The World Bank Mired in Contradictions About Poverty
Photo: CADTM.
On 15 October 2024, the World Bank stated in a press release: ‘The global goal of ending extreme poverty – less than $2.15 per person per day – by 2030 is out of reach: it would take three decades or more to eliminate poverty set at this threshold, which is most relevant in low-income countries.’ [2] This is a terrible acknowledgement of helplessness for an institution that is supposed to contribute to reducing poverty in the world.
The truth is that instead of helping to reduce poverty, the policies financed by the World Bank and its twin, the IMF, reproduce and exacerbate it.
The leaders of the World Bank and the IMF never acknowledge the eminently negative role of the recipes and model that they recommend or even impose on the countries that call on their credits.
This article aims to show that the World Bank has tended for decades to underestimate the number of people affected by poverty. It is worth revisiting an event that occurred more than fifteen years ago, when the World Bank admitted that it had been wrong about the number of people living in extreme poverty. Indeed, in 2008, the World Bank admitted that it had made major errors in its calculations regarding worldwide poverty. While at the same time claiming that its estimations of poverty are becoming more accurate thanks to ‘new and better data’, the Bank discovered in a working paper that ‘an extra 400 million people [are] living in poverty’. [3] An ‘extra’ 400 million people? That is more than half the entire population of Sub-Saharan Africa at the time!
Such an error, even if admitted, reflects the fact that the statistics published by the World Bank are anything but reliable – which is not surprising since those statistics serve primarily to support the neoliberal policies the Bank’s own experts are forcing on countries all over the world.
According to the working paper, ‘For 2005 we estimate that 1.4 billion people, or one quarter of the population of the developing world, lived below our international line of $1.25 a day’ whereas previous estimations had given a figure of around one billion people.
Yet the Bank still congratulates itself on what it sees as a positive trend, because what is important in its view is not the number of poor people, but the proportion of people who are poor. Why? Because with the increase in the world population, a proportional figure hides the truth. If, for example, the number of people living in poverty stagnates, the proportion of poor people will automatically fall over the years in line with the increase in the world’s population. Which explains why the stated ‘millennium’ goal for the period 1990 to 2015 was to reduce the proportion of the population whose revenue is below $1.25 per day.
But with the World Bank’s enormous miscalculations on poverty, the entire edifice of international poverty reduction policies collapses. The structural adjustment policies imposed by the IMF and the World Bank since the early 1980s – cutting social programmes, recovering costs in the health and education sectors, an agriculture geared towards exportation and reduction of food crops, the abandonment of food sovereignty, etc. – have in fact worsened living conditions for hundreds of millions of people around the world.
And there has been no lack of criticism of the Bank regarding this. Thomas Pogge of Columbia University, for example, wrote in 2008:
The World Bank’s approach to estimating the extent, distribution and trend of global income poverty is neither meaningful nor reliable. […] there is reason to believe that the Bank’s approach may have led it to understate the extent of global income poverty and to infer without adequate justification that global income poverty has steeply declined in the recent period. A new methodology of global poverty assessment, focused directly on what is needed to achieve elementary human requirements, is feasible and necessary.’ [4]
The lack of reliability inherent in the World Bank’s methodology is evident in a 2010 declaration by Martin Ravallion, one of the Bank’s main experts on the issue of poverty: ‘The latest poverty estimates draw on 675 household surveys for 116 developing countries, representing 96 percent of the developing world’. [5] How is it possible to claim to be publishing reliable figures on the situation of several billion people on the basis of a survey limited to 675 households surveys? How can such ‘experts’ expect to be taken seriously! The same author also admits that in the early 1990s, the Bank’s sources on poverty were limited to studies conducted in only 22 countries.
