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World Bank: Two and a half billion people live on less than $2 a day

World Bank: Two and a half billion people live on less than $2 a day
By David Walsh
2 September 2008

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The World Bank reported Tuesday that in 2005 an estimated 1.4 billion
people in the so-called ‘developing world,’ one-fourth of its
population, lived on less than $1.25 a day, the new official poverty
line. This figure is 400 million more than the Bank’s 2004 estimate of
985 million. Another 1.2 billion people live on between $1.25 and $2 a day.

The report issues from an institution correctly identified by great
numbers of people around the world as a reactionary pillar of the global
financial system. Despite efforts by Bank officials to put the best face
on things, that more than two and a half billion people continue to live
in unspeakable poverty in the first decade of the 21st century is an
indictment of the capitalist system.

Martin Ravallion and Shaohua Chen, of the World Bank’s Development
Research Group, in a study entitled, “The Developing World is Poorer
than We Thought, But No Less Successful in the Fight Against Poverty,”
note that in 2004, for the first time, the Bank’s global poverty count
had fallen below one billion.

They continue: “Alas the revised estimates reported in the present paper
suggest that our celebrations in finally getting under the one billion
mark for the ‘$1 a day’ poverty count were premature. ... We find that
the incidence of poverty in the world is higher than past estimates have
suggested.”

The 2005 estimates are based on surveys conducted in 116 countries and
interviews with some 1.23 million households.

The most dire conditions exist in Sub-Saharan Africa. After a
quarter-century (1981-2005) that witnessed the most extraordinary
advances in technology, the percentage of people living in absolute
poverty in that region remained unchanged; some 50 percent of its
population subsists on $1.25 a day or less.

The actual number of the extremely poor in Sub-Saharan Africa almost
doubled, from 200 million in 1981 to about 380 million in 2005. “If the
trend continues,” notes a World Bank press release, “a third of the
world’s poor will live in Africa by 2015. Average consumption among poor
people in Sub-Saharan Africa stood at a meager 70 cents a day in 2005.”

Most of the 15 poorest countries in the world—Malawi, Mali, Ethiopia,
Sierra Leone, Niger, Uganda, Gambia, Rwanda, Guinea-Bissau, Tanzania,
Tajikistan, Mozambique, Chad, Nepal and Ghana—are located in Africa.

In South Asia, the percentage of those living below the $1.25 poverty
rate has decreased from 60 to 40 percent over 1981-2005, but the
absolute number of desperately poor people did not decline; there are
some 600 million in that category. In India, extremely uneven economic
development reduced the poverty rate as a share of the total population
from 60 percent in 1981 to 42 percent in 2005, but the number of the
destitute increased from 420 million in 1981 to 455 million in 2005.

The largest factor in lowering the percentage of extremely poor people
in East Asia has been the explosive industrialization of China. In 1981
East Asia was the poorest region in the world. In China the number of
people surviving on less than $1.25 a day in 2005 prices dropped from
835 million in 1981 to 207 million in 2005. A quarter of a century ago,
the report states, “China’s incidence of poverty (measured by the
percentage below $1.25 per day) was roughly twice that for the rest of
the developing world; by the mid-1990s, the Chinese poverty rate had
fallen well below average.”

In the former colonial world, outside of China, the progress has been
far more limited; the total number of extremely poor people has remained
at about 1.2 billion. The percentage of the ‘developing world’
population living in absolute poverty has decreased from 40 percent in
1981 to 29 percent in 2005, according to the Bank. Excluding China,
however, the most oppressed countries are not on track to reach the
Millennium Development Goal (MDG) of halving the 1990 poverty rate by 2015.

In Eastern Europe and Central Asia (EECA), the former Stalinist-ruled
countries, the picture is bleak. “The mean consumption of EECA’s poor
has actually fallen since the 1990s, even though the overall poverty
rate was falling.” In passing, the authors note that social inequality
has grown in that region since the collapse of Stalinism: “The paucity
of survey data for EECA in the 1980s should also be recalled. Thus our
estimates are heavily based on extrapolations, which do not allow for
any changes in distribution. One would expect that distribution was
better from the point of view of the poor in EECA in the 1980s, in which
case poverty would have been even lower than we estimate—and the
increase over time even larger.”

The poverty rate in Latin America and the Caribbean has also declined,
but not enough to bring down the number of extremely poor people.

Ravallion and Chen point to two phenomena that tend to undercut even the
limited progress they cite.

First, although hundreds of millions of people have lifted themselves
out of absolute poverty since 1981, the improvement has been very slight
for vast numbers. While the increase in wealth at the other pole of
global society, registered in the number of billionaires and the share
of national incomes held by the top one or five percent of the
population, has been explosive, the very poor have only inched ahead and
remain immensely vulnerable.

The study’s authors point to the phenomenon of “bunching up” that has
occurred between $1.25 and $2.00 a day. They observe that the number of
people living at that level “has actually risen sharply over these 25
years, from about 600 million to 1.2 billion. This marked ‘bunching up’
of people just above the $1.25 line suggests that the poverty rate
according to that line could rise sharply with aggregate economic
contraction.”

Speaking of the same phenomenon in relation to both East and South Asia,
they note that a total of some 900 million people live on between $1.25
and $2.00 a day, “roughly equally split between the two sides of Asia.
While this points again to the vulnerability of the poor, by the same
token it also suggests that substantial further impacts on poverty can
be expected from economic growth, provided that it does not come with
substantially higher inequality.”

In a press release, the World Bank notes that its estimates “suggest
less progress in getting over the $2 per day hurdle. Indeed, we have
seen no change in the number of people living below $2 per day at around
2.5 billion, between 1981 and 2005.”

In another press release, the Bank is also careful to point out that the
new estimates “do not yet reflect the potentially large adverse effects
on poor people of rising food and fuel prices since 2005.”

Or, as Ravallion and Chen write in their conclusion, “There are a great
many people who have reached the frugal $1.25 standard, but are still
very poor, and clearly vulnerable to downside shocks. One such shock is
the steep rise in international food and fuel prices since 2005. Despite
the progress in reducing the lags in survey data availability, it will
probably not be until 2010 that we can make a reasonably confident
assessment of the ex post impacts of the rising food and fuel prices on
the world’s poor. Until then, ex ante assessments will be required,
based on pre-crisis data and economic assumptions. Such assessments
suggest that at least a few years of the progress reported here have
been eroded since 2005.”