Wednesday, 18 June 2014

Counting the Poor: The Changing Concept of Poverty

Eradicating Poverty is the Prime Goal of Development

Reduction of extreme global poverty is the first and the most important Millennium Development Goal – of the 8 goals set in 2000. Reducing, alleviating or eliminating poverty is increasingly seen as a prime goal and measure of development. The traditional definition of poverty in income terms leaves economic growth as the only option for poverty removal. However, observations from around the world tell us that economic growth alone can’t eliminate poverty.
Poverty research of the past 4-5 decades also points out that poverty in not purely an economic issue; it has several other dimensions covering social, political and cultural spheres of life. The income definition of poverty, though simple, tells very little about the hardships faced by the poor. Other viewpoints have emerged that see poverty as a situation of “shortages” of several things in life. The concept of poverty is now no more confined within the boundary of economics and has expanded to include the social, political, cultural and personal dimensions also.
If we leave the “expert” definitions of poverty and try to see how the poor view their situation, we get another useful perspective on poverty. They see themselves mostly as vulnerable, marginalized, excluded, and deprived. The question they would like to ask is: What can you do to reduce our hardships of living and enable us to come out of deprivation, exclusion and vulnerability? So if “their” life needs improvement, policymakers need to modify the usual top-down approach and pay heed to the inputs coming from the powerless poor stuck at the bottom of the society. Thus, it makes sense to understand poverty form as many perspectives as possible.
In addition, researchers are also increasingly realizing that economic growth alone is not “development” and that the concept of “development” needs to be more broad-based and people-centric if poverty has to be actually rooted out. The concepts of poverty and development are increasingly aligning – so that poverty is now more rightly seen as “shortfall in development.”
I am "Absolutely Poor"
I am "Absolutely Poor"

Critique of the World Bank's $1.25 Poverty Line

According to Lant Pritchett, an ex-World Bank economist, “It is a "successful failure" and has done more harms than good. It has been a failure in terms of achieving the objectives of improving human well-being in the world. It has put the focus on philanthropy more than long-term development and has thus failed to promote prosperous economies. Even if the benchmarks of $1.50 or $2 are used, they are still very low.”
Question: Why doesn't the World Bank work on its $2-a-day poverty line and operate on a greater scale?
It can't claim lack of funds looking at the trillion dollar war budgets of its donor nations.

Absolute Poverty

“The absolute poverty is defined by reference to the actual needs of the poor and not by reference to the expenditure of those who are not poor. A family is poor if it cannot afford to eat.” – Keith Joseph, 1979
According to the United Nations’ 1995 World Summit in Copenhagen,"absolute poverty is a condition characterized by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information. It depends not only on income but also on access to services.
The Traditional Concept of Poverty
Poverty is commonly associated with lack of income - you don’t expect a poor to have money. This is the traditional way to look at poverty. Seen in money terms, the logical question is: how much income would make a poor non-poor? However, “income” itself is no less problematic a concept than “poverty” and is closely related with other resources such as assets and access to public services besides earnings from employment. People are considered poor when they are deprived of income and other resources required to obtain basic things of life – food, shelter, material goods and services – that enable them the opportunity to live without hardships and play the role, meet obligations and participate in the family and social processes.
When poverty is seen from the “subsistence” perspective the nutritional or food aspect takes priority, although allowances are made for clothing, fuel and other items. This gave rise to the concept of subsistence poverty line – people with income below the poverty line are poor; in fact, they are extremely poor. This idea was actively applied by the colonial powers in their colonies for setting wages and framing development plans. It suited them perfectly well because the colonized people were only meant to “work” that needed replenishment of their energies through some minimum food intake.
The Word Bank’s $1.25-a-day benchmark of extreme poverty is a widely used poverty line. On this yardstick, an estimated 1.2 billion people in the world were found to live in extreme poverty in 2010.
However, such as a “subsistence” poverty line is criticized because it considers mainly the physical needs of people. People are not simply “entities” needing replenishment of physical energy needed to work; they are also social and cultural beings and have to perform other roles as parents, neighbors, friends, partners, and citizens.
Basic Needs Approach
In the 1970s, a somewhat wider concept of poverty emerged in the form of the “basic needs.” It added two elements in the “subsistence” model. First, it included the minimum consumption needs – adequate food, shelter, clothing and some other essentials of a household. And second, it added services provided by the state or community such as safe water, sanitation, public transport, medical and education facilities etc. It, thus, established at least some basic framework for community development. Like the subsistence approach, it also sees the poor as passive numbers whose needs are to be met through polices designed by the “experts.” However, the ease of its implementation makes its attractive to policymakers. It played a prominent role in the developmental plans fostered by the international agencies such as the UN’s.
Both these approaches consider poverty in absolute terms and limit themselves to material and physical needs only. Although it is easier to restrict the poverty perspective to material and physical needs, people’s lives have other dimensions that extend into the realm of social, political, cultural and rights. It helps to keep in mind that human lives can’t be simplified to the level of policies that the government can plan. Certainly, the complexities of development programs increase as more dimensions are added; besides, it also brings the issue of quantification and measurement that policymakers like to avoid. In this sense the income poverty lines are the simplest, though they tell nothing about the nature of shortages poor people live with.

