Analyzing poverty with a multidimensional index, there are 50% more poor people than when using the $1.90/day poverty line + what the SDGs don’t include

June 6, 2016

MDI TenindicatorsThe 2016 Multi-Dimensional Poverty Index was published yesterday. It now covers 102 countries in total, including 75 per cent of the world’s population, or 5.2 billion people. Of this proportion, 30 per cent of people (1.6 billion) are identified as multidimensionally poor.

The Global MPI has 3 dimensions and 10 indicators (for details see here and the graphic, right). A person is identified as multidimensionally poor (or ‘MPI poor’) if they are deprived in at least one third of the dimensions. The MPI is calculated by multiplying the incidence of poverty (the percentage of people identified as MPI poor) by the average intensity of poverty across the poor. So it reflects both the share of people in poverty and the degree to which they are deprived.

The MPI increasingly digs down below national level, giving separate results for 962 sub-national regions, which range from having 0% to 100% of people poor (see African map, below). It is also disaggregated by rural-urban areas for nearly all countries as well as by age.

Headlines from the MPI 2016:

  • There are 50% more MPI poor people in the countries analysed than there are income poor people using the $1.90/day poverty line.
  • Almost one third of MPI poor people live in Sub-Saharan Africa (32.%); 53% in South Asia, and 9% in East Asia.
  • As with income poverty, three quarters of MPI poor people live in Middle Income Countries.

This year’s MPI focuses on Africa:

  • In the 46 African countries analysed, 544 million people (54% of total population) endure multidimensional poverty, compared to 388 million poor people according to the $1.90/day measures.
  • The differences between the proportion of $1.90 and MPI poor people are greatest in East and West Africa. By the $1.90/day poverty line, 48% in West Africa and 33% in East Africa are poor, whereas by the MPI, 70% of people in East Africa are MPI poor and 59% in West Africa. The MPI thus reveals a hidden face of poverty that may be overlooked if we consider only its income aspects.
  • African MPI 2016Among 35 African countries where changes to poverty over time were analysed, 30 of them have reduced poverty significantly. Rwanda was the standout star, but every MPI indicator was significantly reduced in Burkina Faso, Comoros, Gabon and Mozambique as well.
  • Disaggregated MPI results are available for 475 sub-national regions in 41 African countries. The poorest region continues to be Salamat in Chad, followed by Est in Burkina Faso and Hadjer Iamis in Chad. The region with the highest percentage of MPI poor people is Warap, in South Sudan, where 99% of its inhabitants are considered multidimensionally poor. The least poor sub-national regions include Grand Casablanca in Morocco and New Valley in Egypt, with less than 1% of the population living in multidimensional poverty.
  • The MPI registered impressive reductions in some unexpected places. 19 sub-national regions – regional ‘runaway’ successes – have reduced poverty even faster than Rwanda. The fastest MPI reduction was found in Likouala in the Republic of the Congo.
  • The Sahel and Sudanian Savanna Belt contains most of the world’s poorest sub-regions, showing the interaction between poverty and harsh environmental conditions.
  • Poverty looks very different in different parts of the continent. While in East Africa deprivations related to living standards contribute most to poverty, in West Africa child mortality and education are the biggest problems.
  • The deprivations affecting the highest share of MPI poor people in Africa are cooking fuel, electricity and sanitation.
  • The number of poor people went down in only 12 countries. In 18 countries, although the incidence of MPI fell, population growth led to an overall rise in the number of poor people.

The above was provided by Oxfam.  Partha Dasgupta, rofessor Emeritus of Economics at the University of Cambridge, adds:

As international policymakers and development experts continue to discuss and focus on integrating the 17 Sustainable Development Goals into on the ground solutions, there is a fundamental challenge that lies just under the surface. Even if we reach the vital goals of poverty eradication, food security and improvements in health, education and gender relations, there is no guarantee that it will be done sustainably.  What is missing from the SDGs and their background documents is an explanation of how governments can assess if the development programs themselves are sustainable.

A prevalent idea is that the only way the SDGs can be realized is by ensuring that the world enjoys healthy rates of economic growth. However, there is a fundamental flaw in this thinking: The universal tool to measure economic growth is the gross domestic product. The problem with measuring growth — and by extension progress toward the SDGs — with GDP is that it is an answer to the wrong question. GDP measures the market value of the final goods and services that are produced in an economy in a period, but it doesn’t measure the way in which it is produced. It doesn’t calculate the depreciation of assets, from wear and tear on manufacturing equipment to misuse and overuse of natural resources and the environment. GDP is increasing in many countries around the world while the factors such as the environment that contribute to its growth are deteriorating.  

This is the very definition of unsustainable development. With time, an economy’s capacity to produce goods and services comes under strain, and eventually growth in GDP will become impossible. Those working on the ground in development understand this tension inherently, and must help feed this understanding to the national and international discussions.

What we need in place of GDP as the measure of progress is a balanced tool that looks at progress not at a moment in time, but in the context of where we are headed over time. The correct measure of an economy’s prospects is an inclusive notion of wealth, which reflects the value of the economy’s assets; not only manufactured capital such as roads, building, machines and human capital such as health and education of its workforce, but also natural capital such as the atmosphere, oceans, land, soils and the ecosystems they harbor. Economic growth should be measured and understood as growth in this inclusive sense of wealth — or “inclusive wealth” — not just output.

Another way to think about this is to look to the private sector. Imagine a company that reported to shareholders only how much it produced and not the state of the factory and physical infrastructure that produces the widget or the workforce in the factory. No shareholder would abide by this. Globally, we’re all shareholders and for too long we’ve only looked at how much we’re producing. The crisis in front of us is that the infrastructure and supplies of our shared planet can’t be replaced like worn-out machine in a factory can. We have to accurately account for our resources.

Economists have begun to demonstrate that we can have this useful national accounting of inclusive wealth. The authors of the Inclusive Wealth Report 2014, which was a joint publication from the United Nations University and the United Nations Environment Program, examined movements in the wealth of 140 countries over the period 1990-2010. They used official statistics to arrive at the value of manufactured capital and estimated human capital by using data on educational attainment. Owing to severe limitations of data, the inclusion of natural capital in this report was limited to agricultural land, forests as a supply of timber, subsoil resources such as oil and natural gas (but not aquifers) and fisheries. Importantly, the national cost of global climate change, although only partially accounted for, was found to have increased during the period in each of the countries.

To be sure, the data behind inclusive wealth is imprecise. For example, the value of forests and oceans for their broader services — not just potential timber and a home to fish — was not included. But when measuring sustainability it is much better to have an imperfect tool that answers the right question (what is the state of a country’s manufactured, natural and human resources) than a precise answer to the wrong question (how much is a country producing). To me, this is a call to continue improving the data we are collecting, not a reason to avoid asking the tough — but vital — questions.

Assessing whether the SDGs are sustainable will require governments to check that the development programs they undertake to meet them increase their economies’ inclusive wealth per capita. As nations work to meet the SDGs, their Statistical Offices should begin preparing wealth accounts and track movements in inclusive wealth over time. Today, no one knows whether the SDGs can be achieved on a sustainable basis.

This is the potential for false comfort in the SDGs. We cannot be blinded by a benchmark outlined by the SDGs that doesn’t consider the path to get there — or the months, years and decades that follow reaching the goals. And we must not let “sustainable” become a buzzword that loses its true meaning.

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