Asia’s Poor Increase by One-Billion Overnight

The news has been exceptionally bad recently: carnage in the Middle East, race riots in the US, ongoing recession in the Eurozone and Japan, tension in the South China Sea, high youth unemployment virtually everywhere, the Ebola epidemic and so on and so depressingly forth.

But perhaps the worst news of all, the most discouraging, is not making the front pages: a short article on page 2 of the 23rd of August edition of the Financial Times announces that international institutions have apparently made a “mistake” in their calculations of the number of poor. According to the Asian Development Bank, the number of people living below the poverty line, when using accurate criteria, would be not the “official figure” of 473 million, but 1.5 billion, requiring a recalibration of the Asian poverty rate from 12.7% to 41.2%. The explanation is that the officially set poverty line of $1.25 a day is too low; by increasing it by 25 cents, to $1.50, the poverty figures explode exponentially.

These figures that are being bandied about refer to individuals, to men, women, young and old, who should be entitled to a minimal amount of dignity. When we are told (assuming the figures are correct) that 2.5 billion people do not have access to proper toilets, it gives us an idea of the conditions these individuals live in.

The news is depressing for three reasons.

The first is of course the plight of the humans concerned, the suffering that poverty implies, the shattering of dreams, the hunger of children.

The second is that the dramatic reduction of poverty, which we were told was taking place was the good news, the silver lining in an otherwise very cloudy universe. This was vividly illustrated, for example, in the euphoric cover and article in The Economist as recently as 1 June proclaiming we (the world) were marching “towards the end of poverty”. Now it appears it was a miscalculation.

The third reason is one of confidence and institutional legitimacy. While there are shattering news stories about events in Gaza, Syria, Ukraine, and elsewhere, there are certain developments that incrementally eat away at the credibility, hence legitimacy, of international governance institutions. We have recently learned of the shortcomings of the UN and most of its agencies, notably the one charged with climate change, the UNFCC; the IMF and its incapacity to reform to reflect new global economic realities; the WTO on trade and its Doha “round” seemingly going on for eternity; the G20, which FT journalist Alan Beattie has aptly described as “a pantomime horse manned by a troupe of slapstick clowns”; etc.

The fact that the World Bank group should have made, apparently, such a monumental error in calculating levels of global poverty defies belief. It also throws into question many of the assumptions that have been made about globalization generally and the “rise” of Asia in particular. This amazing announcement creates nothing less than a crisis of faith. While recognizing that globalization has resulted in rising inequality, the orthodoxy was that this should be seen in the context of rapid declining poverty and hence rising prosperity. These revelations bring into question the whole legitimacy of current global governance and policy. This is arguably the worst news among all the bad news we have had in recent years.

The experts and authorities who are responsible for this error should be held accountable.

This article was first published by IMD and is posted with permission.