Putting a price tag on poverty

Tanim Ahmed*, NewAge, September 4, 2008. Dhaka, Bangladesh

Poverty is not merely a bundle of economic goods with price tags upon them. It is not merely so much rice, so many pencils or paracetamol. It arises out of the lack of one’s ability to effectively participate in social life or the lack of one’s voice in political representation. It arises from one’s sense of insecurity. It arises from the desperation and frustration of not being able to provide for one’s children. It arises from the sense that one is deprived of the opportunities to live a better, or in this case, a more human life.

 

Photo: NewAge

TO BEGIN with an oversimplified example, let us assume that human well-being is measured by their ability to pay for haircuts – the more haircuts one is able to pay for the better off one is. A haircut would cost around $10 in New York and about Tk 20 in Dhaka. It would mean that two persons with the same earning, for instance $10 or Tk 700 per day, would have distinctly different purchasing powers. One would be able to pay for one haircut while the other 35. Since haircuts are the basis of well-being, the Bangladeshi would be 35 times better off than the American. Needless to say, it does not work out that way.
   

Well-being does not depend on the number of haircuts but a host of other more essential services and commodities. Services, as one would find in the case of haircuts, boot polishing or plumbing, are comparatively far costlier in developed countries than they are in poor countries like Bangladesh, especially when compared to the proportional differences in prices of other commodities like food and clothing. In other words, between rich and poor countries, prices of commodities vary less than those of services, i.e. purchasing power would not vary as much in case of those commodities as it would for services in the United States and Bangladesh.
   

Before even going into the latest poverty figures released by the World Bank on August 26 and what it implies, one must first question the benchmark for poverty expressed in purchasing capacity called Purchasing Power Parity. The much popular ‘dollar a day’ was expressed in this purchasing capacity terms across the world and meant to be equivalent to the purchasing capacity of $1 in the United States – the base country – in 1985, changed to $1.03 in 1993 and, according to the latest study, $1.25 in 2005. The question is what the equivalent of $1.25 in takas meant to purchase.
   

The bundle of choice for households or individuals in dire poverty would be distinctly different from those better off. The poor spend a high proportion of their income on basic needs whereas those better off spend a lesser proportion on such items with a substantial portion of their incomes purchasing services. But such benchmarks are derived from national accounts and a more general pattern of consumption in different countries. There are two obvious problems here. Even in Bangladesh’s case, although services contribute about half the GDP consumption pattern of individuals or households living in poverty would hardly reflect such a trend. Secondly, the poor buy commodities in much small quantities that would naturally mean that they end up paying more in the long run – buying a few hundred milligrams of cooking oil instead of a five-litre pack for instance.
   

Another recent study by the Asian Development Bank strives to capture that precise difference attempting to arrive at a more balanced poverty benchmark for Asia. It shows that the bottom 30 per cent of the Bangladeshi population spend 65.6 per cent of their household expenditure on food and drink while the average household spends just over half. In purchase power terms $1 dollar translates into about Tk 14 according to general consumption patterns but it is about Tk 25 according to household consumption patters. What it means is that the poverty benchmark translates into a higher purchasing power when considered on the basis of general consumption but far lower when considered on the basis of household consumption. When Tk 14 is considered equivalent to the ‘dollar a day’ benchmark, it means that an individual would be able to procure enough commodities and services to escape poverty spending Tk 14 every day. In the other case it would mean that the individual requirement to escape poverty would be Tk 25.
   

The two figures could make substantial difference as regards the number and percentage of poor people in Bangladesh and challenge the government’s claimed progress in poverty reduction, especially in the context of Millennium Development Goals. It is not that attainment of these UN development goals would mean substantial improvement in the economic system that inherently breeds poverty, but the new statistics and benchmarks would certainly cause governments to revise their statistics and review their supposed progress based on this new information.
   

A new working paper from the World Bank, ‘The Developing World Is Poorer Than We Thought, But No Less Successful in the Fight against Poverty’, by two of its economists, Shaohua Chen and Martin Ravallion, revised the previous poverty benchmark to the equivalent of $1.25 in 2005 in the United States, instead of the $1.03 in 1993. This revision saw the number of poor people increase from about 879 million, as reported by the World Bank earlier, to almost 1.4 billion. That is a difference of over half a billion people living in extreme poverty.
   