Society can Dictate “Necessities”

“By necessaries I understand not only the commodities which are indispensably necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even the lowest order, to be without. . . . Custom . . . has rendered leather shoes a necessary of life in England. The poorest creditable person of either sex would be ashamed to appear in public without them.” - Adam Smith in The Wealth of Nations
After all people are social beings and are affected by the judgment of the society. Therefore, the relative poverty moves in response to changing social expectations and what used to be luxuries can become necessities. Being a member of a certain society implies that one has to satisfy social obligations and expectations; not having the resources to do so means that one is in poverty.
Why should Rich Nations have Poverty?
Why should Rich Nations have Poverty?

Definition of Relative Poverty in Europe

Relative poverty is when some people’s way of life and income is so much worse than the general standard of living in the country or region in which they live that they struggle to live a normal life and to participate in ordinary economic, social and cultural activities.– European Anti Poverty Network (EAPN)
The EU’s Relative Poverty Standard
"People falling below 60% of median income are considered to be at-risk-of poverty."

Relative Poverty

The philosophical foundation of relative poverty is provided by Karl Marx, Our needs and enjoyments spring from society; we measure them, therefore by society and not by the objects of their satisfaction. Because they are of a social nature, they are of a relative nature.
People are poor if they live with "resources that are so seriously below those commanded by the average individual or family that they are, in effect, excluded from ordinary living patterns, customs and activities." – Peter Townsend, a leading authority on UK poverty
People are “relatively poor” when their average resources or average living standard falls below the society average, which provides the reference mark. Thus, a person is considered relatively poor if his resources are seriously below the society average. Moving to relative poverty is in fact a shift from the “needs” to “wants” – people are poor if they “want” to live like others but can’t. Now the measure is “the deficit in the living standard”, compared with the society average. The philosophy of relative poverty is common in the developed nations, since they have progressed beyond the point where people are no more struggling for basic survival needs.
Relative poverty is also seen as inequality. It will be always present in any society, no matter how much it progresses. Certain sections of the society will always perform less than others. So, relative poverty can never be eliminated and it remains the same if there is a general decline in prosperity across the society. However, if there is more equal distribution of income relative poverty falls.
Make us Capable and strong.
Make us Capable and strong.
“The poor themselves can create a poverty-free world... all we have to do is to free them from the chains that we have put around them.” – Muhammad Yunus, Bangladeshi Nobel laureate of 2006 and founder of the Grameen Bank to help women and poor through micro-credit
Micro-credits have helps 10 million Bangladeshis move above the $1.25-a-day threshold of extreme poverty.

