The World Bank’s Poverty Illusion

Mel Gurtov

(8/3) What would you estimate is the minimum amount of money you need to get by every day? $100? $50? The figure, of course, depends very much on where you live and what you’re used to spending. Now shift and imagine you’re in a so-called developing country, say in sub-Saharan Africa or Southeast Asia. You might estimate you can get by on $10 if you’re in, say, Kenya as opposed to $20 in Thailand. But how about trying to live on $1.90 a day? According to the World Bank, that would put you in "extreme poverty." Yet the Bank uses that figure as the "International Poverty Line (IPL)," and by that measure, global poverty has been reduced significantly. Which also means that if you’re making two or three times that amount per day, you’re supposed to be overcoming poverty.

From a critical and human-interest perspective, the IPL is nonsense. Anyone living on $1.90 a day—the World Bank for many years used $1 a day to define extreme poverty—cannot possibly live a meaningful life no matter how defined. In fact, the IPL is a political measure, set deliberately low to show how well the World Bank, other international funding agencies, and governments are doing at overcoming poverty. Governments like the low figure because they can pretend that citizens making the next highest levels of daily income, $3.20 and $5.50, are far more numerous than their poorest cousins. In short, the figure is a great way to evade responsibility.

Fortunately, we have an impeccable source for calling out the World Bank’s claim: Philip Alston, who has just left his post as the UN special rapporteur on extreme poverty and human rights. In his final report to the UN in early July, Alston said:

Even before COVID-19, we squandered a decade in the fight against poverty, with misplaced triumphalism blocking the very reforms that could have prevented the worst impacts of the pandemic. COVID-19 is projected to push hundreds of millions into unemployment and poverty, while increasing the number at risk of acute hunger by more than 250 million. But the international community’s abysmal record on tackling poverty, inequality and disregard for human life far precede this pandemic. Over the past decade, the UN, world leaders and pundits have promoted a self-congratulatory message of impending victory over poverty, but almost all of these accounts rely on the World Bank’s international poverty line, which is utterly unfit for the purpose of tracking such progress.

Alston called the Bank’s $1.90 poverty line, by which it could claim that over 1.1 million people were lifted out of extreme poverty between 1990 and 2015, "scandalously unambitious." "The best evidence shows it doesn’t even cover the cost of food or housing in many countries," he said. "The poverty decline it purports to show is due largely to rising incomes in a single country, China. And it obscures poverty among women and those often excluded from official surveys, such as migrant workers and refugees." In all, a devastating critique.

The reality about global poverty, which the World Bank would prefer that we forget, is that extreme poverty has hardly improved at all in recent decades. "Even before the pandemic," Alston says, "3.4 billion people, nearly half the world, lived on less than $5.50 a day. That number has barely declined since 1990." And with COVID-19, which the World Bank does take into account, "poverty rates will go up as the global economy falls into recession and there is a sharp drop in GDP per capita. The ongoing crisis will erase almost all the progress made in the last five years." That conclusion seems all but certain since, as two analysts say in an upcoming issue of Foreign Affairs, it will probably take several years for the global economy as a whole to recover from the contraction brought on by the pandemic. They cite a massive decline in exports (2020 will be "the worst year for globalization since the early 1930s"), very high unemployment, and an especially harmful impact on low-income people, who lack the education, job security, and health to survive without government support that will not be available in struggling economies.

The result? The World Bank estimates that 40 million to 60 million people will fall into extreme poverty (under $1.90/day) in 2020, compared to 2019. But again, the Bank uses the same flawed measurement, which means we have to add in (by the Bank’s account) anywhere from 70 to 180 million more people in the $5.50 a day category.

A major omission from the World Bank’s assessment is who benefits from poverty. The Bank says nothing about the world’s richest one percent, whose fortunes never fall, or the tax havens that enable multinational corporations to hide a large percentage of their profits. Again, Philip Alston, in his final report: "Instead multinational companies and investors draw guaranteed profits from public coffers [such as through tax havens], while poor communities are neglected and underserved. It’s time for a new approach to poverty eradication that tackles inequality, embraces redistribution, and takes tax justice seriously. Poverty is a political choice and it will be with us until its elimination is reconceived as a matter of social justice."

Poverty is indeed a political choice, as we in the US know very well. Philip Alston told us that in 2017 when he visited several deep pockets of poverty, from Los Angeles to West Virginia and Detroit to Puerto Rico, at the end of 2017. His report (UN General Assembly Doc. A/HRC/38/33/Add.1, May 4, 2018) is a devastating indictment of the government that underscores the large and growing contradictions between the American Dream and reality. Alston told The Guardian that Trump’s policies amount to " a systematic attack on America’s welfare program that is undermining the social safety net for those who can’t cope on their own. Once you start removing any sense of government commitment, you quickly move into cruelty.

In support of Alston, Robert Reich, the former labor secretary who often writes on inequality in America, says:

Over the last four decades, the median wage has barely budged. But the incomes of the richest 0.1% have soared by more than 300% and the incomes of the top 0.001% (the 2,300 richest Americans), by more than 600%. The net worth of the wealthiest 0.1% of Americans almost equals that of the bottom 90% combined. This grotesque imbalance is undermining American democracy.

The story of the "grotesque imbalance" between rich and poor is a global story that has been told often—and just as often ignored by those who enjoy keeping things as they are. Creating an economy based on social justice cannot be accomplished with quick fixes or "reforms." It really is a revolutionary enterprise.

Mel Gurtov is Professor Emeritus of Political Science at Portland State University.

Read other articles by Mel Gurtov