The World Bank has changed its poverty indicator and lifted 200 million people out of extreme poverty. Critics have said this change calls into question recent progress in poverty reduction. EURACTIV France reports.
Extreme poverty has been in decline since the 1990s, and may disappear altogether by 2030. This flagship objective of the newly-adopted UN Sustainable Development Goals seems to be on course for success, according to the World Bank.
New predictions published by the World Bank on 4 October show that the number of people living in extreme poverty is expected to fall below 10% of the global population this year, from 902 million in 2012 to 702 million in 2015.
Extreme poverty is expected to fall from 7.2% to 4.1% in East Asia, from 18.8% to 13.5% in Latin America and from 42.6% to 35.2% in sub-Saharan Africa over the same period.
A new poverty line
This impressive improvement is not entirely based on real events, but is also a result of controversial changes to the way in which statistics are interpreted. Until now, the poverty line was set at $1.25 per day.
The World Bank has just made its biggest revision to these criteria since 1990. Unchanged since 2005, the threshold has now been raised to $1.90 per day to account for inflation.
Quality of life may have changed a lot over the last ten years, but any revision of the poverty line always leads to big statistical changes.
“The problem of reevaluation is that it disrupts the statistics in certain countries, sometimes pushing several millions of people into or out of extreme poverty,” said Xavier Godinot of ATD Quart Monde, a French anti-poverty NGO.
The last revision of the poverty line, up to $1.25 in 2005, led to a sudden cut extreme poverty in Nigeria by 20%; a variation that could easily discredit the very real progress made in tackling extreme poverty.
The World Bank’s poverty indicator is a global reference in poverty evaluation. “As the UN does not have its own indicator, it uses the World Bank’s poverty threshold to evaluate the success of the Millennium Development Goals,” Godinot said.
The new 2015-2030 development programme will also use this indicator to evaluate the progress of one of its main objectives: the eradication of poverty by 2030.
The objective of halving poverty between 1990 and 2015 was one of the success stories of the Millennium Development Goals (MDGs). The United Nations estimates the number of people living in extreme poverty today at 836 million, against 1.9 billion in 1990.
But for Xavier Godinot, “The claim that poverty has fallen by half is not credible. Even the UN experts accept that.”
“This is a simple, but also simplistic measure that has never really been thought through,” he added.
The World Bank’s system for measuring the number of people living in extreme poverty was established in 1990, and is based on the average price of basic goods in the world’s 15 poorest countries. It was first fixed at $1 per day, before being raised to $1.25 in 2005.
Using purchasing power parity, this figure can be projected onto other developing countries.
“Extreme poverty is about much more than a monetary threshold,” said Friederike Röder, director of One France.
The invisible poor in rich countries
This threshold, applied only in terms of purchasing power parity in developing countries, makes the poor in rich countries essentially invisible by leaving them out of the statistics.
“When they say that poverty has halved, that does not take into account the poor in the 34 OECD countries,” Xavier Godinot pointed out. “But they are a significant group. In New York alone, one fifth of the population depends on food bank donations to survive.”
Another common criticism of this single poverty threshold is that it does not distinguish between poverty and extreme poverty.
“Extreme poverty is more and more concentrated in sub-Saharan Africa. In this area, the majority of populations in extreme poverty live on $0.8 per day, well below the World Bank’s threshold,” said Röder.
The revision process
“The poverty line we use today makes no sense. It has not risen in line with prices,” Xavier Godinot said. “If it had increased along with inflation, it would already be at $2 or $2.50,” he added.
This gap is not improved by the data at the World Bank’s disposal. The institution relied on data collected in 2011 and only made available in 2014 for tis recent re-calculation of the poverty line.
But the recent revision should go some way towards correcting this gap. “The adjustments are made based on inflation, but also by including new products as core items, like mobile phones,” Friederike Röder explained.
But many obstacles to the effective measurement of poverty persist, including a lack, or absence, of reliable statistics for certain developing countries and the exclusion of the most vulnerable populations, including women.
To address this problem, the World Bank launched a new Commission on Global Poverty in June 2015, which will “report on the best ways to measure and monitor poverty around the world”. The final report from the Commission is due at the end of April 2016.
“One of its recommendations may be to establish several different poverty lines in order to take into account the various levels of poverty,” Godinot said.