Progress in China conceals increased poverty in the rest of the world

Can poverty be measured as the
World Bank does? (Photo: WB)

The World Bank has calculated that extreme poverty in the developing South fell by half in the period 1981 to 2008, but according to the Social Watch Coordinator Roberto Bissio, in an interview with Radio Nederland, this overall perspective conceals a worsening situation in many regions that is counterbalanced by data showing an improvement in China. Bissio explained that these studies, in which extreme poverty is defined as earning less than USD 1.25 per day, do not take account of the impact of recent disasters like rising food prices or the effects of the world economic crisis. 

The World Bank report states that in 1981 some 52% of the population of the planet were living on less than 1.25 dollars per day, but by 2008 the proportion of people in this situation had fallen to a mere 22%. However, Bissio pointed out that while “in the last 15 years the fall amounted to 600 million people, in China there was a fall of 700 million”, so outside the Asian giant “100 million more people are living in extreme poverty, even according to the World Bank’s own measure.”

The Social Watch Coordinator went on to say that the calculations made by this Washington-based financial institution establish a minimum income of 1.25 dollars a day adjusted to the “buying power” of the local currency in each country. But “every tourist knows that a dollar does not buy the same amount in a European country as in a country in the South.” Moreover, the World Bank adjusted its calculations “in line with average consumption in each country, but this is not the same as consumption among the poor.” This consumption basket “includes the price of an automobile, a DVD and other middle and upper class consumer products.” But what poor people mostly consume is food. If the price of cars or televisions decreases this will raise the buying power of that currency in World Bank calculations, but the price of the rice or sorghum the poor consume has risen to prohibitive levels.

Bissio went on to say that “the World Bank only measures income poverty and does not consider access to services or quality of services… The perception of Social Watch members in more than 85 countries is that poverty measured in terms of infant mortality, education, nutrition and births attended by skilled health personnel is on the rise even though many economies in the South are prospering, and this is because inequality is getting worse every day.”

Bissio attributes the positive statistics in some African economies and most Latin American countries to “huge increases in international prices for prime materials” such as “metals, oil and agricultural products.” These high prices mean that “the export sector is making big profits” and “foreign currency is coming into these countries, and this is taken to indicate economic growth.”

But these price increases “cause big rises in the price of food, and this is what poor people mainly spend their money on.” Therefore, “if the real consumption of lower income families were taken into account, the extreme poverty line would probably have to be raised to include people earning up to 2 dollars per day, and this would be reflected not as a fall in extreme poverty but as a massive increase.”

“The prices of the soya that South America exports and of the palm oil exported by many African countries have soared to tremendous levels,” and consequently “exporters are exploiting vast swathes of land and subsistence farmers and producers supplying food to local markets” are changing over “to export products”. Thus a country with immense agricultural wealth like Argentina “exports enormous quantities of soya to China, and these crops have displaced other agro-products that went for local consumption.” As a result, “domestic food prices have increased enormously, agriculture is expanding into larger areas of land and the owners of these enterprises are making fortunes.”


Growth with risks

The macroeconomic indicators of some countries in the South are performing well, but they do not show “growth that generates employment,” which, according to Bissio, “is what really underlies development.” He added that “in countries like Brazil that have grown enormously, industry actually shrank last year.” This has “negative consequences not only socially but also as regards decent jobs, and this is worrying.”

Bissio also sounded a warning: “Many people think… that good macroeconomic results… are a bubble that is about to burst, like the housing bubble in Spain and the banking bubble in the United States. An awful lot of money is going into the prime materials area and pushing prices up, but this might disappear overnight and cause a very serious crisis even in countries that have the good luck to be benefiting from extraordinary export earnings.”

Bissio was asked about the target to cut the proportion of poor people by half in the 1990 to 2015 period, which is the first objective of the first of the Millennium Development Goals agreed by the international community in 2000. His answer was that “According to our calculations based on the information we receive from countries, that goal will almost certainly not be reached. There may be some technical debate about the statistics and how China’s good performance affects the world total, but this does not mean that in most countries, above all in Africa and in less developed regions, this goal will be attained.”

“Our perception is that it will not be, and this should be borne in mind in the current discussions about what the development goals after 2015 should be.”

On the question of aid from rich countries to the developing world, Bissio said “the crisis is causing a retraction.” In any case, to make progress towards the Millennium Development Goals “the most important thing is not aid,” it is to consolidate “these countries’ capabilities to secure their own resources through taxation, for example, which is a permanent solution and not dependent on changing circumstances.”

“If countries can levy reasonable taxes on extractive industries and on the agro-export sector, international aid will become much less necessary. We have to think of ways to move beyond aid and construct a system in which it will not be needed.”

Another problem hindering developing countries in their efforts to progress is the lack of “coherence in European policies… Europe uses its so-called economic cooperation agreements to forbid African countries to take measures to protect their peasants, although Europe itself employs similar measures to protect its agriculture.” This question is blocking progress at the Doha Development Round of multilateral negotiations at the World Trade Organization. 

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World Bank reports about poverty: