poverty alleviation. In turn, both the World Bank and the United Nations
Development Programme (UNDP) have asserted authoritatively that economic
growth in the late 20th Century has contributed to a reduction in the
levels of World poverty. According to the UNDP, "the progress in reducing
poverty over the 20th century is remarkable and unprecedented... The key
indicators of human development have advanced strongly. "1
The Devastating Impacts of Macro-economic Reform are casually denied
The increasing levels of global poverty resulting from macro-economic
reform are casually denied by G7 governments and international
institutions (including the World Bank and the IMF); social realities are
concealed, official statistics are manipulated, economic concepts are
turned upside down.
The World Bank Methodology: Defining Poverty at a "Dollar a Day"
The World Bank framework deliberately departs from all established
concepts and procedures (eg. by the US Bureau of Census or the United
Nations) for measuring poverty.2 It consists in arbitrarily setting a
"poverty threshold" at one dollar a day per capita. It then proceeds
(without even measuring) to deciding that population groups with a per
capita income "above one dollar a day" are "non-poor".
The World Bank "methodology" conveniently reduces recorded poverty without
the need for collecting country-level data. This "subjective" and biased
assessment is carried out irrespective of actual conditions at the country
level.3 The one dollar a day procedure is absurd: the evidence amply
confirms that population groups with per capita incomes of 2, 3 or even 5
dollars a day remain poverty stricken (ie. unable to meet basic
expenditures of food, clothing, shelter, health and education).
Arithmetic Manipulation
Once the one dollar a day poverty threshold has been set (and "plugged
into the computer"), the estimation of national and global poverty levels
becomes an arithmetical exercise. Poverty indicators are computed in a
mechanical fashion from the initial one dollar a day assumption.
"Authoritative" World Bank Numbers
These authoritative World Bank numbers are those which everybody quotes,
--ie. 1.3 billion people below the poverty line. But nobody seems to have
bothered to examine how the World Bank arrives at these figures.
The data is then tabulated in glossy tables with "forecasts" of declining
levels of global poverty into the 21st Century. These World Bank
"forecasts" of poverty are based on an assumed rate of growth of per
capita income, --ie. growth of the latter implies pari passu a
corresponding lowering of the levels of poverty. Its a numerical game!
World Bank "Forecasts": Poverty in China will decline to 2.9 percent by
the Year 2000
According to the World Bank's "simulations", the incidence of poverty in
China is to decline from 20 percent in 1985 to 2.9 percent by the year
2000.4 Similarly, poverty levels in India (where according to official
data more than 80 percent of the population (1996) have per capita incomes
below one dollar a day), the World Bank's "simulation" (which contradicts
its own "one dollar a day" methodology) indicates a lowering of poverty
levels from 55 percent in 1985 to 25 percent in the year 2000.5
The whole framework (stemming from the one dollar a day assumption) is
tautological; it is totally removed from an examination of real life
situations. No need to analyse household expenditures on food, shelter and
social services; no need to observe concrete conditions in impoverished
villages or urban slums. In the World Bank framework, the "estimation" of
poverty indicators has become numerical exercise.
The UNDP Framework
While the UNDP Human Development Group has in previous years provided the
international community with a critical assessment of key issues of global
development, the 1997 Human Development Report devoted to the eradication
of poverty broadly conveys a similar viewpoint to that heralded by the
Bretton Woods institutions. The UNDP's "human poverty index" (HPI) is
based on "the most basic dimensions of deprivation: a short life span,
lack of basic education and lack of access to public and private
resources".6
Based on the above criteria, the UNDP Human Development Group comes up
with
estimates of human poverty which are totally inconsistent with
country-level realties. The HPI for Colombia, Mexico or Thailand, for
instance, is of order of 10-11 percent (see Table 1). The UNDP
measurements point to "achievements" in poverty reduction in Sub-Saharan
Africa, the Middle East and India which are totally at odds with
country-level data.
The human poverty estimates put forth by the UNDP portray an even more
distorted and misleading pattern than those of the World Bank). For
instance, only 10.9 percent of Mexico's population are categorised by the
UNDP as "poor". Yet this estimate contradicts the situation observed in
Mexico since the mid-1980s: collapse in social services, impoverishment of
small farmers and the massive decline in real earnings triggered by
successive currency devaluations. A recent OECD study confirms
unequivocally the mounting tide of poverty in Mexico since the signing of
the North American Free Trade Agreement (NAFTA).7
Double Standards in the "Scientific" Measurement of Poverty
"Double standards" prevail in the measurement of poverty: the World Bank's
one dollar a day criterion applies only to the "developing countries".
Both the Bank and the UNDP fail to acknowledge the existence of poverty in
Western Europe and North America. Moreover, the one dollar a day criterion
is in overt contradiction with established methodologies used by Western
governments and intergovernmental organisations to define and measure
poverty in the "developed countries".
In the West, the methods for measuring poverty have been based on minimum
levels of household spending required to meet essential expenditures on
food, clothing, shelter, health and education. In the United States, for
instance, the Social Security Administration (SSA) in the 1960s had set a
"poverty threshold"which consisted of "the cost of a minimum adequate diet
multiplied by three to allow for other expenses". This measurement was
based on a broad consensus within the US Administration.8
The US Poverty Threshold
The US "poverty threshold" for a family of four (two adults and two
children) in 1996 was of the order of $16,036. This figure translates into
a per capita income of eleven dollars a day (compared to the one dollar a
day criterion of the World Bank used for developing countries). In 1996,
13.1 percent of the US population and 19.6 percent of the population in
central cities of metropolitan areas were below the poverty threshold.9
According to the UNDP Poverty in Mexico is lower than in the United States
Neither the UNDP nor the World Bank undertake comparisons in poverty
levels between "developed" and "developing" countries. Comparisons of this
nature would no doubt be the source of "scientific embarrassment" --ie.
the poverty indicators presented by both organisations for Third World
countries are in some cases of the same order of magnitude as (or even
below) the official poverty levels in the US, Canada and the European
Union. In Canada, heralded by the World community as "a promised land",
occupying the first rank among all nations according to the same 1997
Human Development Report, 17.4 percent of the population are below the
(official) poverty threshold compared to 10.9 percent for Mexico and 4.1
percent for Trinidad and Tobago.10
Conversely, if the US Bureau of Census methodology (based on the cost of
meeting a minimum diet) were applied to the developing countries, the
overwhelming majority of the population would be categorised as "poor".
