Where does poverty begin - and end?

The United Nations claims extreme poverty has more than halved since 1990, but is it an accurate assessment, asks Jonathan Gornall.

A child scavenges on the Anlong Pi rubbish dump, Siem Reap, Cambodia – a country where a third of the population lives in extreme poverty, on less than US$1 a day. Omar Havana / Getty Images
Powered by automated translation

The United Nations is celebrating reducing the level of the world’s population who live in ‘extreme poverty’ by half, but how do we set such a benchmark?

In 15 years, extreme poverty will be a thing of the past.

That is the extraordinary claim by the United Nations, which on July 6 celebrated its Millennium Development Goals (MDG) programme for having produced “the most successful anti-poverty movement in history”.

In September 2000, all 189 UN member nations, including the UAE, adopted the Millennium Declaration, committing to “spare no effort to free our fellow men, women and children from the abject and dehumanising conditions of extreme poverty”.

At the time, the UN estimated that more than a billion people were living in extreme poverty. By 2015, it pledged, “the proportion of the world’s people whose income is less than $1 a day” (a threshold raised to $1.25 in 2009) would be halved.

Now, says the UN Development Programme, “the world community has reason to celebrate”.

In the 15 years since the MDGs were adopted, it says, the number of people living in extreme poverty has declined by more than half, from 1.9 billion in 1990 to 836 million this year. Under phase two of its plan, the UNDP says, poverty will be gone altogether by 2030.

But how exactly does the UNDP define and measure poverty – and how meaningful, or even possible, is it to say that extreme poverty has been halved, let alone that it can be eradicated?

The millennium goals were not only about income. There were eight distinct targets for health, equality, development and education, although all had a bearing on the first – the reduction of extreme poverty and hunger.

There has been progress on all eight targets, says the UNDP. Yet the claim of success has been based on a single, simplistic definition of poverty – the number of people living on less than US$1.25 a day.

The idea of such a convenient single sum stems from a report published by the World Bank in 1990, which suggested $1 day as the poverty threshold.

This figure was based on data from only 22 countries, mostly from academic studies carried out in the 1980s, and as such, admits the World Bank, “while this was the best that could be done at the time, the sample was hardly representative of developing countries, even in the 1980s”.

In 2009, two-thirds of the way through the MDG programme, three World Bank economists mulling over fresh data from 75 nations proposed that the new “international poverty line” should be raised to $1.25, and that is where it has remained ever since.

“I wouldn’t say it’s meaningless,” says Takumo Yamada, Oxfam’s senior policy adviser on the UN’s post-MDG agenda. “The fact that people’s income has increased has to mean something.”

But under the definition, if everyone categorised as being in extreme poverty received a pay hike that lifted their income to $1.26 a day, poverty would have been eliminated.

And, says a recent paper from the Centre for Global Development, “changing a global poverty line by a dime – 10 US cents – can make a difference to global poverty of the order of 100 million people”.

If someone lives in a market economy where the prices are high, says Mr Yamada, “then just because you’re above the $1.25 threshold doesn’t mean a lot”. “Even if your income increases to $2 it doesn’t really mean much,” he says.

In a post on an Oxfam blog site in 2012, two economists – one from the World Food Programme, the other from the Institute of Development Studies – pointed out that the “absolute poverty line” of $1.25 had been derived from the mean of the national poverty lines of the poorest 15 countries in the world.

And this, they said, threw up two problems. The first was that “at national level all countries define poverty for themselves, often using different approaches”. The raw data, in other words, was not directly comparable from country to country.

The other problem was that poor people were increasingly living in middle-income countries and, because the extreme poverty calculation was based on only the poorest 15 countries, which in fact “are actually only home to about 10 per cent of the world’s absolute poor”, they simply were not taken into account.

One of the authors was Andrew Sumner, co-director of the King’s International Development Institute, London. Today, he says, “really ending global poverty” would demand a threshold of $10, not $1.25.

This is not the first time the UNDP has celebrated the apparent inroads it has made into poverty.

In March 2012, three years before the end of the 15-year MDG programme, it announced figures for 2010 showing that, despite the global recession, the number of people living in extreme poverty had already been halved, five years ahead of schedule.

At the time, eyebrows were raised in specialist circles about the way the statistics had been interpreted.

In a paper published for the Comparative Research Programme on Poverty, Thomas Pogge, professor of philosophy and international affairs at Yale University, pointed out that according to the World Bank’s figures, “over one-third of all human beings – 2,471 million – live on less each day than what $2 could buy in the US”.

Yet they were living “fully 60 per cent above the $1.25/day poverty line that is actually used, within MDG, for tracking the world’s progress against poverty”.

And we should, he said, question carefully any claimed “drastic” decline in extreme poverty.

For example, the ranks of the poor were “continuously thinned by some 50,000 deaths each day from poverty-related causes” and the reported reduction in poverty might be due to nothing more than “many poor people having died”.

To be fair, the World Bank, which set the $1.25 threshold and shares the UN’s ambition to end global poverty, concedes that despite the progress under the MDG programme, “the number of people living in extreme poverty globally remains unacceptably high”.

It also points out that if the threshold had been $2 a day, rather than $1.25, there would have been “only a slight decline” in poverty, from 2.59 billion people in 1981 to 2.2 billion in 2011.

It is also true that, however we measure poverty, progress to eradicate it has not been even across the board. While over the past three decades China has accounted for most of the reported decline in extreme poverty, the biggest concentration of the extremely poor remains in sub-Saharan Africa.

This, according to a recent report from the World Bank, “is the only region in the world for which the number of poor individuals has risen steadily and dramatically” – between 1980 and 2010 the number deemed to be extremely poor in the region doubled from 205 million to 414.

There are, of course, uncomfortable issues surrounding the question of poverty, which organisations such as Oxfam say is about the haves as well as the have-nots.

Ahead of the 2013 World Economic Forum meeting in Davos, Switzerland, Oxfam pointed out that “the $240 billion net income in 2012 of the richest 100 billionaires would be enough to make extreme poverty history four-times over”.

Put another way, noted Forbes magazine, "the world's 85 richest people own assets with the same value as those owned by the poorer half of the world's population, or 3.5 billion people [including children]."

Both groups had $1.7 trillion – $20 billion each if you were in the rich group, and $486 if you were in the poor.

As it celebrated the success of the 15-year millennium goals effort, UNDP admitted that the job remained “unfinished for millions of people – we need to go the last mile on ending hunger, achieving full gender equality, improving health services and getting every child into school”.

In an attempt to achieve this, the MDGs will soon be replaced by the SDGs – proposed Sustainable Development Goals that will shape policy and funding for the next 15 years.

The UNDP is in the process of defining these goals, which will be adopted at a summit in New York in September, but a draft list begins with the most admirable and, some would say, improbable target yet – to “end poverty in all its forms, everywhere”.

Whether in 2030 the UNDP will be able to look back and say it succeeded will, of course, depend very much on how it chooses to define poverty – and how it goes about counting the poor.