Food for a wrongly accepted thought (3)
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The reflections on poverty, MDGs and the $1/day issue chime well
with some work we're planning on "Rethinking Poverty" which in-
cludes developing a concept of a "rights-based poverty line",
with an application based on the right to child survival and
child mortality rates. The basic principle is that the poverty
line should be set at the level of income corresponding with
what might be considered as fulfilling a particular right - as
much as anything to highlight the inconsistency of the moral
judgments implicit in the $1 and $2 a day poverty lines with any
concept of economic and social rights.
On the question of the "$1-a-day" poverty line, the same was
originally set at $1-a-day in purchasing power parity (PPP)
terms at 1985 prices. PPP means that this is not based on how
much it costs to buy dollars, but how much it would cost to buy
equivalent goods and services in the US. In practice this means
that it's typically about 20-30 cents, not a dollar. The 1985
prices bit in theory means that it goes up with inflation - but
it's not clear (to me, anyway) how accurate this adjustment is.
The problem is that the inflation rate faced by the poor is dif-
ferent to the overall inflation rate, because they buy different
things, so it's difficult to compare with general purpose con-
sumer price figures.
The figure currently used by the Bank is $1.09 at 1993 prices -
the increase from $1 presumably being intended as an inflation
adjustment. I seem to remember the Bank arguing that price in-
creases for goods and services bought by the poor were much less
than for the population at large. But even allowing for this, it
seems like a very small adjustment (9%, compared with about 35%
cumulative consumer price inflation in the US over the same pe-
riod). This is one of the issues I want to address in the "Can
We Believe the Numbers?" strand of the Rethinking Poverty pro-
ject.