'You are poorer than you think'

Published July 2, 2015
When it comes to creating illusions, it doesn’t matter where one lives; the same gimmicks are deployed to conceal poverty.  —Reuters/file
When it comes to creating illusions, it doesn’t matter where one lives; the same gimmicks are deployed to conceal poverty. —Reuters/file

Poverty, like beauty, is in the eye of the beholder. In fact, defining poverty is essentially a by-product of dispassionate calculus that economists cherish and policymakers abuse to tell the poor they are richer than they really are.

Some years ago, the development banks and the inept governments in developing countries settled on an arbitrary definition of poverty. Living under $1.25 per day or other similar metrics were set as the thresholds for poverty. If one is above the arbitrary threshold, one is not deemed poor even if one's children are malnourished, unschooled, and stunted.

To alleviate poverty, we need to do better than devising arbitrary thresholds of poverty, such as living under a dollar or two a day. Instead, we require a multidimensional view of poverty that captures the multifaceted manifestations of poverty that the poor face every day.

Thanks to the researchers at Oxford University, one such measure exists; it exposes the deep-rooted poverty in numerous countries where the official stats paint a rosier picture over the ugly façades of intergenerational poverty.

Governments distort metrics to create an illusion of declining poverty

When it comes to creating illusions, it doesn’t matter where one lives; the same gimmicks are deployed to conceal poverty. Governments, development banks, or the marketers working for a commercial bank all try to convince the naked of being dressed, the hungry of being full, and the homeless of being sheltered.

In Canada, the Bank of Nova Scotia tells its customers, “you are richer than you think.” Never mind that the Canadian households have never been indebted to such levels in the recent history.

But the worst examples of such heartless calculus come from the developing countries where the economists and policymakers play even with the number of essential calories to devise a politically acceptable level of poverty.

Know more: Experts term economic growth mere illusion

Not so very long ago, I heard one such debate at a leading economic think tank in Islamabad. The learned economists were debating who were more poor, Indians or Pakistanis. As the debate circled around statistics and the arguments got sillier, one senior economist had a eureka moment: He declared with a great sense of pride that Pakistanis were less poor, especially when one uses a lower threshold of calories to define poverty.

So apparently, the key to eliminating poverty is to change the definition of 'starvation'.

In 2011, the government statistics in Pakistan identified 12.4 per cent of the population below the poverty line. This number was similar to living under US$1.25 per day threshold, which put 12.7 per cent of the population below the poverty line. Imagine if the government had picked US$2 per day as the threshold. This would have condemned 50.7 per cent of Pakistanis to poverty.

A government inclined to make a false impression would set a lower income threshold for poverty. The MPI, however, defines poverty based on the lived experience of the poor as they fail to meet the health, education, and other living standards.

The goal to reduce the proportion of the population living under US$1.25 per day will not lower poverty. What difference will such a transition make if the same population can still not afford to send their children to school, provide them with basic healthcare and minimum standards of living, such as access to a toilet or potable water?

Oxford University's new index considers poverty in all its dimensions

The researchers at the Oxford Poverty and Human Development Initiative (OPHI) have developed the Multidimensional Poverty Index (MPI) for more than 100 countries. They have also made available a detailed poverty index for Pakistan, that exposes the hitherto systematic under-reporting of poverty in Pakistan.

Unlike other income-based arbitrary measures, the MPI reveals a much larger number of Pakistanis are poor and destitute.

The Multidimensional Poverty Index (MPI) estimates 44.2 per cent of the population to be poor in Pakistan.

Also read: Over half of Pakistan lives under poverty line: Dar

Source: OHPI, Pakistan Country Report (2015).
Source: OHPI, Pakistan Country Report (2015).

A multidimensional view of poverty shows that for many countries, the incidence of poverty was much more pronounced than what the official poverty lines conceded. The figure below shows that the US$1.25 per day allows governments to portray a lower incidence of poverty than the reality.

For Pakistan, Cambodia, and many others, even the very poor cohorts (destitute) were larger than the ones below the US$1.25 per day threshold.

Source: OHPI, Pakistan Country Report (2015).
Source: OHPI, Pakistan Country Report (2015).

The MPI also offers a subnational breakdown of poverty to identify the regional and other differences. The rural-urban divide for poverty emerges as a result. Whereas the MPI identifies 44.2 per cent Pakistanis to be poor, 55.7 per cent of those living in rural areas are identified as poor compared to 20 per cent of the urban population (see the table below).

That the incidence of poverty in rural areas is more than twice that of urban areas should inform public policy in Pakistan so that additional funds are dedicated to poverty alleviation in rural parts of the country.

The reality, however, is much different. The poor continue to become worse off than before.

Source: OHPI, Pakistan Country Report (2015).
Source: OHPI, Pakistan Country Report (2015).

The MPI also identifies the inter-provincial differences in poverty. Balochistan continues to be the most deprived province in Pakistan, where more than 70 per cent of the population is deemed poor. Punjab, Pakistan’s most populous province – that is also home to Pakistan’s political and military elite – boasts a poverty rate that is half of the one in Balochistan.

Despite the fact that Sindh-based politicians have occupied the highest political offices in the country, the economic deprivation in the province’s rural areas has not improved. The MPI identifies over 53 per cent of the population to be poor in Sindh.

Also read: ‘Pakistan loses Rs500bn annually in tax exemptions’

The multidimensional view of poverty championed by the researchers at the Oxford University is similar to what others have advocated in the past. John Kenneth Galbraith, a giant in economic thought, argued as early as in 1958 to take a relative view of poverty rather than an absolute one, such as the ones based on absolute income or caloric thresholds.

He argued that “[p]eople are poverty-stricken when their income, even if adequate for survival, falls markedly behind that of their community.”

Later, in 1979, the British sociologist, Peter Townsend, furthered the definition of poverty when he argued that “individuals... can be said to be in poverty when they lack the resources to obtain the types of diet, participate in the activities and have the living conditions and amenities which are customary, or are at least widely encouraged or approved, in the societies to which they belong.”

To make a meaningful and sincere attempt to alleviate poverty at the national and subnational levels, one needs to define and measure poverty adequately. The gimmicks to make poverty appear less in official statistics than it really is, fools no one.


Reference:

Oxford Poverty and Human Development Initiative (2015). Pakistan Country Briefing. Multidimensional Poverty Index Data Bank. OHPI, University of Oxford, June. Available here.

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