Capability Poverty

The capability approach of Amartya Sen expresses poverty in terms of deprivation of people’s capabilities – referring to what we can or cannot do, can or cannot be. It sees income, resources and public facilities as mere means to achieve or expand human capabilities. In laymen’s language, Sen’s approach aims to make people more capable in terms of their skills, physical and mental abilities.
Expanding capabilities increase well-being and shrinking capabilities decrease well-being. The set of capabilities needed to escape poverty is rather limited. Thecapability poverty is typically lack of capabilities related to satisfying basic needs of food, nutrition, health, shelter, etc. In the capability approach, expansion of people’s capabilities is the prime goal – income and resources and facilities have no meaning unless they enhance human capabilities. Consider this simple example.
Having access to a bike can enable the capability of mobility, if a person uses it properly. However, mere ownership of the bike doesn’t tell what the person can do with it; a handicapped person may not be able to use the bike. Therefore, the important point is not the commodity or its features, but the ability to use it.
As mentioned above, when Adam Smith argued that leather shoes became social necessity in order to avoid shame in the public, he was referring the capability of avoiding public shame. As societies get richer and richer, the commodities required to “avoid shame” also increase. Being poor in such societies mean lacking the capability to “avoid shame” because the poor lacks the capability to “afford” all those commodities. There is certainly a strong psychological component here because the “needs” are dictated by social customs (and people’s degree of obeisance). This is not the case in the context of basic needs; for example, the poor lack the capability to be well nourished, or to move about freely, or to live in a good shelter, or to be free from diseases. But there are no social custom motivating people to take care of such needs.

The Human Development (HD) Approach

In order to understand poverty in this approach, we have to first understand what human development is. Poverty is just the opposite – shortages in human development. The HD idea revolves around the basic theme: “People are the real wealth of a nation.” The basic objective of development is to create an enabling environment for people to live long, healthy and creative life – as stated in the firstHuman Development Report (HDR)published in 1990.
It was also developed in the 1980s after noting that handing over economic growth to market forces alone and curtailing the role of government in the economic activities led to increased poverty. It combines the elements of the basic needs and capability approaches and defines the human development as a process of enlarging people’s choices. The most critical choices relate to leading a long and healthy life, to be educated and to enjoy a decent standard of living. Other choices include political freedom, guaranteed human rights and self-respect.
A key aspect of HD is that it sees people as ends, not means; incomes and resources are taken as means, not ends. In practice, it focuses on the “basic needs” type goods and services but also give importance to other issues such as freedom, environment and society. It is open ended, and considers everything that may affect human potential, so that different societies can focus on what is important for them. It accords widening human choices.
In terms of advantages, it goes beyond the “basic” of the Bangladesh approach. It also goes beyond physical conditions and material needs to institutional and political elements. It simplifies the concept of capability approach to include “choices” and “freedom”. It has become the rallying point for all those seeking human-focused and humane alternatives of the usual “economic growth” as development.
As a further step, the HD initiative also came up with an alternate measure of development in the form of the human development index (HDI) which combines life expectancy, literacy and adjusted income. The HDI is an important milestone in trying to measure human well-being in terms other than per capita GDP or income.
Since the first HDR in 1990, every year a different human development theme is picked up for the report and the global scenario is presented. These reports have greatly impacted the national policies and provide fresh perspective to look at poverty. It has brought into focus the importance of issues like women empowerment and literacy, income inequalities, inclusive growth, social exclusion etc as major impediment to human development.
In 2010, a multidimensional poverty index (MPI) was launched that analyses poverty through a set of 10 indicators. It has been adopted as an effective policy-making tool by many countries around the world. The World Bank should also adopt a similar ideology, in place of its $1.25 a day poverty line, and undertake global poverty eradication at a much more comprehensive level.


In the 21st century, rapid changes are taking place all over the world – even in the economically underdeveloped countries under the wave of globalization and IT and communication technologies. The poverty standard of income devised in the historical past is no longer relevant under new conditions. People today are no longer subject to the same laws, customs and social order of the bygone era.
Globalization and easy connectivity is exposing the ultrahigh inequalities between the rich West and the poor East as well as the unjust world-order. That makes people of the economically backward nations aspire for speedier and equitable development of their societies. More than just economic growth they want development of people and societies and governance structures where they can make their voices heard and steer the direction of development. It is time for the international financing agencies to realize these new aspirations of people and stop acting like proxies of the donor countries. The poor of the world need development, not charities. The rich West too has to shift their role as condescending donors to equal and responsible partners in development. More importantly, they too should move from the narrow confines of “GDP led economic growth” to more comprehensive human development.