Opinion & Commentary
Lies and statistics
Surjit Bhalla's book Imagine There's No Country has created a furore in Washington by convincingly demonstrating that the World Bank's poverty count of 1.15 billion poor people in developing countries is a gross exaggeration. Bhalla blames the monopoly the World Bank exercises over the vast and costly data set on which its poverty estimates are based for the prevalence of exaggerated poverty estimates that are used to drum up support for aid, particularly for contributions to World Bank's programs. To add insult to injury, the costs of these exaggerated estimates are paid for by interest loans on World Bank loans.
David Dollar of the World Bank, speaking to the Reserve Bank-Treasury Conference on Globalisation, Living Standards and Inequality in Sydney in May 2002, claimed an even higher 1.4 billion people living on less than US $1 a day in developing countries.
Bhalla estimates that the number of people in absolute poverty is only 650 million.
Bhalla has carefully added up the number of poor people in developing countries. He has, like the World Bank, used household surveys, but because these are based on small and irregular samples in developing countries, as well as being notoriously inaccurate, particularly for low incomes, he has supported these data by national income and expenditure data.
He has used purchasing power parity estimates carefully, increasing the World Bank's US$1 dollar a day to US$1.50 a day for a more generous poverty line. (Many national measures of poverty in developing countries are lower. The official Chinese poverty line, for example, is US60 cents, resulting in only 80 million living in poverty, compared to over 100 million in Bhalla's calculation and over 200 million in the World Bank's estimates.) Bhalla has also worked in percentiles rather than quintiles or deciles to arrive at more accurate results.
Bhalla concludes that globalisation 'has been the golden age of development'. From 1985 to 2000 poverty in developing countries declined from 37 to 13 per cent of the population. Growth in China and India played a key role in this outcome. World-wide, Bhalla argues, inequality is at its lowest level in 50 years.
These figures make nonsense of halving the numbers in poverty by 2015 to 15 per cent of the developing country population, the target that James Wolfensohn used to justify the Monterrey aid raising jamboree.
The number of people in poverty is, of course, still far too high. Further poverty reduction is crucial. Dollar and Bhalla agree that it depends on continuing economic growth, to which international trade and capital are critical. It is also important to recognise that the poorest people, with least improvement - and sometimes even decline - in living standards are in failed states. They are the victims of civil and international wars and their own governments in countries such as Burundi, Sudan, Congo, Mali, Chad and Sierra Leone, some 28 in all in Africa.
Estimates of poverty must be realistic if poverty is to be alleviated and eliminated. 'Crying wolf' by exaggerating developing country poverty diffuses aid efforts and makes them ineffectual.
