UN report castigates WB's poverty estimates

ASHOK B SHARMA

The United Nations has noted that economic liberalization across the world since 1980s has slowed down growth and poverty reduction and increased inequality and vulnerability in most countries. The growth slowdown was market in all the years except the period 2003-08.

No viable yardstick exists to estimate poverty. The world is not on the track to meet the Millennium Development Goals 1 of bringing down extreme global poverty by half by 2015. MDG high-level meeting is scheduled in September 2010.

The impact of the current financial crisis which began from later half of 2008 has only added to the worsening situation.

Economic liberalization has reduced the policy space of the government and decreased revenue collection, both of which are necessary tools of the state to combat poverty and hunger.

South Asia and sub-Saharan Africa house most of the world’s poor. Poverty in SouthAsia increased from 20% in 1981 to 43% in 2005, while that in sub-Saharan Africa it has more than doubled from 11% to 28% between 1981 and 2005.

The UN Report on the World Social Situation-2010 with the theme – Rethinking Poverty – released by the UN Assistant Secretary-General, Jomo Kwame Sundaram here on Monday, in this context, urged “it is time to rethink way we understand poverty, how it is measured and policies to address it.”

It called to set up efforts for promoting decent work, protecting and augmenting social expenditures, particularly for health and education and establishing social protection floor comprised of a basic social security package. The 1995 Copenhagen World Summit for Social Development identified poverty eradication as one of the three pillars of social development. The 1995 World Social Summit has defined poverty as deprivation, social exclusion and lack of participation.

The report also observed that there is no proper mechanism to estimate the level of poverty. Income or spending yardstick does not tell the entire story.

The earlier estimate of poverty was those living on less than US$ 1 per day. Later it was said that those living on less than US$ 1.08 a day are poor. In 2005 the World Bank redefined poor as those living on less than UD$ 1.25 a day. If US inflation is considered, the poverty line should be US$ 1.45 a day, the UN report said.

In India the Arjun Sengupta Committee has estimated that about 78% of the people live on less than Rs 20 a day. According to Tendulkar Committee poverty in India has increased, while NC Saxena Committee estimates more that half of the population of rural India as poor.

The World Bank has said that the global poverty has declined from 1.9 billion in 1981 to 1.4 billion in 2005. Taking a dig at the World Bank, the UN Assistant Secretary-General, Jomo Kwame Sundaram said : “if this is so then why the UN Food and Agriculture Organisation (FAO) has estimated an increase of 142 million hungry people in the world since 1990-92. This shows there is a contradiction in the estimate of poverty.”

The UN report noted inconsistent correction for rural-urban price differences, only for India and China, mainly for urban prices introducing urban bias. Hence the World Bank estimates for India and China are not comparable to rest of the developing world as it grossly underestimate poverty in these two large countries or overestimate poverty elsewhere. If China is removed from the World Bank’s estimate, the number of poor people living worldwide has increased from 1.1 billion to 1.2 billion.

The UN report also observed that the conventional household income estimate tends to ignore the variations in household size, assets and demographic composition. It also tends to ignore intra-household disparities. There may be some chronically ill member in some households

The report also found that “poverty magic bullets” like micro-finance, property rights, including land titling and “Bottom of the Pyramid” marketing have not worked well to eradicate poverty.

According to the report as market failures are likely to occur, good governance with social objective is necessary for poverty alleviation. Focus should be on alternative growth-enhancing governance capabilities to address key development bottlenecks. Growth process needs to be more stable by maintaining consistently counter-cyclical macroeconomic stance. Measures should be aimed at reducing inequality. Targeting poor is often expensive and politically unsustainable, while missing out many deserving and therefore the social measures should be universal in nature.