As other estimates and analyses point out, revision of these benchmarks by small margins result in huge differences in the numbers and as Sanjay Reddy, an assistant professor of economics at Columbia University in the United States, points out, such a difference in result with slight changes in the benchmark would render the benchmark itself ‘unfit for use’ in most cases pertaining to economic statistics. According to analyses, if the benchmark is revised upwards to $1.45 in 2005, which is closer to $1.03 in 1993 in terms of prices, then the number of poor increases to 1.72 billion. If the year 2005, on the other hand, is taken back to 2003, the developing world’s poverty reduction rate shows substantial deterioration so as not to favour the claim made in the World Bank paper.
   

Then, of course, there is the factor of China and India that skews the overall poverty figures substantially and make allowances for the claim of having attained substantial poverty reduction, although sub-Saharan Africa’s number of poor have increased by all estimates. The Asian Development Bank’s set the poverty benchmark at an equivalent of $1.35 in 2005 in purchasing power, which according to the Key Indictors of the Asia and the Pacific 2008 is Tk 22.64 in 2005.
   

The general contention of most critical analyses regarding the World Bank’s poverty estimates is that it undercounts poverty and thereby projects a rosier picture of poverty. Critics, therefore, make the claim that poverty estimates should be made in a more inclusive manner taking into consideration a wider variety of data to make it more robust and acceptable.
   

Another point that must be made is that the global context has gone through significant transformation in the past two years with fuel and food prices rising phenomenally and inflation increasing markedly. During this time currencies have seen their purchasing power decrease and cost of living rise. In the case of Bangladesh, these months have also seen a perceptible increase in employment that could only mean further decrease of real wages.
   

Regardless of all the analyses and estimates and regardless of the robustness of whatever estimates are employed to ascertain poverty around the world, these estimates would necessarily concentrate on the precision of a certain bundle that should allow one to escape poverty. The central debate then would revolve around the precision of that bundle and its market price and how best to translate that value into a globally acceptable unit such as the purchasing power parity. The value of PPP dollars then would require further revision. However, this bundle would typically include ‘needs’ or ‘necessities’ that are tradable in the market; items that have a price tag to be more precise. Thus, it would include food, shelter, clothing, medicine and books but not such things as security or happiness or leisure, which should be considered as crucial when ascertaining even dire poverty.
   

The very proposition that an individual’s degree of happiness be included as a factor for assessing dire poverty might well be summarily dismissed considering that it is a luxury that not even the rich might claim to have. Let us consider the advertisement of a Bangladeshi mobile operator that captured the imagination of many. In ‘din bodlaise’ – roughly meaning ‘times have changed’ in English – the young boy in monochrome grows up to inherit the livelihood of his forefathers who were fishermen, but does not have to sell his catch to the parasitic middleman and therefore is ostensibly better off.
   

That young boy in monochrome had wanted to visit the fair and by evening, after his father had sold the entire catch for a paltry sum, realised that it was not to be. The look on his father’s face told him a visit to the fair was out of the question. It appears he tears himself away from the fireworks that shoot off the fairgrounds as night settles and his father tugs his hand. In the next generation that young boy, now a man, having sold his catch for a good price, takes up his young son – who has stood first in his class by the way – in his arms declaring that they would visit the fair that evening.
   

Poverty is not merely a bundle of economic goods with price tags upon them. It is not merely so much rice, so many pencils or paracetamol. It arises out of the lack of one’s ability to effectively participate in social life or the lack of one’s voice in political representation. It arises from one’s sense of insecurity. It arises from the desperation and frustration of not being able to provide for one’s children. It arises from the sense that one is deprived of the opportunities to live a better, or in this case, a more human life.
   

Agencies and organisation such as the World Bank and Asian Development Bank will continue with their exercise to attain a better estimate for poverty and demonstrate how the market works to alleviate their poverty, if only to vindicate their work and justify their existence. Critics would dissect their methodology to prove them wrong. But that entire exercise is limited to putting a price tag on poverty. However, the question for governments must be one of principle – how they regard poverty. As an institution that serves the citizens and must look towards the welfare of the common people, attainment of a price tag must not suffice.

