Are we really reducing global poverty?
Are we really reducing global ?
By Jan VandemoorteleLecturer: HOUT SokuntheaClass: M3.2
Group member : CHEA KesorphearomHOUT VannarothSIN
ChansophheakIntroductionIs $1 per day a valid poverty gauge?Are
statistics for China unduly biasing global poverty trends?Is much
of the global poverty debate about misplaced concreteness?Is equity
good for the poor?Is social shock absorber feasible and
affordable?Global Poverty TrendsBetween 1990 and 1999, people in
developing countries living on less than $1 per day dropped from
32% to 25%Results in a headcount index of about 16%, indicating
that the world is on track for reaching the global goal of halving
poverty between 1990 and 2015Global Poverty Trends
Global Poverty Trends
The reasons for slowdown country-specificOften relate to
insufficient and inefficient public spending, crippling debt
burdens, failing commodity prices, inadequate access to markets in
developed countries, declining official development assistance and
widening gaps between the rich and the poor.
Global Poverty TrendsThe problem is not that we have tried to
eradicate global poverty and failed; the problem is that no serious
and concerted attempt has ever been made. James Grant (early
1990s)
Global Poverty TrendsIs 1$ per day a valid poverty
gauge?NO!!!Why?$1 per day per person has become the intl benchmark
for measuring the extent of poverty in developing countries.The
intl poverty line is not based on a global common basket of goods
and servicesIt is based on the average or the median of some 8-10
national poverty lines.Each basket is based differently but
converted to Purchasing Power Parity (PPP) values.
Why?PPP values have some technical
issues.IncomparableUnverifiable
Why?The intl poverty norm violates the standard definition of
income poverty a person is considered poor when s/he does not reach
the min level of economic wellbeing set by society.The norm cannot
be kept static and applied uniformly to all societies.
Why?Different societies have different norm to be applied
toExample: Latin America - $2 ; Eastern Europe and the former
Soviet Union - $4 (sometimes)China $0.66. Its useful when the
incidence of extreme poverty was high.
Why?Therefore, poverty line cannot be frozen by disassociating
it from the average standard of living society.As countries become
richer, societies gradually adopt a higher level of min. economic
wellbeing.
Are statistics for China unduly biasing global poverty
trends?Poverty estimates for China influence global poverty
levelGetting them right is important for an accurate assessment for
global poverty trendsHowever, different sources give very different
poverty trendsBased on the international poverty line of 1$ per day
in PPP value (World Bank) showed:Little change in poverty between
1987 and 1993A steep decline between 1993 to 1996Stability in 1996
to 1998
Are statistics for China unduly biasing global poverty
trends?
Are statistics for China unduly biasing global poverty
trends?People who struggled to survive on less than 1$ per day
dropped by 138 million in 1993 and 1996An average of 125,000 people
per day for 3 yearsAn annual decrease of four percentage point in
the povertyYet, it is not clear why poverty rate was dramatically
decline between those years (1993 and 1996)There is no major
Pro-poor policyAre statistics for China unduly biasing global
poverty trends?National poverty estimated by Ministry of
Agriculture showed different resultNo significant acceleration in
1993 to 1996Percentage of poverty rate decline only by 1% each
year
Are statistics for China unduly biasing global poverty trends?Is
much of the global poverty debate about Misplaced
Concreteness?Macro-Economic tends to analyze poverty's causes at
the aggregate level.For explaining complex realities and searching
for general laws.However, averages can be misleading.Excessive
reliance on aggregate indicators and averages can unduly bias
policy making.
Averages is nothing more than an abstract concept.Aimed to help
us understand complex realities more easily.It does not exist in
realityThe Fallacy can lead to unwarranted conclusions about
concrete realities.Based on deduction from abstractions, not on
real observationIs much of the global poverty debate about
Misplaced Concreteness?Therefore, policy analysis must go beyond
averages to avoid such fallacy.Disagreement on economic policies
can be explained by differences in the level of disaggregation of
economic analysis. (Kanbor, 2001)Poverty estimates based on the
frozen 1$ per day norms not only tend to:Overestimate the number of
people who escape from poverty overt timeBut also, likely to
reinforce that aggregate growth is the best.Is much of the global
poverty debate about Misplaced Concreteness?
