Sun, Apr 27, 2003 page12

• Does one dollar a day keep world poverty away?

  Deciding on a minimum level of monetary income necessary for survival is as much a battle of ideology as it is pure economics

  • By Daniel Altman / NEW YORK TIMES NEWS SERVICE
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  In Vietnam one US dollar buys half a pound of rice, half a pound of potatoes and a third of a pound of ground beef. In Mexico the same dollar buys a pound of rice, a pound of beans and half a loaf of bread.

  And in the sleek offices of the World Bank in Washington or the UN in New York, a dollar a day in either of those places is an important dividing line between living in poverty and not.

  "It's kind of a minimum living standard for survival," said Shaohua Chen, a senior information officer at the World Bank, which established the dollar-a-day standard for data from low-income countries in the 1980s. By the bank's calculation, 23 percent of the world's population, or 1.2 billion people, live in poverty.

  Despite the widespread use of the World Bank's standard, there are deep divisions over how to measure poverty.

  What are the ingredients of a minimum living standard? Should you count only how much money people earn? How about what they decide to spend their money on? Or what kinds of goods and services they have access to? What about how they compare with their neighbors?

  Some of the disputes are methodological. The dollar-a-day threshold is based on what a single dollar buys at 1990 prices and it is adjusted for differences in prices among less-developed countries. Just how that is done, though, is a subject of contention. Until recently, the World Bank was basing its calculations on things like airplane tickets and computers, which poor people could never afford to buy.

  But many of the most significant disagreements are philosophical. "If you want to have an absolute income poverty line, you have to start out with some sort of idea about what the important needs or requirements or capabilities of human beings are," said Thomas Pogge, a philosophy professor at Columbia University, who was one of the experts who criticized the World Bank's standard at a conference organized by the Initiative for Policy Dialogue at Columbia.

  To some economists, using daily income to measure the ability to fulfill important needs makes sense. It is, after all, easy to add up and can, in many economic models, be a stand-in for well-being.

  Still, income by itself can fall short when it comes to deciding who is poor and who is not, many critics argue. How money is spent matters, said Gerald Cohen, a professor of social and political theory at Oxford University. "You may have the same per capita income or income stream, because of some forms of investment that are available to people," he said, "but one form of investment could liberate the children and the other not." The difference, say, between spending some of that dollar on a lottery ticket and on sending a child to school.

  And depending on how someone spends money, two people with the same income in the same circumstances might not both consider themselves poor, said Meghnad Desai, director of the Center for the Study of Global Governance at the London School of Economics. Focusing on a minimum standard of living -- as the World Bank does -- is "a really crude way of doing it," he said.

  Even Jan Vandemoortele, the principal adviser for the Social Development Group of the UN Development Program, admits the dollar-a-day measure lacks an easy interpretation. "There is the conceptual problem: Why that and why not basing it on a basket of goods and services one needs to survive? It's important to realize that that's not possible with US$1 a day."

  Desai recommended focusing on different criteria of the sort first proposed by Amartya Sen, who won the Nobel Peace Prize in economic science in 1998. "Don't think about just food, but think about what you want people to be able to do in life," Desai said. "And if they can't do that, you call them poor."

  Sen's idea, Desai said, found itself somewhere in between utilitarianism and Aristotelian philosophy. For those who may have forgotten their first-year philosophy, utilitarians were interested in maximizing the total well-being across society as a whole. "The greatest happiness of the greatest number," said the 18th-century philosopher Jeremy Bentham, a founder of utilitarianism. Although money is by no means the only way to measure well-being, it is one of the easiest, and therefore has often been favored by utilitarians.

  Aristotle, by contrast, conjectured that an individual had to realize his potential to attain the highest levels of happiness. Sen did not ask that poverty be measured solely by income or solely by the fulfillment of potential but rather the capability to participate normally in life.

  But what does leading a normal life mean? "In some communities, if you don't have television you may be isolated or excluded, because you can't have a conversation with your neighbors," said Desai. "You may not need a television in India, but you might need one in America. Can you have a full life as a member of the community? You really have to define what is essential."

  Cohen of Oxford carried Sen's notion one step further. A person's well-being, he said, depends not only on one's own endowment of resources or abilities but also on one's environment. For example, it is better to live in an area free of malaria, "but that isn't a matter of capability; it's given to you by nature or by policy."
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