PHA-Exchange> Food for a wrongly accepted thought (4)

[Claudio]

From: "David Woodward" <woodwarddavid at hotmail.com>

The reflections on poverty, MDGs and the $1/day issue chime well with some
work we're planning on "Rethinking Poverty" which includes develoing a
concept of a "rights-based poverty line", with an application based on the
right to child survival and child mortality rates. The basic principle is
that the poverty line should  be set at the level of income corresponding
with what might be considered as fulfilling a particular right - as much as
anything to highlight the inconsistency of the moral judgments implicit in
the $1 and $2 a day poverty lines with any concept of economic and social
rights.

 On the question of the "$1-a-day" poverty line, the same was originally set
at $1-a-day in purchasing power parity (PPP) terms at 1985 prices. PPP means
that this is not based on how much it costs to buy dollars, but how much it
would cost to buy equivalent goods and services in the US. In practice this
means  that it's typically about 20-30 cents, not a dollar. The 1985 prices
bit in theory means that it goes up with inflation - but it's not clear (to
me, anyway) how accurate this adjustment is. The problem is that the
inflation rate faced by the poor is different to the overall inflation rate,
because they buy different things, so it's difficult to compare with general
purpose consumer price figures.

 The figure currently used by the Bank is $1.09 at 1993 prices - the
increase
 from $1 presumably being intended as an inflation adjustment. I seem to
 remember the Bank arguing that price increases for goods and services
bought by the poor were much less than for the population at large. But even
allowing for this, it seems like a very small adjustment (9%, compared with
about 35% cumulative consumer price inflation in the US over the same
 period). This is one of the issues I want to address in the "Can We Believe
 the Numbers?" strand of the Rethinking Poverty project.