Will we reach the Millennium Development Goals?

Iyanatul Islam, The Daily Star, Asia News Network, Dhaka

The World Bank, through its 2004 World Development Indicators, has released new global poverty estimates for the 1981 to 2001 period. The world's poor are classified by determining whether their income/ consumption levels fall below two so-called international poverty lines: US$1 a day and $2 a day.

Both these thresholds are expressed in terms of 1993 purchasing power parity (PPP). It is customary to treat the $1 a day poverty line as a measure of extreme poverty, while $2 a day is interpreted as the practical minimum for middle-income economies.

The $1 a day poverty line is now enshrined as part of the Millennium Development Goals (MDGs) that the international community -- represented by 189 countries -- endorsed in September 2002 at the UN Millennium summit. The MDGs commit the global community to attain target reductions in both income and non-income dimensions of poverty by 2015 (using 1990 as the base year).

The global figures suggest that extreme poverty in relative terms has apparently fallen significantly (from 39.5 percent in 1981 to 21.3 percent in 2001). Projections made by the Bank suggest that the developing world as a whole is likely to reach the target set by the MDGs.

The overall trends are influenced by a "China effect". Rapid growth in China has been accompanied by a rapid reduction in poverty. Given its large weight in the world's population, the trends in the absolute numbers in extreme poverty have been heavily influenced by developments in China.

If one excludes China from the estimates, the absolute numbers in extreme poverty are slightly higher in 2001 than they are in 1981 (881 million in 2001 vs. 845 million in 1981). Regional trends are consistent with this conclusion, where stagnation and negative growth seem to have taken their toll, as in Africa and, for much of the 1990s, in the ex-Communist bloc in Eastern Europe.

In recent years, the global poverty statistics have been mired in controversy. Some argue that the use of the PPP method imparts both a downward bias and considerable volatility to the poverty estimates. Thus, for example, the Bank's decision to update the PPP series (from 1985 to 1993) caused large and arbitrary changes in poverty counts for quite a few countries.

At the other extreme are those scholars who demonstrate that the trend decrease in extreme poverty has been much faster than the evidence compiled by the Bank and that the MDG goal of halving extreme poverty has already been reached. Surjit Bhalla has made the astonishing claim that the Bank deliberately overstates the incidence of poverty so that it can continue to justify its large operations in developing countries.

As Angus Deaton has argued, the nature of the controversy can be traced to the fact that some scholars have relied on readily available national accounts data to generate the poverty estimates, while the Bank relies on household surveys.

The average consumption/income that can be derived from the national accounts are usually significantly higher than the corresponding mean from the survey data. In some important cases, such as India, the discrepancy has grown over time. This suggests that household surveys understate the income/consumption growth of the poor and thus overstate poverty levels.

One should not, however, jump to the conclusion that the national accounts data are more reliable than survey data. The former aims to measure macroeconomic aggregates, while the latter are geared towards estimating living standards at a household level.

It is a perilous procedure to conflate the two. This has motivated Angus Deaton to argue that the professional community concerned with global poverty estimates must come to an agreement on appropriate protocols for monitoring global poverty. At the same time, he suggests that the Bank should seriously consider abdicating its current position as the sole official producer of global poverty statistics and either transfer the enterprise to an independent, accountable body or pursue its current obligations jointly with the UN.

In a refreshingly radical paper, Lant Pritchett has rejected the idea that one should continue to measure global poverty in terms of the $1 a day benchmark. He makes the important point that the current approach does not measure global poverty because its application inevitably means that there is hardly any poverty even in a middle-income country such as Malaysia. Any measure of global poverty should have a uniform standard against which all the poor in the world -- from Chad to Canada -- can be assessed.

Using this novel approach, Pritchett argues that a measure of global poverty would need to rely on $15 a day (in terms of PPP dollars) which corresponds to the practical minimum for OECD economies. In this scheme, $1 a day is a measure of destitution, while $2 a day is a measure of extreme poverty. The message clearly is that the world in last the two decades of globalization has witnessed some progress against destitution, but any meaningful progress against global poverty is a long way off and is certainly not going to be achieved by 2015.

Preoccupation with the $1 a day measure of extreme poverty has also deflected attention from assessing changes in non-income dimensions of poverty within the framework of the MDGs, especially target reductions in hunger and malnutrition, child and maternal mortality as well as provision of universal primary schooling for boys and girls.

Here is the latest report card compiled by the World Bank. Less than 50 percent of the countries are on track to reach the 2015 target for reductions in hunger and malnutrition; children in more than half the developing world will not receive primary education by 2015; most regions in the developing world will not achieve the target reductions in child and maternal mortality by 2015. The challenges of attaining the MDGs are clearly monumental!

The writer is Professor, Department of International Business and Asian Studies, Griffith Business School, Griffith University, Australia, and one of the founding editors of the Journal of the Asia Pacific Economy.