Is much of the global poverty debate about Misplaced
Concreteness?Although the evidence may look compelling, correlation
is beside the point.From the observation on 31 countries, yields a
slope coefficient of -1 , 1This implies that, for every 1% increase
in per capita income, poverty declines by 1% too.Other 370
observation on 125 countries using the same method.The result was
obviously the sameIs much of the global poverty debate about
Misplaced Concreteness?They argue that the finding hold true for
both poor and rich countries.But, Is it possible that simple
systems exist in the real economy??NO!!!Such findings merely
illustrate the danger of Misplace ConcretenessIs much of the global
poverty debate about Misplaced Concreteness?The income of the poor
rises one-for-one with overall per capita income may be
statistically valid, but it is not necessarily true.Using the same
method to random number yield the similar results.It is more theory
than reality.Nothing more than an example of the fallacy of
misplaced concretenessIs much of the global poverty debate about
Misplaced Concreteness?More growth does not necessarily mean less
poverty.Making such conclusion makes much influence on so many
people:Policy makersResearchersJournalistsIs much of the global
poverty debate about Misplaced Concreteness?Is equity good for the
poor?Concerns about equity are often ignored.Based on the belief in
the Kuznets curve or the conviction that in equality is a necessary
incentive for growth.Two stylized facts emerge from recent
analyses:High inequality limits the impact of aggregate growth on
povertySlow economic growthBoth, economist, Persson and Tabellini
(1994) stated:Inequality is harmful for growth.Temple (1999)
supported and stated:It has become extremely difficult to build a
case that inequality is good for growth.Supported again by
Dagdeviren et al (2000)Greater distributional equality provides a
favorable initial condition for rapid and sustainable growthIs
equity good for the poor?Economic growth has an obvious role to
play in poverty reduction.But, if inequality inhibits growth, then
equity must be good for the poor because it will help sustain
growth.Identify relevant and specific policy measures that will
improve the economic wellbeing of the poor.Is equity good for the
poor?Empirical evidence shows a very close link between inequality
and slow growth.Researched data suggests that income disparities
are widening, both between and within countries.It is difficult to
dismiss that inequality is on the rise in most countries, as well
as global level.Malinovic (1999) derives a world income
distributionBy combining the results of household budget survey
covering 85% of the worlds populationUsing PPP valuesIs equity good
for the poor?The results indicate that:The richest 10% of the world
population control about half of the global income.The bottom half
earn less than 10% of global income.The income distribution
worsened between 1988 and 1993.More seriously, the poor not only
lost in relative terms but also in absolute terms.Three quarters of
the world population saw their real income fall during 1988 to
1993.Is equity good for the poor?
Is equity good for the poor?The inequality is harmful to the
poor is further confirmed:By data provided by Demery and Squire
(1996)Disparities are not only increasing between rich and poor,
but also among the poor.Nigeria saw poverty headcount index decline
by 9% (1985 to 1992)However, the extreme poverty increased by 3%The
number of the poor declined, yet the number of destitute people
increased.Is equity good for the poor?Anti-poverty strategies often
overlook equity concerns.Labor intensive growthInvestment in
education and healthSocial safety netsEquity is seldom mentioned as
an explicit goal.Most of the people believe that Aggregate Growth
and More jobs will be efficient to fight poverty.It does not
guarantee a ticket out of poverty.Is equity good for the poor?Most
of the poor are either unaffected by aggregate growth or having a
job.The Voice of Poor (Narayan et al, 2000) a poor woman in
Cambodia says,Poverty means working for more than 18 Hours a day,
but still not earning enough to feed myself, my husband, and my two
children.Is equity good for the poor?Is a social shock absorber
feasible and affordable?Definition: Shock AbsorberSocial Shock
AbsorberWashington Consensus:Economic Policies for under crisis
developing countriesBased on international economic
institutionsUnfortunately, it did not prevent unemployment and
poverty from rising, and inequality from worsening
Economic growth alone cannot reduce poverty, unless that growth
is translated into poverty reductionIt is governments job to set
the efficient poverty reduction policyIf inequality between and
within countries continues to rise, it could affect the
sustainability of the globalization process.And they shall help
those who are bearing a disproportionate share of the cost of
globalizationEx: Market liberalization, public action, social
policy, etc.
Is a social shock absorber feasible and affordable?During 1990s,
social policies of the international financial institutions were
not the objective of installing such a social shock absorberEx: The
International Development Association (IDA) doubled its funds to
social sectors during 1990s, but still partially satisfactory
because it did not ensure that the rich and poor could equitably
benefit
Do we need a social shock absorber?ConclusionPoverty rates will
continue to fall if growth continues(World Bank, 2001)
