World Bank poverty measure unreliable

18 April 2007 by IBON

Ibon press release

Recently released poverty estimates by the World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

are unreliable and grossly underestimate the extent of poverty in the country, according to independent think-tank IBON Foundation.

According to IBON research head Sonny Africa, “The Bank’s estimates using 2000 population figures, of 15 million Filipinos a day living on less than $1 a day and 43 million on less than $2 a day, are not based on the real needs of Filipinos but on an arbitrary poverty line adopted to support the claims that economic globalization policies bring about development and human progress.”

Using this benchmark, the Bank claimed that global poverty rates fell in 2004, with the global proportion of people living on $1 a day falling below the 1 billion mark.

According to the most recent (2003) Family Income and Expenditure Survey (FIES), some 83% of Filipino households, or approximately 68 million Filipinos, are already living under $2 a day.

Africa added that the most critical flaw in the measurement is the use of “purchasing power parity (PPP)” to make comparable” the consumption patterns of people in different countries. “But items that people buy in different countries are so vastly different that it is meaningless to try to assume, as PPP-based poverty estimates do, that there is a common standard and a common income level to escape poverty,” he said. National poverty has to be defined according to specific national circumstances.

“The World Bank’s poverty measure is misleading. Anyone who looks at how it is computed will see that it does not really say as much about poverty and the state of the world’s people as it pretends to,” Africa said.

More important than income-based measures in gauging the extent of poverty in the Philippines are social indicators, such as access to education and health services, he pointed out. According to the Department of Education, dropout rates in secondary schools grew to 15.8% in 2005-2006 from 8.5 % in 2000-01, and as much as 30% in some schools, due to poverty.

IBON Foundation, Inc. is an independent development institution established in 1978 that provides research, education, publications, information work and advocacy support on socioeconomic issues.



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