Alert Sign Dear reader, online ads enable us to deliver the journalism you value. Please support us by taking a moment to turn off Adblock on

Alert Sign Dear reader, please upgrade to the latest version of IE to have a better reading experience


New measure of poverty

July 21, 2010


FOR long economists have sought to devise yardsticks to quantify economic progress which can be called an intangible phenomenon.

At one time, measures such as the GDP growth rate, the employment rate and inflation were considered enough to help governments determine how the economy was doing and how it was affecting people. When international aid-giving agencies became major actors in the global economy the need was felt to develop universal standards in order to allow governments and aid-givers to compare the economies of different countries.

That was not all. It was also recognised that economics called for a holistic view if it was not simply to be viewed as the capacity to make money. There are many factors that determine the quality of life of people and enhance the economic productivity of a nation. The key ones are education, healthcare and basic civic amenities that came to be regarded as the responsibility of the state.

A new concept was also put forward by economists spearheaded by Nobel Laureate Prof Amartya Sen that poverty was not simply 'income deprivation' as it had been conventionally understood but 'capability deprivation'. It is the latter that prevents people from realising their optimal wellbeing and potential.

In the 1970s a rudimentary measure had been developed called the Physical Quality of Life Index (PQLI) that was based on calculating the literacy rate, the infant mortality rate and life expectancy at age one.

Then development practitioners moved on to the human development index which was first devised by Pakistani economist Dr Mahbubul Haq and has been published by the UNDP annually for 20 years. Based on more complex calculations, it factorises life expectancy, literacy and the standard of living based on real GDP per capita (purchasing power parity).

Although the UNDP has developed additionally a number of indices such as the gender empowerment index, poverty index and so on, we now have a new one called the Multidimensional Poverty Index (MPI) that will feature in this year's UNDP's Human Development Report to be released in October.

Developed by the Oxford University's Poverty and Human Development Initiative for the UNDP, the MPI has been billed as an “innovative new measure that gives a multidimensional picture of people living in poverty”.

Measuring poverty in 104 Third World countries where 78 per cent of the world's population lives, the index claims to go beyond measuring income (that determines the purchasing capacity of a person) to assess the “nature and intensity of poverty at the individual and household level in education, health outcomes and standard of living” (that includes water supply, sanitation and electricity).

Hence the indicators have been increased to 10. A person who is deprived in 70 per cent of the weighted indicators is clearly worse off than someone with 30 per cent deprivation, the latter being the cut-off mark for poverty.

There is no denying that this approach delineates in greater detail the nature of poverty that afflicts people in any country. More worrying for many governments — at least those who care — is that the poverty ratio by the MPI in most cases works out to be much higher than has been done by conventional methods.

Take Pakistan's case. Comparing the MPI with other poverty measures gives different results. According to the MPI 51 per cent of Pakistanis are poor when the older criteria of $1.25 a day showed only 23 per cent to be poor, the $2 a day measure put 60 per cent in the impoverished category while the government's own national poverty line placed 33 per cent of the population in poverty.

According to the new index Pakistan has 88 million poor. The figure may well be higher considering that the calculations are based on the data given in the Demographic and Health Survey of 2007 and we know that the situation has grown worse in the last three years.

It is not clear how this extra information will help eliminate poverty, which is proclaimed to be the ultimate goal of all governments and aid-givers. Pakistan should be worrying most about the high degree of deprivation in schooling and enrolment — 19.3 per cent and 30 per cent respectively.

Along with child mortality these three indicators contribute to more than half of the multidimensional poverty in the country. The deprivation in nutrition is not given. The poor social-sector performance means the poor in Pakistan can hardly hope for a better future. It is patent that a good education is the key that can open doors to opportunities and the realisation of one's capabilities.

Some countries emerge as poorer than us in this index but their better education indicators mean that more people will acquire the capability to pull themselves out of poverty. Poverty in India, according to the MPI, is 55.4 per cent but the deprivation in schooling (17.6 per cent) and enrolment (25 per cent) is much lower than ours.

Similarly Bangladesh is poorer with 57.8 per cent poverty and its deprivation in schooling (23.7 per cent) is also more than Pakistan's but deprivation in enrolment is nine per cent which means that schooling should improve in due course.

Another feature that characterises the fate of the poor and which no index has been able to record includes the humiliation and injustice they have to suffer. Consider. Why is it that the victims of police excesses are invariably poor? Why does a crime against a poor person generally go unpunished? Why is the wrong he suffers not redressed? Is it surprising when a poor person in trouble — not because he has been on the wrong side of the law — has to forge connections with the more privileged to save his skin?

The MPI does not have any mechanism to measure the injustices that are an integral part of poverty in most Third World countries. And yet we know how the absence of social justice affects the self-esteem of people which in turn creates capability deprivation.