*Tanim Ahmed: tanimahmed@gmail.com

Millions Stand Against Poverty in 24-Hour Global Rally

By Haider Rizvi, Republished from CommonDreams.org

UNITED NATIONS - Anti-poverty activists Wednesday organized thousands of meetings and demonstrations across the world to highlight the plight of the downtrodden and the poor.

Organizers said about 39 million people joined the international anti-poverty campaign during the 24-hour period, setting a new Guinness World Record for participation in mass rallies against poverty.

People participated in more than 6,000 rallies in 110 countries in support of the campaign called “Stand Up and Speak Out.” This year, the event coincided with the 20th International Day for the Eradication of Poverty.

From workers to peasants to students, those who joined the global campaign against poverty urged governments to fulfill their commitments on achieving the Millennium Development Goals (MDGs) by 2015.

The MDGs include a 50-percent reduction in poverty and hunger; universal primary education; reduction of child mortality by two thirds; cutbacks in maternal mortality by three quarters; the promotion of gender equality; and the reversal of the spread of HIV/AIDS, malaria, and other diseases.

“Every day 50,000 people die needlessly as a result of extreme poverty,” said UN Secretary-General Ban Ki-moon in a statement, noting that the gap between rich and poor is getting wider.

Like demonstrators across the world, Ban took world leaders to task for the slow progress towards achieving the MDGs. “(The) record is mixed,” he said. “Many countries are still off track.”

UN experts on development say, worldwide, almost 1 billion people are still living on less than a dollar a day and some 72 million children are not in school.

In Ban’s view, poverty can be eradicated only if governments of both developed and developing countries live up to their promises. He urged poor countries to spend more on health and education and, in the same breath, appealed to wealthy ones to increase the level of their official funding for development.

For his part, UN General Assembly President Srgjian Kerim noted that more than anywhere in the world, it was in sub-Saharan Africa where governments were failing to achieve the MDGs. Kerim said that, as this year marks the midpoint to the goals’ deadline, the world community must recommit its efforts to eradicate poverty.

The president said he would use the current General Assembly session to “build consensus” for urgent actions to achieve the MDGs.

Last year, 23.5 million people took part in the mass rallies to support the MDGs; 3.6 million in Africa; 19 million in Asia; 55,000 in Latin America; 520,000 in the Middle East; and 900,000 in Europe.

“By standing up last year, millions around the world demonstrated their frustration with the lack of real progress in poverty eradication,” said Salil Shetty of the United Nations Millennium Campaign before the event. “This year, millions more are joining this growing global movement of people who refuse to stay silent in the face of poverty or broken promises to end it.”

For this event, the Global Call to Action Against Poverty (GCAP) and the UN Millennium Campaign worked with large numbers of national and local partners — from schools and universities to local community groups and women’s groups, choirs, and sporting clubs to faith groups, trade unions, and corporations.

The events planned were meant to be entertaining and engaging, while making a strong impression on national and regional politicians and governments, as well as state and global institutions. Millions of people also joined the campaign in cyber space, posting blogs, wikis, videos, and pictures on various online communities such as Facebook, MySpace, and Bebo.

In Italy, Microsoft created a dedicated micro-site for the action, and in many poor countries — especially in Africa — mobile phone technology enabled groups to pre-register their activities online view videos of “Stand Ups” in other countries.

In Rwanda youth groups organized a “Stand Up” soccer tournament with 20 primary schools. A youth network in Ghana appointed “Stand Up” ambassadors to lead events all over the country.

In Bangladesh an umbrella movement of youth groups mobilized 10,000 young people to block a busy crossroads with a human chain, and in India, a local organization planned a march of 20,000 Dalits (also known as “untouchables”), focusing on land rights and the achievement of the MDGs for Dalits in the State of Madhya Pradesh.

Similar events also took place all over Europe and North and South America. In Germany the Euro 2008 Qualifier soccer game against the Czech Republic saw fans starting the match with a massive “Stand Up” moment. In The Hague the national anti-poverty campaign displayed 200 life-size avatars representing members of the public from across The Netherlands.

In London trade union representatives, students, and the UN Deputy Secretary-General used a white band — the symbol of the global anti-poverty campaign — to call for renewed commitments on more and better aid, debt cancellation, trade justice, gender equality and public accountability.

