In his article “Is Globalization Reducing Poverty and Inequality”, Robert Hunter Wade argues that it doesn’t. Wade agrees with Wolf (see post below), in that many of the world’s developing countries are making great increases in their economic growth rates. However, Wade states that “the most striking feature is not the trends but the size of the gaps, testimony to the failure of ‘catch-up’”. Wade believes that the wealth difference between the world’s richest and poorest countries is simply too large for the current rates of economic growth to change. Wade’s major criticism of proponents of the neo-liberal inequality-is-falling argument lies with the large margin of error in the World Bank’s statistical assessment of poverty. This error is quite large and, Wade argues, in favor of the neo-liberal argument.
First, Wade discusses the trouble of the level of the international poverty line. A percent change in the line results in a greater percent change in the number of people below it. For example, in China, a 10% increase in the international poverty line results in approximately a 20% increase in the poverty headcount. This disproportionate ratio between the percent change in the arbitrary line and the growth of the amount of people affected by policies based on this measure is unacceptable. Below is a map of countries where people are living on less than one dollar a day, according to the UN Development Report.
Second, the household surveys from which the World Bank statistics are based on lack reliability. These surveys are conducted by various organizations with many practices. There is no international template for the surveys. There are many standards with a multitude of exceptions and loopholes. Overall, the quality of these surveys is not at all consistent.
Third, the purchasing power parity (PPP) adjusted figures are affecting the data. Wade calls PPPs “guess work” and argues that the process fro coming up with PPP figures “is based on guestimates form small, ad hoc price surveys in a few cities, adjusted by rules of thumb to take account of the huge price differences between urban and rural and between eastern and western regions”. This incongruity is particularly influential because both China and India use dubious PPP figures Thus, the largest proportion of population-weighted figures is in doubt.
Finally, the World Bank’s statistics on the number of people in extreme poverty from 1980 in comparison to 1998 is not valid. This “often-cited comparison” of the 1.4 billion in extreme poverty in 1980 to the 1.2 billion in 1998 is non-comparable because of a late 1990s change in World Bank methodology.
Wade believes that these for mistakes are sufficient enough to debase the legitimacy of the World Bank’s statistics.
First, Wade discusses the trouble of the level of the international poverty line. A percent change in the line results in a greater percent change in the number of people below it. For example, in China, a 10% increase in the international poverty line results in approximately a 20% increase in the poverty headcount. This disproportionate ratio between the percent change in the arbitrary line and the growth of the amount of people affected by policies based on this measure is unacceptable. Below is a map of countries where people are living on less than one dollar a day, according to the UN Development Report.
Second, the household surveys from which the World Bank statistics are based on lack reliability. These surveys are conducted by various organizations with many practices. There is no international template for the surveys. There are many standards with a multitude of exceptions and loopholes. Overall, the quality of these surveys is not at all consistent.
Third, the purchasing power parity (PPP) adjusted figures are affecting the data. Wade calls PPPs “guess work” and argues that the process fro coming up with PPP figures “is based on guestimates form small, ad hoc price surveys in a few cities, adjusted by rules of thumb to take account of the huge price differences between urban and rural and between eastern and western regions”. This incongruity is particularly influential because both China and India use dubious PPP figures Thus, the largest proportion of population-weighted figures is in doubt.
Finally, the World Bank’s statistics on the number of people in extreme poverty from 1980 in comparison to 1998 is not valid. This “often-cited comparison” of the 1.4 billion in extreme poverty in 1980 to the 1.2 billion in 1998 is non-comparable because of a late 1990s change in World Bank methodology.
Wade believes that these for mistakes are sufficient enough to debase the legitimacy of the World Bank’s statistics.
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