Where does poverty end?

BY Sangwani Mwafulirwa

Former South Africa’s president Nelson Mandela once
said: “Poverty is not natural. It is man-made and it
can be overcome and eradicated by the actions of human
beings”. SANGWANI MWAFULIRWA explores the parameters
of poverty based on the poverty threshold of the World
Bank.
Osbert Bamusi works as minibus conductor and gets
K6,000 for a month’s work. From this wage, he pays
rent for a single bedroom hut in the amorphous
neighbourhood of Zambia in Ndirande, buys food and
clothes and pays for other services like health.

His daily income – of K200 – is above the World Bank’s
poverty threshold of $1 (K140) a day. Could he be
described as living above the poverty line where 65
percent of Malawians or half of Africa or 1.2 billion
people of the world are described to be under?

Although more “normalised” in the developing
 world,
poverty also exists in big economies. The US Census
Bureau says by the end of 2005, there were 37 million
people — about 13 percent of the total population —
living in poverty. It also estimated that everyday
2,019 babies are born into poverty in the USA. 

Unicef estimates that 30,000 people die everyday
because they are too poor to stay alive.

The World Bank, born International Bank for
Reconstruction and Development, has used the one
dollar a day since 1990 as a threshold for measuring
poverty in Africa and Asia and US$2 a day for Latin
America and the Caribbean based on the purchasing
power parity. 

The purchasing power parity basically suggests that
prices of goods in countries tend to equate under
floating exchange rates and therefore people would be
able to purchase the same quantity of goods in any
country for a given sum of money. That is, the notion
that a dollar should buy the same item
 in all
countries.

The bank has published these figures for 15 years
which have been used for policy and other major
decision making like the Millennium Development Goals
and measuring global economy but it is surprising how
it fails to come up with a crosscutting benchmark.

However, this formula has come under attack for
focusing much on purchasing power while ignoring the
social dimension of poverty. It measures the ability
of the poor to buy goods and services the economy is
offering and forgets that the poor do not purchase
some services offered like washing and fitness
instructions.

The fault with the bank’s formula is that it is not
clearly defined what is included in the US$1 a day
except that “the ability of the income to satisfy the
most compelling of human desires”. It does explicitly
if some desires which are met without paying for them
like water from a borehole, vegetables from a bush
 and
game meat are included and how they are valued.

The World Bank Malawi Office fails to explain what the
US$1 a day could entail in a Malawian situation and if
it is really possible that a person can get all the
basic needs with that amount. There are some services
like washing, firewood and some foods like vegetables
and game which are not purchased, are they included in
the $1? Is it really possible that one can meet all
her basic needs with one dollar?

Basing on the World Bank benchmark, a family of six
would need not less than K25,200 in a month to live
above the poverty line. This makes interesting
revelations for graduates with this family size who
joins the civil service. With a monthly net income of
K22,000, definitely they are predestined to live below
the poverty line if there is no supplementary income.

The World Bank estimates are relatively close to
findings by the Centre for Social Concern
 (CFSC) which
monitors prices of goods on the local market from
which it derives the average monthly net income a
family of six would need, dubbed the basic needs
basket.

The average for the first five months of this year was
between K23,942 to K27,106. The basic needs basket
includes cost of milling, eggs, beans, dry fish,
rape/Chinese cabbage, tomatoes, onions, fresh milk,
Kazinga cooking oil, bread, sugar, kitchen salt, tea
leaves, potatoes/cassava, charcoal, paraffin Lifebuoy,
Sunlight, Vaseline Blue Seal, electricity, coast of
water, housing (2 bed-roomed) education and transport
to and from work.

Although there is a strong confidence interval between
the statistics, the question is: does poverty end
after attaining a living above US$1 a day? If a beggar
gets an average of K200 a day but sleeps under a
bridge, could he be described as living above the
poverty line?

The centre says the concept of
 US$1 a day was based on
studies conducted in low-income countries in the 1980
where it was found that the cost of a minimum basket
of basic goods and services was about an equivalent of
US$1 per day per person.

“The question is whether the benchmark of US$1-a-day
actually measures poverty or whether it simply
measures how many people are struggling to survive
everyday on less than US$1,” remarked CFSC in response
to a questionnaire.

CFSC says in principle, poverty should end after
attaining a living standard of more than US$1 a day
and Malawi could have moved half of its population out
of poverty by 2015 if it attains a living standard
above the benchmark, if poverty is defined to include
only income and basic elements.

“The assumption emphasises a strong link between
economic growth and poverty levels. However, poverty
has many dimensions including non-measurable
attributes such as the right to
 dignity,
non-discrimination and other,” says CFSC.

The centre says the concept of US$1 cannot be static
and applied uniformly to all societies because as a
country reaches higher levels of development, the
relevance of the concept is gradually eroded.

“Poverty estimates based on the US$1-a-day benchmark
are therefore likely to underestimate the number of
people living in poverty,” says CFSC.

With the omnipresence of poverty on a globalising
planet, it is necessary to have an internationally
defined role that if one moves from Ndirande to
Washington, ceteris paribus, they should be described
the same.

Using the US$1 day benchmark a family of four would
need close to US$120 (K16,800) for month and US$1,460
(K204,400) in a year while the same family size in the
US needs $18,850 annually, according to the US Census
Bureau report of 2005. This shows the failure of the
bank to come up with an international
 standard for
measuring poverty.

Definitely, if a US family spending $18,000 a year,
which is below the US poverty threshold, relocates to
Malawi without a decrease in their income, it would
not be classified as living below the poverty line.
Their income would be more than ten times above the
poverty threshold in Malawi. Would that mean the end
of their poverty? 

Similarly, there are Malawians living below the
poverty level in the US but they send money back home
to their families enough to afford them a life above
the $1-a-day benchmark. 

So where does poverty end? Is it after moving from a
developed country to a poor one or vice versa? 

Definitely, the bank should come up with a reference
basket of commodities containing all relevant
characteristics that meet the elementary consumption
needs of individuals and overcome geo-economics.

($1=K140).

Published in The Sunday Times June 25, 2006