By Michel Chossudovsky
Professor of Economics, University of Ottawa, author of The Globalisation of Poverty, Impacts of IMF and World Bank Reforms, Zed Books, London, 1997.
© copyright by Michel Chossudovsky, Ottawa, 1999.
Until the 1998 financial meltdown ("black September" 1998), the World economy was said to be booming under the impetus of the "free market" reforms.
Without debate or discussion, so-called "sound macro-economic policies" (meaning the gamut of budgetary austerity, deregulation, downsizing and privatisation) continue to be heralded as the key to economic success and poverty alleviation. In turn, both the World Bank and the United Nations Development Programme (UNDP) have asserted authoritatively that economic growth in the late 20th Century has contributed to a reduction in the levels of World poverty. According to the UNDP, "the progress in reducing poverty over the 20th century is remarkable and unprecedented... The key indicators of human development have advanced strongly."1
The Devastating Impacts of Macro-economic Reform
are casually denied
The World Bank Methodology: Defining Poverty at
a "Dollar a Day"
The World Bank "methodology" conveniently reduces recorded poverty without the need for collecting country-level data. This "subjective" and biased assessment is carried out irrespective of actual conditions at the country level. 3 The one dollar a day procedure is absurd: the evidence amply confirms that population groups with per capita incomes of 2, 3 or even 5 dollars a day remain poverty stricken (ie. unable to meet basic expenditures of food, clothing, shelter, health and education).
"Authoritative" World Bank Numbers
The data is then tabulated in glossy tables with "forecasts" of declining levels of global poverty into the 21st Century. These World Bank "forecasts" of poverty are based on an assumed rate of growth of per capita income, --ie. growth of the latter implies pari passu a corresponding lowering of the levels of poverty. Its a numerical game!
World Bank "Forecasts": Poverty in China will decline
to 2.9 percent
The whole framework (stemming from the one dollar a day assumption) is tautological; it is totally removed from an examination of real life situations. No need to analyse household expenditures on food, shelter and social services; no need to observe concrete conditions in impoverished villages or urban slums. In the World Bank framework, the "estimation" of poverty indicators has become numerical exercise.
The UNDP Framework
Based on the above criteria, the UNDP Human Development Group comes up with estimates of human poverty which are totally inconsistent with country-level realties. The HPI for Colombia, Mexico or Thailand, for instance, is of order of 10-11 percent (see Table 1). The UNDP measurements point to "achievements" in poverty reduction in Sub-Saharan Africa, the Middle East and India which are totally at odds with country-level data.
The human poverty estimates put forth by the UNDP portray an even more distorted and misleading pattern than those of the World Bank). For instance, only 10.9 percent of Mexico's population are categorised by the UNDP as "poor". Yet this estimate contradicts the situation observed in Mexico since the mid-1980s: collapse in social services, impoverishment of small farmers and the massive decline in real earnings triggered by successive currency devaluations. A recent OECD study confirms unequivocally the mounting tide of poverty in Mexico since the signing of the North American Free Trade Agreement (NAFTA). 7
Double Standards in the "Scientific" Measurement
In the West, the methods for measuring poverty have been based on minimum levels of household spending required to meet essential expenditures on food, clothing, shelter, health and education. In the United States, for instance, the Social Security Administration (SSA) in the 1960s had set a "poverty threshold"which consisted of "the cost of a minimum adequate diet multiplied by three to allow for other expenses". This measurement was based on a broad consensus within the US Administration. 8
The US Poverty Threshold
According to the UNDP Poverty in Mexico is lower
than in the United States
Conversely, if the US Bureau of Census methodology (based on the cost of meeting a minimum diet) were applied to the developing countries, the overwhelming majority of the population would be categorised as "poor". While this exercise of using "Western standards" and definitions has not been applied in a systematic fashion, it should be noted that with the deregulation of commodity markets, retail prices of essential consumer goods are not appreciably lower than in the US or Western Europe. The cost of living in many Third World cities is higher than in the United States.
Moreover, household budget surveys for several Latin American countries suggest that at least sixty percent of the population the region does not meet minimum calorie and protein requirements. In Peru, for instance, following the 1990 IMF sponsored "Fujishock", 83 percent of the Peruvian population according to household census data were unable to meet minimum daily calorie and protein requirements. 11 The prevailing situation in Sub-Saharan Africa and South Asia is more serious where a majority of the population suffer from chronic undernourishment.
The investigation on poverty by both organisations take official statistics at face value. It is largely an "office based exercise" conducted in Washington and New York with few insights or awareness of "what is happening in the field". The 1997 UNDP Report points to a decline of one third to a half in child mortality in selected countries of Sub-Saharan despite the slide in State expenditures and income levels. What it fails to mention, however, is that the closing down of health clinics and the massive lay-offs of health professionals (often replaced by semi-illiterate health volunteers) responsible for compiling mortality data has resulted in a de facto decline in recorded mortality. The IMF-World Bank sponsored macro-economic reforms have also led to a collapse in the process of data collection.
Vindicating the "Free" Market System
Declining levels of poverty including forecasts of future trends are derived with a view to vindicating the "free market" policies and upholding the "Washington Consensus" on macro-economic reform. The "free market" system is presented as the "solution", namely as an instrument of poverty alleviation. The impacts of macro-economic reform are denied. Both institutions point to the benefits of the technological revolution and the contribution of foreign investment and trade liberalisation to the eradication of poverty.
Source: Human Development Report 1997, table 1.1, p. 21
POVERTY IN SELECTED G7 COUNTRIES, BY NATIONAL STANDARDS
** Centre for International Statistics, Canadian Council on Social
2. For a methodological review on the measurement of poverty see Jan Drewnowski, The Level of living Index, United Nations Institute for Social Research and Development (UNRISD), Geneva, 1965. See also the extensive research on poverty thresholds conducted by the US Bureau of the Census.
l'internationalisation, Le Devoir, Montreal, 28 March 1998, p.A4.
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