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The Prosperity Hoax

The world is awash in happy talk about poverty

No one denies that a large number of people worldwide live in drudgerous poverty. But it would appear that we are in the midst of a historic transformation. In recent years, a spate of articles in the anglophone press and academia have suggested that global poverty has entered terminal decline—all thanks to capitalism. Writing for the World Economic Forum in 2015, Ricardo Hausmann lamented that “capitalism gets blamed for many things nowadays: poverty, inequality, unemployment, even global warming,” which was unfair, since “it also lifted [thousands] out of poverty and made them more prosperous.” The following year, Charles Lane proclaimed in the Washington Post that “freer flows of international trade and private capital” have produced “historic progress, with its overwhelmingly beneficial consequences for millions of the world’s humblest inhabitants.” In the New York Times, Nicholas Kristof wrote that 2017 was “probably the very best year in the long history of humanity . . . a smaller share of the world’s people were hungry, impoverished or illiterate than at any time before.”

The World Bank has churned out a series of reports over the last six years promoting this cheery story. “The world has made tremendous progress in reducing extreme poverty,” the Bank declared in its “Poverty and Shared Prosperity 2018” report. Over a quarter of humanity had escaped indigence in the past twenty-five years, its research showed. Where once the majority of the world population lived in poverty, now the figure was just 10 percent. Just a decade earlier, it had seemed like hard times for free-market triumphalists, particularly in America, as the financial crisis rudely discredited their fantasies of ineluctable progress. Against this, the World Bank offered a redemptive story. Whatever the injustices and corruptions of globalized capitalism, it had lifted millions out of destitution. The spread of privately owned capital and free trade would see extreme poverty disappear by as early as 2030. With that, the most basic form of human suffering would be consigned to history.

It was clear to those who lived in poor countries that there were problems with the World Bank’s data. Consider only the Middle East. Anyone who visits Egypt for even a short time will not fail to notice that at least half of the country’s one hundred million people live in terrible penury. Egypt’s military regime, which had every reason to downplay the problem, pegged the official poverty headcount at 33 percent in 2019. Yet the World Bank announced in 2015 that poverty had been all but eliminated in Egypt. Not nearly a third, but only 1 percent of the Egyptian population were deemed to be living in extreme poverty by the Bank’s calculations. In Algeria it was zero percent. The scavengers who scrape a living from the edges of the Diyarbakir garbage dump in southeastern Turkey were not living in extreme poverty either. According to the Bank, no one in Turkey was.

Of course, there’s another side to the story—one that reflects reality on the ground. In July 2020, Philip Alston, the outgoing UN Special Rapporteur on extreme poverty and human rights, published a remarkable report on the global response to poverty. Alston argues that there has been a wholesale misrepresentation of the facts. “Single-mindedly focusing on the World Bank’s flawed international poverty line,” he writes, “facilitates greatly exaggerated claims about the impending eradication of extreme poverty and downplays the parlous state of impoverishment in which billions of people still subsist.” Appointed to his position in 2014, Alston served during the apogee of the World Bank’s triumphalist rhetoric on poverty reduction. His report was the culmination of five years of research. Its conclusions are as damning as is conceivable in the context of a sober UN document.

Where the World Bank states that “extreme poverty is nearing eradication,” Alston responds that “that claim is unjustified by the facts, generates inappropriate policy conclusions, and fosters complacency.” This is not just a quibble about the statistics. The Alston report is rather a wholesale critique of the World Bank’s framework. It shows that hundreds of millions of people have been “airbrushed out” of survey data. A more honest assessment, the report argues, would reveal that global poverty, far from seeing an unprecedented reduction, is in fact rising. International efforts at poverty eradication are failing. The message delivered by the World Bank has allowed the international policy community to adopt a fantasy vision of progress.

Where the World Bank states that “extreme poverty is nearing eradication,” Alston responds that “that claim is unjustified by the facts, generates inappropriate policy conclusions, and fosters complacency.”

