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The ethical poverty line as a tool to measure global absolute poverty

Peter Edward

SARPN acknowledges the Radical Statistics Issue no. 89 as a source of this document.
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The Millennium Development Goals (MDGs) have set the target of halving ‘extreme’ poverty by 2015, ‘extreme’ poverty being defined by the World Bank as living on less than one dollar-a-day. Responding to the MDG challenge, in early 2005 Gordon Brown called for a 'Marshall Plan' for the world's poor arguing that there is a moral duty on the rich to ensure that economic growth and redistribution benefit those in ‘extreme’ poverty. Setting out his ideological standpoint, Brown invoked global interdependence plus duty, stating that:

    "We are one moral universe. And the shared moral sense common to us all makes us recognise our duty to others" (The Guardian, 7 Jan 2005: 2)
Brown's plan calls for pro-poor economic growth complemented by more substantial redistribution from the rich to the poor, or at least for debt relief to reduce redistribution from the poor to the rich. But, while Brown acknowledges the interdependence of poverty, income inequality and economic growth in the global economy, his invocation of a ‘moral duty’, if such a duty exists, must be seen as only partial. On one hand, he invokes morality to 'invent' an obligation on the rich to reduce poverty. On the other though, he, along with most of the international community, seems to base his understanding of the extent of global poverty simply on the World Bank's dollar-a-day poverty-line.

The dollar-a-day threshold is the average of a limited number of national poverty lines. It is not derived from any assessment of individual basic needs for survival let alone from any consideration of moral obligation. If we genuinely want to argue that there is a moral duty to remove poverty then surely we also need to consider what would constitute a morally defensible or, in the terminology of this paper, 'ethical' poverty-line.

This paper starts by briefly reviewing the derivation of the World Bank’s dollar-a-day poverty-line to highlight the absence of a robust moral basis for setting that line. The paper then describes how the same World Bank dataset used to monitor dollar-a-day poverty can also be used to derive an alternative, morally-defensible international poverty line. This is done by linking a model of world income distribution, incorporating both within-country and between-country income inequality, with life outcome data.

The paper draws on established health literature to show that below an income threshold, life-expectancy is found to fall rapidly with falling income. Above this threshold, life-expectancy rises only very slightly with income so that the threshold can form a moral basis for an international poverty-line. Linking health relationships at the individual level with the income inequality model described above and with macro-data on national life expectancy, this threshold income level is quantified as the Ethical Poverty Line (EPL).

The EPL is found to be slightly less than twice the $1-a-day 'extreme' poverty-line used by the World Bank. Given that the World Bank, UN Development Programme (UNDP) and governments of developing countries all regularly use poverty-lines higher than $2-a-day, the EPL does not seem unreasonable. However its implications are significant. From an analysis of the distribution of economic growth in the 1990s, it is shown that while dollar-a-day poverty can probably not be eliminated by growth alone, it might yet be eliminated with relatively modest economic impact on the developed world. Elimination of ‘ethical’ poverty however would require significant socio-economic change in the developed world.

By quantifying the problem of poverty in this way, the dollar-a-day poverty-line is found both to disguise the current scale of absolute poverty and to understate the challenges that the elimination of absolute poverty poses for the developed world. The EPL therefore raises challenging conclusions and issues about the true price of removing global poverty today. It demonstrates through quantification that the problem of absolute poverty cannot be resolved in a sustainable way without also addressing issues of the over-development of the affluent world. In doing so, it raises substantial doubts as to whether the rich world really is ready to pay the price of accepting a moral obligation to remove global absolute poverty.

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