The poverty stats

You will be shocked to learn that quite recently the government of a major country, with a single bureaucratic edict, threw 100,000,000 (one hundred million) of its own citizens into poverty. This, surely, must be comparable to the magnitude of human misery caused by social upheavals like the Bolshevik Revolution or the Great Leap Forward. Or is it?

http://www.guardian.co.uk/world/2011/nov/30/china-raises-rural-poverty-line

China has redefined the level at which people in rural areas are considered poor by raising the official poverty line, despite a booming economy. A sharp upward revision in the official poverty line, announced by the government on Tuesday, means that 128 million Chinese in rural areas now qualify as poor, 100 million more than under the previous standard. The new threshold of about $1 a day is nearly double the previous amount.

So there you have it – as a result of an administrative decision 100 million Chinese woke up one morning below the poverty line. A country which, in the last 20 or so years, dramatically improved the living standard of its population has now suffered an embarrassing setback. Those responsible for this failure must be found and brought to justice. The bureaucrat who changed the “poverty line” should feel a bit uneasy – people have lost lives in China for lesser crimes than creating 100,000,000 poor.

The reason for the sarcastic intro is that we are presented with another “poverty” statistic which is utterly meaningless. In reality nothing changed in China that fateful Tuesday morning; milkmen wheeled out their trolleys, industrial workers rushed to factories, mothers sent kids to school as usual. The country continued on its relentless march to prosperity with the new poverty stats being an irrelevant sideshow. The poverty line in China was raised to USD1 per day precisely because the society is getting wealthier and the level of income deemed acceptable has gone up. But instead of being celebrated these stats will end up in reports compiled by the likes of UN and WHO showing that the World poverty has increased.

Which brings me to my main gripe with the current approach to poverty – its definition differs between countries. We know that the Chinese poverty line is currently at USD1 a day. In New Zealand it will fall somewhere around USD10 a day. Assuming there are say 100,000,000 poor in China and 100,000 in New Zealand, the total number of the poor in New Zealand and China is not 100,100,000. Those on USD9 a day in New Zealand would not qualify as poor in China so a tallied up stat is meaningless. Why it matters is that poverty stats are used to allocate the UN development funds, humanitarian aid, chastise countries for their anti-poverty policies etc.

But there is much more wrong with the way we refer to poverty. What the variation in the poverty line adopted in different countries is trying to hide is the fact that poverty is relative, not absolute. A USD9 per day spender in New Zealand feels poor because most people they know are on USD10+. It does not matter from their perspective that in China they would not be considered poor – they do not live in China. In this sense a much more meaningful definition of poverty would be say the bottom 5% of earners. These are the people who feel poor, regardless of the dollar figure of their earnings. But a bottom 5% poverty definition would put scores of government and UN employees out of work because there would no longer be a need to collect and process the poverty stats. There would always be exactly 5% of the “poor” – not more and not less.

Until a relative definition of poverty is adopted there is a delightfully simple (although completely immoral) way of reducing the World poverty. If we, in New Zealand, relocated say 50,000 of the poorest citizens to China and paid them their “entitlements” there the New Zealand poverty stats would be cut in half. Even more interestingly, the Chinese stats would not increase (those relocated would be receiving well over USD1 a day). So, in a global perspective, the number of the poor would be reduced by 50,000! By sending our poor to China we would do our bit to fight the World poverty – how noble!

Alternatively, the Western countries should stop fighting poverty among their own citizens and send all the money overseas. It is a lot easier (in an accounting sense) to lift peoples’ income above USD1 a day then USD10 a day, so a New Zealand tax dollar would be better spent in China. The absurdity of the situation has been picked up by the KidsCan charity founder, Julie Chapman

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10829909

Mrs Chapman said (…) “Up to $100 million goes offshore [every year] to sponsor-a-child schemes but there is a real need for support here,” she said.

Well, Mrs Chapman needs to realise that as long as we are happy to accept inconsistent definitions of poverty in different countries there is more return for a dollar spent offshore than in New Zealand.

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