This article argues for an increase in the international poverty line from $1.08 a day to $1.75 a day. It also examines the need for more aid and concludes that aid in the last decade has been in considerable excess of that needed for poverty elimination.
For most of its formative period, the field of development economics was concerned with one overriding, and one related, objective. The former was growth, the latter poverty reduction. Since about the mid-nineties, the focus has shifted to the second, derived goal of poverty reduction. While it is recognized that growth is essential, it nevertheless is felt that growth can have differential effects on poverty; in particular, differences can result because of the important mediation on poverty reduction of both the levels, and changes, in inequality.
One of the most important development goals is the reduction in absolute poverty to 15 percent by 2015. This, and related, development goals have been agreed upon by governments and the UN system, and have been labeled the Millennium Development Goals. In my recently published book, Imagine there’s no country: Poverty, Inequality and Growth in the Era of Globalization, I had documented how the poverty reduction goal had already been reached by 2000, the very year of formulation of the goals for 2015. In a critique of my study, World Bank as well as its main poverty analyst, Martin Ravallion, question the authenticity of the data, assumptions and methods used by Imagine. In fact, data and definitions account for an insignificant amount of the difference in the poverty estimates of World Bank and Imagine. The major explanation for the higher World Bank poverty rates is found to be due to a lower growth estimate of per capita expenditures, and especially lower compared to the growth estimate obtained from national accounts data (Imagine). This lower growth, 10.4 percent over 11 years, 1987-1998, is based on household survey means (World Bank data). An associated, and surprising, finding is that while poverty estimates are accurately reproduced, there is a big divergence between the published growth rate of 10.4 percent and the “reproduced” survey growth of 5.6 percent. Notwithstanding this major uncertainty about the World Bank data or its growth and poverty results, all the major findings of Imagine are faithfully reproduced exclusively using only World Bank data. Further, an extension of the World Bank poverty measurement method also yields the result that the MDG poverty reduction goal has been reached. Finally, using the recently released 1996 PPP data, poverty in 2000 was below 15 percent for all methods, including the flawed World Bank poverty measurement method.
This book is about a miracle; the findings are even more poignant given that this miracle is not even recognized as having occurred. To be sure, there have been several documents in recognition of the East Asian miracle – but even this documentation has been questioned by many after the occurrence of the East Asian financial crisis. The miracle being talked about here is the transformation of a poor Asia into a thriving middle class Asia. This transformation started in some Asian countries in the early sixties; by the early eighties, fast growth had enveloped almost the entire continent. The pace of development observed in the eighties and nineties has been the fastest on record for any large region of the world – ever.
In September 2000, the international aid community set the millennium development goals (MDG). The main poverty reduction goal was outlined as the reduction of absolute poverty to half the level prevailing in 1990 i.e. 15 percent for the head-count ratio in 2015. This study documents that for a variety of methods, this MDG goal was met at the time of the millennium declaration in 2000, and no later than 2002. Several bits of evidence have been gathered to show why the conventional wisdom – that the world is “on track” to reduce poverty to 15 percent by 2015 – is manifestly wrong. It is noteworthy that the MDG target has been met by even the “conservative” upper-bound poverty estimate method of the World Bank.