While this exercise of using "Western standards" and definitions has not
been applied in a systematic fashion, it should be noted that with the
deregulation of commodity markets, retail prices of essential consumer
goods are not appreciably lower than in the US or Western Europe. The cost
of living in many Third World cities is higher than in the United States.
Moreover, household budget surveys for several Latin American countries
suggest that at least sixty percent of the population the region does not
meet minimum calorie and protein requirements. In Peru, for instance,
following the 1990 IMF sponsored "Fujishock", 83 percent of the Peruvian
population according to household census data were unable to meet minimum
daily calorie and protein requirements.11 The prevailing situation in
Sub-Saharan Africa and South Asia is more serious where a majority of the
population suffer from chronic undernourishment.
The investigation on poverty by both organisations take official
statistics at face value. It is largely an "office based exercise"
conducted in Washington and New York with few insights or awareness of
"what is happening in the field". The 1997 UNDP Report points to a decline
of one third to a half in child mortality in selected countries of
Sub-Saharan despite the slide in State expenditures and income levels.
What it fails to mention, however, is that the closing down of health
clinics and the massive lay-offs of health professionals (often replaced
by semi-illiterate health volunteers) responsible for compiling mortality
data has resulted in a de facto decline in recordedmortality. The
IMF-World Bank sponsored macro-economic reforms have also led to a
collapse in the process of data collection.
Vindicating the "Free" Market System
These are the realities which are concealed by the World Bank and UNDP
poverty studies. The poverty indicators blatantly misrepresent country
level situations as well as the seriousness of global poverty. They serve
the purpose of portraying the poor as a minority group representing some
20 percent of World population (1.3 billion people).
Declining levels of poverty including forecasts of future trends are
derived with a view to vindicating the "free market" policies and
upholding the "Washington Consensus" on macro-economic reform. The "free
market" system is presented as the "solution", namely as an instrument of
poverty alleviation. The impacts of macro-economic reform are denied. Both
institutions point to the benefits of the technological revolution and the
contribution of foreign investment and trade liberalisation to the
eradication of poverty.
TABLE 1
THE UNDP'S HUMAN POVERTY INDEX
SELECTED DEVELOPING COUNTRIES
Country Poverty Level
(percent of the
population below the
poverty line)
Trinidad and Tobago 4.1
Mexico 10.9
Thailand 11.7
Colombia 10.7
Philippines 17.7
Jordan 10.9
Nicaragua 27.2
Jamaica 12.1
Iraq 30.7
Rwanda 37.9
Papua New Guinea 32.0
Nigeria 41.6
Zimbabwe 17.3
Source: Human Development Report 1997, table 1.1, p. 21
TABLE 2
POVERTY IN SELECTED G7 COUNTRIES, BY NATIONAL
STANDARDS
Country Poverty Level
(percent of the
population below the
poverty line)
United States (1996)* 13.7
Canada (1995)** 17.8
United Kingdom (1993)*** 20.0
Italy (1993)*** 17.0
Germany (1993)*** 13.0
France (1993)*** 17.0
Source: *US Bureau of Census,
** Centre for International Statistics, Canadian Council on
Social Development
***European Information Service.
FOOTNOTES
1. United Nations Development Programme, Human Development
Report, 1997, New York, 1997, p. 2.)
2. For a methodological review on the measurement of poverty see
Jan Drewnowski, The Level of living Index, United Nations
Institute for Social Research and Development (UNRISD), Geneva,
1965. See also the extensive research on poverty thresholds
conducted by the US Bureau of the Census.
3. See World Bank, World Development Report, 1990, Washington
DC, 1990.
4. See World Development Report, 1997, table 9.2, chapter 9.
5. Ibid., chapter 9, table 9.2.
6. Ibid., p. 5.
7. See Clement Trudel, Le Mexique subit le choc de
l'internationalisation, Le Devoir, Montreal, 28 March 1998, p.
A4.
8. See US Bureau of the Census, Current Population Reports,
Series P60-198, Poverty in the United States: 1996, Washington,
1997.
9. US Bureau of the Census, Poverty in the United States: 1996,
Washington, 1997, p. 7.
10. According to the official definition of Statistics Canada
(1995). For country ranks based on the UNDP's Human Development
index, see Table 6, Human Development Report, 1997, p. 161
11. See Michel Chossudovsky, El Ajuste Economico: El Peru Bajo el
Dominio del FMI, Mosca Azul Editores, Lima, 1992, p. 83.
Michel Chossudovsky
Department of Economics,
University of Ottawa,
Ottawa, K1N6N5
Voice box: 1-613-562-5800, ext. 1415
Fax: 1-514-425-6224
E-Mail: [EMAIL PROTECTED]
Recent articles by Chossudovsky on the global economic crisis at:
http://www.transnational.org/features/g7solution.html
http://www.interlog.com/~cjazz/chossd.htm
http://www.heise.de/tp/english/special/eco/
http://heise.xlink.de/tp/english/special/eco/6099/1.html#anchor1
http://www.newwork.com/Guest_commentary.html
paul rodgers [EMAIL PROTECTED]