The conclusions of the Alston report run deeper still. The World Bank poverty line is not simply arbitrary, miscalculated, or too low—it has been artificially maintained that way. In 2000, the UN set eight Millennium Development Goals to be achieved by 2015. Halving the number of people in extreme poverty was the first goal. According to Alston, the World Bank’s poverty figures served to “guarantee a positive result and to enable the United Nations, the World Bank, and many commentators to proclaim a Pyrrhic victory.” When the UN established a further seventeen Sustainable Development Goals in 2015, the first item was “an end to poverty in all its forms everywhere” by 2030. Alston believes that the World Bank is sticking to its extreme poverty methodology simply to appear to meet the first Sustainable Development Goal. In doing so, it has allowed the international community to hide “behind an international poverty line that uses a standard of miserable subsistence.”

In effect, the World Bank has been playing a shell game. It wilfully concealed the real state of world poverty by legerdemain. (“The failure to take the necessary steps to eliminate it is a political choice,” is Alston’s unflinching conclusion.) As a result, a massive opportunity to alleviate the impoverishment of millions has been squandered. The resources were there. With a modification of poverty assessment, concerted state action, redistribution through taxes, and a commitment to universal social protection, real poverty reduction would have been possible. Instead poverty is turning epidemic rather than declining. Climate change and Covid-19 will only accelerate the trend.

The Eyes of the Bank

The World Bank began tracking worldwide poverty rates in the early 1980s. After experimenting with the so-called “India line” (based on national poverty statistics in India), the Bank’s economists settled on the “dollar a day” standard in the 1990s. This number never reflected how much money was actually needed to obtain basic necessities in any society. Instead, it was arbitrarily derived from the definitions of poverty used in eight of the world’s poorest countries. In 2008, the reference group was expanded to include fifteen countries, all but two in sub-Saharan Africa. In other words, the question the World Bank asked was: How many people have the same consumption levels as the poorest sub-Saharan Africans? Over time, the results were updated through Purchasing Power Parity calculations. Today, the World Bank classifies extreme poverty as living on less than the equivalent of $1.90 per day. It has been criticized for setting the line too low, and it accepts that a minority of cases go unreported. But it has always stood by its methodology.

It is still common to hear of a division between absolute and relative poverty. But poverty is always both relative and absolute. In a monetized economy, an individual’s relative lack of income can result in absolute deprivation. ($1.90, whatever it is worth in sub-Saharan Africa, can’t purchase three meals in most other parts of the world.) This is not reflected by the World Bank’s poverty line, one reason why its numbers are so low. In 2016, the economist Robert Allen proposed in an independent report that the World Bank instead measure poverty based on the resources needed to purchase basic necessities of subsistence. In theory, this would make the Bank once again recognize poor people in Thailand, Turkey, and Romania—countries where, according to the $1.90 line, poverty has been entirely banished.

In response to criticisms by Allen and others, the Bank now publishes data pegged to the $3.20 and $5.50 per day poverty lines as complements to its main $1.90 per day measure. These are supposed to reflect poverty levels in middle-income countries. They paint a very different picture of world destitution. Under the $5.50 per day measure, there has been no global reduction in poverty over the past thirty years, with the only sustained fall occurring in China. The proportion of the world population living in poverty is not 10 percent but closer to 50 percent. This may still underestimate the problem. The economic anthropologist Jason Hickel has argued that in order for the international poverty line to capture what it takes to actually escape from poverty—that is, to secure access to food, shelter, and health care—the line should be set at over four times its current level.

ln the most basic sense, poverty is the lack of the necessities for dignified life: food and water, shelter, and health, literacy, and education. A poor person in a developed country derives some benefit from its technological advancement, even though they have a miniscule claim on its general productive capacity. The UN definition of poverty as “severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education, and information,” is thus reasonable. Yet the World Bank’s main poverty line tells us nothing about it. The World Bank’s story also conflicts with recent research on global income inequality by Branko Milanović, James K. Galbraith, and others. In his book Global Inequality: A New Approach for the Age of Globalization (2018), Milanović shows that the overwhelming majority of gains in income since 1980 have been captured by the global rich, with the poorest 20 percent securing less than 1 percent of added income in absolute terms.