Religious leaders in many parts of the world also joined in.

During the campaign, many activists highlighted the link between gender inequalities and poverty because women constitute the majority of the world’s poor, largely as a result of their unequal opportunities and access to resources, discriminatory laws, and unequal distribution of household resources.

Women: The Missing Piece of the Poverty Puzzle

By Anita Petry, Inter Press Service, October 17, 2007

UNITED NATIONS - Women are seen as the key for ending global poverty and the issue of gender equality is receiving special attention at events marking the International Day for the Eradication of Poverty on Wednesday.

One of the largest is the International Women’s Tribunals on Poverty, which will highlight the feminisation of poverty.There will be four major tribunals this week presenting testimony on the worsening conditions of women worldwide, and discussing strategies to tackle the root causes at the political and economic level. They will take place at the United Nations in New York, in Cairo, Egypt, Lima, Peru, and in Delhi, India.

“We know already that the concept of Women’s Tribunals has been very successful and we are expecting the biggest ever alliance of women’s groups and NGOs in India to join together on Oct. 17 in Delhi to discuss responses to poverty that the government can deliver on this year, especially for women,” said Ciara O’Sullivan of the Global Call to Action Against Poverty, a three-year-old movement that claims nearly 2,000 member organisations and millions of supporters worldwide.

“Three hundred women from 20 states are attending this unprecedented moment,” she told IPS.

The fact that so many women live in poverty means they are critical — but often ignored — players in reversing poverty itself. While figures from the World Bank estimate that 1.1 billion people live in “extreme poverty”, surviving on less than a dollar a day, women represent a disproportionate 70 percent of the world’s poor.

The U.N. Population Fund notes that worldwide, women on average earn slightly more than 50 percent of what men are earning, while women and girls are often the last to eat, and women’s health problems are considered less important than other family priorities.

The huge numbers of women affected means that empowering women is critical to the effort to halve extreme poverty by 2015, one of the so-called Millennium Development Goals set by world leaders meeting at the United Nations in 2000. They also include gender equality and reducing child deaths by two-thirds and maternal deaths by three-quarters, although these goals are lagging in nearly every country.

This week’s events are organised by many different institutions, but one of the biggest campaigns is “Stand Up and Speak Out”, supported by GCAP and the Millennium Campaign. The Stand Up and Speak Out campaign, now in its third year, consists of a global call to action against poverty and inequality, and for the achievement of the Millennium Development Goals.

The U.N. Development Fund for Women (UNIFEM) and Women’s Funding Network recently established a partnership to draw international attention to women during the Stand Up Campaign by launching a call for greater investment in women by governments and donor institutions.

UNIFEM notes that among the factors that place women at risk of poverty are their unequal access to resources and capabilities, such as education, skills, land and property, the discrimination they face in the labour market and their lack of political voice. In all countries, women do most of the unpaid household and care work — yet this work is not counted as contributing to national economies.

The partnership is a unique initiative because it also focuses on the mobilisation of a vast online community to support the message that, in the fight against poverty, gender equality is an essential target.

“The Economist [magazine] estimates that over the past decade, women’s work worldwide has done even more to fuel the global economy than has the stunning growth of China,” said Joanne Sandler, UNIFEM’s acting executive director.

“We know what is possible when women are recognised as agents of change,” she said. “To realise this vision we must remove obstacles such as discriminatory ownership and inheritance laws to help women embark on asset building.”

“Women are indeed the missing piece of the poverty puzzle,” agreed Christine Grumm, president and CEO of the Women’s Funding Network, a U.S.-based group that mobilises private donors and foundations to support a range of initiatives for women and girls, including programmes to help women start businesses, leave violent homes, gain access to health care, raise their self-esteem, and advocate for fair public policies.

While the network has raised more than 400 million dollars over the last 15 years, it notes that just seven percent of all philanthropic dollars overall are earmarked for programmes for women and girls.

“Our network’s experience in the area of economic empowerment has convinced us that policy supporting women’s economic empowerment — from education to job training to child care to financial literacy to microfinance and beyond — holds the potential for vast change, and fast change. Our cooperative outreach with UNIFEM will call on policy makers to recognise the untapped potential of women in eradicating extreme poverty,” Grumm said.

