On a Dollar A Day

Over the summer, I was preparing for my Global Citizenship course by reading Global Crises, Global Solutions, ed. Bjorn Lomborg. In a book written for economists in which every number was detailed and argued with, I found a statistic so common it wasn't even footnoted: 1.1 billion people live on less than a dollar a day.

The number got me thinking. I wanted to know what that meant, so I began to calculate what I live on. I might have spent $7 on lunch today, but that didn't begin to cover what I spent. Neither adding up all of my bills or my income and dividing by 30 or 31 made sense because I have equipment that helps me live. How should I count my fridge and oven, purchases I made long ago? I was stuck, so I turned on my computer (how about that? I suppose we have to say that immediate access to information counts as an improvement, even if I occasionally bemoan responsibilities created by my email at 2am.)

As it was 2am, I began this quest with a google search. I had thought I'd find several articles with links to an economics journal somewhere. After all, George W. Bush and Kofi Annan have used this statistic in speeches. My very first search revealed a controversy. As I hadn't questioned it, I felt ridiculous, but smart people throw this figure around like they were saying "Abraham Lincoln was the 16th President" or "the Earth is the third planet from the sun."

This statistic was made up by the World Bank. Its not backed by anything useful; it just makes poverty catchy. That's not the worst thing ever, right? Right? RIGHT?!

Well, not according to Sanjay G Reddy and Thomas W. Pogge, who argue in their article How Not to Count The Poor (http://www.columbia.edu/~sr793/count.pdf) that:

"The World Bank’s approach to estimating the extent, distribution and trend of global income poverty is neither meaningful nor reliable. The Bank uses an arbitrary international poverty line that is not adequately anchored in any specification of the real requirements of human beings. Moreover, it employs a concept of purchasing power "equivalence" that is neither well defined nor appropriate for poverty assessment. These difficulties are inherent in the Bank’s “money-metric” approach and cannot be credibly overcome without dispensing with this approach altogether. In addition, the Bank extrapolates incorrectly from limited data and thereby creates an appearance of precision that masks the high probable error of its estimates. It is difficult to judge the nature and extent of the errors in global poverty estimates that these three flaws produce. However, there is reason to believe that the Bank’s approach may have led it to understate the extent of global income poverty and to infer without adequate justification that global income poverty has steeply declined in the recent period. "

So, instead of spending the week trying to understand what poverty is like and thinking about what I can do or encourage others to do, I spent the week mucking through biased websites trying to figure out what's really going on with the World Bank and the IMF. Are they evil conspirators, or well-meaning failures? All this and more, coming up.