If we turn to measures such as food insecurity, or undernourishment, or child infant mortality, a still grimmer picture emerges. According to the UN Food and Agriculture Organization’s 2020 study, there has been a reduction in the number of undernourished since 1990, but it is a minor fall of around 160 million people and one driven almost entirely by revisions to the data on hunger from China. The global percentage of people undernourished is rising again. In 2018, it was declared that 25 percent of the world population, 1.9 billion people, lived with food insecurity. If infant mortality is taken as a baseline, around 60 percent of the world population lives in poverty.

In Jean-Luc Godard’s 1960 film À bout de souffle, an author visiting Paris is asked what he considers the great ambition of his life. He responds: “devenir immortel, et puis mourir” (“to become immortal, and then die”). In the eyes of the World Bank, hundreds of millions of people have escaped poverty and then died of it. It has essentially defined out of existence the destitution of a large part of humanity. This in turn has provided a refuge for status quo political forces. The myth of global poverty eradication has been used to justify levels of wealth concentration that have no relationship with individual productive capacity and that defy meritocratic rationalization. Technological advances resulting from the Industrial Revolution (particularly factory production and electrification in China) have been claimed as achievements of globalized capitalism. The fact that indigence is produced by—and is a necessary consequence of—our current socioeconomic system is ignored by elites everywhere. What need is there for labor protections or radical reform of the financial system if the current order is ending global poverty?

The Dirt Poor

For the very poor, the immediate experience of poverty is inevitably the experience of dirt, of living with or on refuse. The villages on the outskirts of Diyarbakir are just one of the countless garbage economies that exist all over the world. Here the main economic activity is scavenging pieces of plastic and metal for recycling; food and shelter are likewise sourced from the dump. Metaphors of humanity devalued and discarded with repugnance are unnecessary. They present themselves in a form starker than invention could produce.

In the vast walled-off slums on the west side of Cairo, rows of crumbling buildings are packed so tight together they seem to form a single structure. The gaps between individual houses—each perhaps two meters across and made from mud and discarded plastic bags—are so slight that roofs almost touch. Passing between them is more like walking through tunnels than along streets. On the opposite edge of the city, the Qarafa slum is airy by comparison because it sits on the giant city cemetery. Yet the destitute of Cairo, as of all large cities, refuse to be confined to the underworlds to which they are assigned. They are as much a part of the urban economy as anyone else. There are rare places where the worst privation is kept far from the urban centers. In the tent cities of the Sahrawi refugee camps in the Algerian Sahara—set up in the aftermath of the U.S.-backed Moroccan invasion of Western Sahara in 1975—poverty and isolation are inseparable. The camp residents would starve without lentils flown in by the United Nations.

The global percentage of people undernourished is rising again.

It is tempting to believe that the crushing poverty of the low-income countries somehow distinguishes those indignities from the poverty in advanced industrial societies. Yet to see a man without shoes collecting empty bottles on the streets in New York, or to visit a colonias settlement of shanties without sewage systems along the southern border of Texas, is to grasp a fundamental similarity. To a European, the visible inequality of the racial caste system in American cities appalls. But in the deindustrialized steel towns of northern England one cannot avoid the morphological signs of a very recent impoverishment. From Melbourne and Zurich to Mexico City and Lagos, badly designed American sportswear made by East Asian factory workers is the uniform of the urban poor, a surer class marker than anything mandated by Medieval sumptuary laws.

In July, the U.S. Census Bureau reported that 30 million Americans don’t have enough to eat. The wealthiest large society on earth, built on perhaps its most favorable geography, is home to a mass of people living off tins of collected food. In the end, it is not the particularity of “Third World” poverty that matters, but the community of degradation the links the poor of the world’s periphery and of its developed metropolises. The Alston report is the most serious challenge yet to poverty triumphalism, to the political apologias that it has supported, and to the fiction that economies of massive inequality are destroying poverty rather than destroying the poor. The most dangerous effect of the happy talk about eradicating poverty is the complacency it encourages. It gives a blessing to the system that promises more of the same.