More than 720 different events are to take place in over 100 countries in the 24-hour period from 9 p.m. GMT on Oct. 16 to 9 p.m. GMT on Oct. 17, the International Day for the Eradication of Poverty. These events will range from major rallies and concerts to gatherings in school assemblies, town halls, and refugee camps.

The international gatherings are intended to help the poorer, marginalised people of the world get actively involved with existing campaigns, become aware of the work that is being done and become actual agents of change.

According to GCAP, last year, 23.5 million people were part of the campaign and literally “stood up” against poverty in a 24-hour period, setting a new Guinness World Record. This year, GCAP and the United Nations Millennium Campaign hopes to break that record, although it is unclear what the lasting impact would be.

A wide variety of organisations, institutions and community groups are expected to call on political leaders to deliver more and better aid to the poorest nations, implement fairer trade conditions, cancel debt, and ensure gender equality.

MDG sets poverty line at Tk 15 a day: Campaigners remain silent over deflated targets

Tanim Ahmed*, NewAge, October 18, 2007. Dhaka, Bangladesh

Anti-poverty campaigners are not aware of the actual value of the poverty benchmark of $1 in purchasing power parity set by the UN Millennium Development Goals. Although they agree that the measurement of poverty should be redefined and modified to one more appropriate to the local context, initiatives and programmes taken up by many of these activists do not question either the flawed poverty reduction targets set by the government or the rather low poverty benchmark.

According to an MDG progress report, jointly published by the government and the UNDP, about half the population of Bangladesh earned less than a ‘dollar a day (PPP)’ or less than Tk 15 in 2005. According to this document, Bangladesh’s poverty reduction target is to reduce this proportion of people (earning below Tk 15 per day) from 50 per cent to 29.4 per cent by 2015.

Publications, monitoring reports and assessments of the development goals brought out by citizens’ organisations and anti-poverty campaigners, who are also part of larger coalitions and networks to fight poverty, continue to reproduce the data without questioning the validity or authenticity of the government’s poverty reduction targets.

Taking into account the data of the World Development Report 2007 (per capita income of $470 and $2,090 in PPP), the MDG poverty line for Bangladesh is Tk 15 per day, meaning that an individual earning more than that amount would be considered one above the poverty line.

Sayed-ul-Alam Kazal, coordinator of Bangladesh secretariat for the People’s Forum on MDGs, said the value of $1 PPP fluctuated but wrongly put it in the range of Tk 69 to 70, which happens to be the value of market dollars.

He agreed that the definition of this poverty benchmark should be modified to suit the local context. Kazal told New Age on Wednesday that advocacy was a continuous process and that it continued in different forms across the country. ‘The people’s forum is a coalition of coalitions. Our main objective is to raise the awareness of the people about what the development goals actually are.’

Similar forums in other countries, such as the Philippines, have already lobbied and convinced their respective governments to redefine and modify their poverty benchmarks to something that are more acceptable. Officials of the UN Millennium Campaign have previously vowed to support any such move from the citizens’ organisations of any country but point out that it is essentially the responsibility of these campaigners.

Atiur Rahman, chairman of Unnayan Samunnay, a non-governmental organisation, and also the local chapter of the Social Watch, said Bangladesh might reach the development targets on time but that would hardly change the scenario. He also agreed that the poverty benchmark had to be redefined according local needs. ‘I prefer to use the term localising our development goals so that they are more meaningful.’

Anu Muhammad, a professor of economics at Jahangirnagar University, said the UN development goals were in fact a retreat from the level of ambition that had been set by the Bangladesh government in its five-year plans. ‘These targets actually lower the level of ambition and would amount to nothing meaningful even if they are achieved.’

Anu told New Age, ‘There is a continuous effort to change the methodology to measure poverty so that it undercounts the poor and projects a better image of poverty around the world.’ He said the ‘dollar a day (PPP)’ devised by the World Bank was also such a ploy.

‘I do not think poverty is a problem by itself but a manifestation of problems elsewhere. Thus reduction of poverty must be approached through productive and social sectors.’ He said otherwise one would merely engage in an ornamental approach which would allow the basic reasons of poverty to remain as they are.

*Tanim Ahmed works for NewAge, a leading english daily newspaper in Dhaka, Bangladesh. he can be reached at: tanimahmed@gmail.com