Adopting a diplomatic tone, the same Martin Ravallion writes: ‘Our latest revision of poverty numbers is the largest revision yet because of important new data revealing that the cost of living in the developing world is higher than we thought.’ [6]
As this is being written, in 2024, the World Bank considers that a person is not living in extreme poverty if they live in a developing country and have more than $2.15 per day to live on. Such a figure is obviously highly debatable. It sets an extremely low borderline for extreme poverty. The figure of $2.15 per day is not a reliable indicator, and the methods used to extrapolate the number of poor people on the planet cannot be taken seriously.
As British economist Michael Roberts wrote, if instead of taking 2.15 dollars a day, we set the extreme poverty threshold “at $5 a day there were still 40% of the world’s population in poverty; at $10 a day it was 62% and at $30 it was 85%.” [7]
Note that in its recent publications, the World Bank announces that as a result of the crisis related to the Coronavirus, more than 100 million human beings will be added to the ranks of those living in extreme poverty in 2020–21. Referring to a Bank report published in 2020, worldbank.org states: ‘Now, for the first time in a generation, the quest to end poverty has suffered a setback. Global extreme poverty rose in 2020 for the first time in over 20 years as the disruption of the Covid-19 pandemic compounded the forces of conflict and climate change’. The authors add: ‘New research estimates that climate change will drive 68 million to 132 million into poverty by 2030.’ [8]
While these estimates need to be taken with a grain of salt given the methods the Bank uses in making its calculations, they nonetheless point to dramatic developments that urgently call for radical solutions to ensure the protection of human rights.
The press release issued by the World Bank on 15 October 2024 was entitled: ‘Ending Poverty for Half the World Could Take More Than a Century’. In the 2008 World Bank article quoted above, one of the sub-headings stated: ‘Developing world still on track to halve poverty from its 1990 level by 2015 compared to 1990 levels’. [9]
It is high time we got rid of the World Bank-IMF duo and replaced it with other institutions at the service of humanity.
Footnotes
“[1] Source: https://www.worldbank.org/en/topic/poverty/overview#1 [accessed 22/10/2024].
[2] World Bank, “Ending Poverty for Half the World Could Take More Than a Century”, 15/10/2024, https://www.worldbank.org/en/news/press-release/2024/10/15/ending-poverty-for-half-the-world-could-take-more-than-a-century[accessed 22/10/2024].
[3] Shaohua Chen and Martin Ravallion, The Developing World Is Poorer Than We Thought, But No Less Successful in the Fight against Poverty (World Bank: Policy Research Working Paper 4703, August 2008) https://documents1.worldbank.org/curated/en/526541468262138892/pdf/WPS4703.pdf [accessed 22/10/2024].
[4] Sanjay G. Reddy and Thomas W. Pogge, ‘How not to count the poor’, 29 October 2005 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=893159 [accessed 22/10/2024]. For an overview of the question see Thomas Pogge, Politics as Usual: What Lies behind the Pro-Poor Rhetoric (Cambridge: Polity Press, 2010).
[5] World Bank, ‘World Bank updates poverty estimates for the developing world’, World Bank News Feature, 26 August 2008, updated 17 February 2010 https://www.worldbank.org/en/news/feature/2008/08/26/world-bank-updates-poverty-estimates-for-the-developing-world [accessed 22/10/2024]. (pas vu de mise à jour)
[6] Ibid.
[7] Michael Roberts, “Measuring global poverty”, Michael Roberts Blog, 8 October 2024, https://thenextrecession.wordpress.com/2024/10/08/measuring-global-poverty/ [accessed 22/10/2024].
[8] World Bank, “Global Action Urgently Needed to Halt Historic Threats to Poverty Reduction”, October 7, 2020, https://www.worldbank.org/en/news/feature/2020/10/07/global-action-urgently-needed-to-halt-historic-threats-to-poverty-reduction[accessed 22/10/2024].
[9] “World Bank Updates Poverty Estimates for the Developing World”, August 26, 2008, https://www.worldbank.org/en/news/feature/2008/08/26/world-bank-updates-poverty-estimates-for-the-developing-world[accessed 22/10/2024].
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