Global poverty is worse than you think

A few weeks ago the World Bank changed the international poverty line from $1.25 to $1.90 (R27) a day. Normally, changes to the poverty line slide by without attracting much attention, but for some reason this time people got excited. At first glance, it looks as if the bank has finally admitted that the old line was just too low, and has raised it to a more meaningful standard.

But the reality is closer to the opposite. The World Bank didn’t raise the poverty line at all — it simply “rebased” the old line to adjust for depreciation in the purchasing power of the dollar. The bank claims that the new poverty line is roughly equivalent to the old line, in real terms. But in effect it is actually significantly lower, and therefore makes it seem as though there are fewer poor people than before.

This is why the bank has suddenly announced that the global poverty headcount has decreased by 100 million people overnight, and that the poverty reduction trend has been declining more rapidly than we used to believe.

Nothing has actually changed in the real world, of course; there are just as many poor people as there were before. But the development industry has been happy to take the new story on board, claiming gains against poverty that haven’t actually happened. The NGO community is celebrating the fact that, according to the bank’s new line, the poverty rate will dip below 10% this year. Jim Yong Kim has called this “the best story in the world today”.

It’s a PR coup for the World Bank: the poverty line appears to have been raised to a more humane level and the number of poor people is lower than before.

But amid all the excitement, we seem to have lost sight of one crucial fact. $1.90 is not enough for basic human survival. Not by a long shot. And this is not a fringe opinion — on the contrary, it enjoys strong scholarly consensus.

How much is $1.90 a day, adjusted for purchasing power? Technically, it represents the international equivalent of what $1.90 could buy in the United States in 2011. But we know that this amount of money is inadequate to achieve even the most basic nutrition. The US Department of Agriculture calculates that in 2011 the very minimum necessary to buy sufficient food was $5.04 (R72) a day. And that’s not taking account of other requirements for survival, such as shelter and clothing.

We have many examples of this deficit. In India, children living at $1.90 still have a 60% chance of being malnourished. In Niger, infants living at $1.90 have a mortality rate three times higher the global average. The same story can be told of many other countries. If $1.90 is too low to achieve basic nutrition, or to secure a fair chance of surviving the first year of life, why are we using it?

The World Bank picked the $1.90 line because it’s the average of the national poverty lines of the very poorest countries in the world, like Chad and Burundi. But it tells us very little about what poverty is like in most other countries. The bank itself admits that poverty in Latin America, for example, should be measured at about $6 a day. And yet for some reason it persists with the $1.90 line.

So what would a more meaningful measurement of poverty look like? One option is to count poverty country-by-country using each nation’s own poverty line, with $1.90 as an absolute floor. If we did that, we would see that about 1.7 billion people remain in poverty today, which is more than 70% higher than the World Bank would have us believe.

If we want to stick with a single international line, we might use the “ethical poverty line” devised by Peter Edward of Newcastle University. He calculates that in order to achieve normal human life expectancy of just over 70 years, people need roughly 2.7 to 3.9 times the existing poverty line. In the past, that was $5 a day. Using the bank’s new calculations, it’s about $7.40 a day. As it happens, this number is close to the average of national poverty lines in the global south.

So what would happen if we were to measure global poverty at this more accurate level? We would see that about 4.2 billion people live in poverty today. That’s more than four times what the World Bank would have us believe, and more than 60% of humanity. And the number has risen sharply since 1980, with nearly 1 billion people added to the ranks of the poor over the past 35 years.

The UN’s sustainable development goals, launched in September, are set to use the $1.90 line to measure poverty. Why do they persist with this implausibly low threshold? Because it’s the only one that shows any meaningful progress against poverty, and therefore lends a kind of happy justification to the existing economic order. A more honest approach would force us to face up to the fact that the global economy simply isn’t working for the majority of humanity.

I recently found myself in a debate with a UN economist about this issue. We quickly got bogged down in the technical details of the $1.90 line, which he was intent on defending. As I listened to him, it struck me that the whole conversation was a bit absurd. Here we are in 2015. Our world has never been richer. We just learned that the richest 1% of the world’s population now has more wealth than the rest of humanity combined. Even worse, 67 billionaires have more than the poorest 3.5 billion people. And yet the economists are telling us that as long as people have at least $1.90 a day, there’s nothing to worry about — everything is fine.

It’s hard to believe that our discourse about poverty has sunk to this level. How did we let this happen? How did we let our moral spirit atrophy so? Sometimes I don’t know whether I find the whole $1.90 charade to be silly or obscene. But I suspect that at least 4.2 billion people won’t have much difficulty deciding.