Tag Archives: poverty

Equal Societies Good for All

The more unequal a soci­ety’s income dis­tri­bu­tion, the more health and social prob­lems ail both the rich and the poor.

With this the­ory brought to his atten­tion through the “quite fas­cin­at­ing book“ The Spir­it Level, Nic­olas Bau­mard dis­plays the evid­ence to sup­port the the­ory that eco­nom­ic inequal­ity is bad for all inhab­it­ants of a coun­try before con­sid­er­ing some pos­sible explan­a­tions, and look­ing at what this means in terms of poverty and cli­mate change.

It is com­mon know­ledge that in rich soci­et­ies the poor have short­er lives and suf­fer more from almost every social prob­lem. In [The Spir­it Level], [the authors] demon­strate that more unequal soci­et­ies are bad for almost every­one – the well-off as well as the poor […]. The remark­able data the book lays out and the meas­ures it uses are like a ‘spir­it level’ which we can hold up to com­pare the con­di­tions of dif­fer­ent soci­et­ies. The dif­fer­ences revealed, even between rich mar­ket demo­cra­cies, are strik­ing. Almost every mod­ern social and envir­on­ment­al prob­lem – ill-health, lack of com­munity life, viol­ence, drugs, obesity, men­tal ill­ness, long work­ing hours, big pris­on pop­u­la­tions – is more likely to occur in a less equal soci­ety.

Base­ball fan? Bau­mard also points out that “the more equal the salar­ies in a base-ball team are, the bet­ter its per­form­ance”.

India and the Definition of Middle Class

A newly pro­posed inter­na­tion­al defin­i­tion of the middle class for devel­op­ing coun­tries, pro­duced by the Cen­ter for Glob­al Devel­op­ment for the World Bank, has some sur­pris­ing con­clu­sions for India.

The report, pro­duced by the pres­id­ent of the Cen­ter for Glob­al Devel­op­ment, Nancy Bird­sall, sug­gests that “middle class” is defined as every­one with an income above $10 a day, exclud­ing those in the top 5% of earners in the coun­try… mean­ing India has no middle class.

This is a com­bin­a­tion both of the depth of Indi­a’s poverty and its inequal­ity. China had no middle class in 1990, but by 2005, had a small urb­an middle class (3% of the pop­u­la­tion). South Africa (7%), Rus­sia (30%) and Brazil (19%) all had siz­able middle classes in 2005. […]

In socio-polit­ic­al terms, the middle class is tra­di­tion­ally that seg­ment of soci­ety with a degree of eco­nom­ic secur­ity that allows it to uphold the rule of law, invest and desire sta­bil­ity. They do not, unlike those defined as rich, depend on inher­it­ances or oth­er non-pro­duct­ive sources of income. […]

OECD coun­tries define their poverty lines as 50% of medi­an income which works out […] to about $30 day. In the US the poverty line for a single indi­vidu­al in 2008 was $29 per day and for each indi­vidu­al in a four-per­son house­hold was about $14 per day.

How­ever, people in devel­op­ing coun­tries liv­ing on even $10 a day still have extremely low social indic­at­ors. Eco­nom­ist Lant Pritch­ett has shown that infant mor­tal­ity of house­holds in the richest quin­tile in Bolivia was 32 and Ghana 58 per 1,000. Few­er than 25% of people in the richest quin­tile in India com­plete 9 grades of school, Pritch­ett showed. “An upper lim­it of the 95th per­cent­ile, while on the high side, is just about suf­fi­cient to exclude the coun­trys richest,” Bird­sall adds.

via The Browser

Absolute and Relative Poverty

I’ve already men­tioned the World Bank’s start­ling defin­i­tion of extreme poverty: $1.25, adjus­ted for PPP. This is what is known as abso­lute poverty and it is sel­dom used by politicians—who prefer to look at poverty in rel­at­ive terms.

Rel­at­ive poverty is slightly more involved, and the BBC weighs in with the inter­na­tion­ally accep­ted defin­i­tion of rel­at­ive poverty: 60% of the medi­an income for a giv­en coun­try.

This is not to com­ment on the exper­i­ence of poverty or the rights and wrongs of who gets what, just to show how the sys­tem works. […]

It’s the cal­cu­la­tion the gov­ern­ment uses to meas­ure its suc­cess in redu­cing poverty, includ­ing child poverty, for which it sets tar­gets. It’s also used for coun­try com­par­is­ons. […]

[The medi­an is used] because cal­cu­lat­ing the mean would include every­one, includ­ing the Chelsea foot­ball team’s stel­lar earners. Would it make sense to say that one per­son’s poverty depends on what John Terry earns [£150,000 /week]? Using the mean would make it a meas­ure of inequal­ity.

But then some have argued that rel­at­ive poverty is so sim­il­ar to income inequal­ity that the lat­ter term should be used instead.

Weather Forecasts and Economic Development

The eco­nom­ic impact of met­eor­o­lo­gic­al fore­casts is wide-ran­ging and, some­times, unex­pec­ted.

A few of these influ­ences are described briefly before this (tongue-in-cheek, yet still some­what logic­al) piece of advice is offered to devel­op­ing coun­tries:

A study from the mid-1990s […] con­cluded that every dol­lar inves­ted in weath­er fore­cast­ing ser­vices would save $10 in eco­nom­ic losses.

The World Bank broadly agrees, and is sup­port­ing Rus­si­an efforts to rein­vig­or­ate fore­cast­ing sys­tems that have been deteri­or­at­ing since the col­lapse of the Soviet Uni­on.

The World Bank’s research­ers reck­on that the bene­fits of such efforts out­weigh the costs by five to one. If those num­bers stack up, that sug­gests an unlikely devel­op­ment tac­tic for poor coun­tries: hire more weath­er fore­casters.

Prosperity, Freedom, Fertility

When it comes to repro­duc­tion, are indi­vidu­als who strive only for per­son­al gain—as Adam Smith stated in The Wealth of Nations—“led by an invis­ible hand […] to pro­mote the pub­lic interest”?

In The Tragedy of the Com­mons, eco­lo­gist Gar­rett Hardin sug­ges­ted not and called for fur­ther gov­ern­ment inter­ven­tion to help con­trol rising pop­u­la­tions.

Recent stud­ies, how­ever, are sug­gest­ing that the cur­rent lais­sez-faire approach to repro­duc­tion in developed and eco­nom­ic­ally ‘free’ coun­tries does lead to an optim­al pop­u­la­tion. (As always, there are caveats.)

In 2002, Seth Norton, a busi­ness eco­nom­ics pro­fess­or at Wheaton Col­lege in Illinois, pub­lished a remark­ably inter­est­ing study on the inverse rela­tion­ship between prosper­ity and fer­til­ity. Norton com­pared fer­til­ity rates of over 100 coun­tries with their index rank­ings for eco­nom­ic free­dom and anoth­er index for the rule of law. “Fer­til­ity rate is highest for those coun­tries that have little eco­nom­ic free­dom and little respect for the rule of law,” wrote Norton. “The rela­tion­ship is a power­ful one. Fer­til­ity rates are more than twice as high in coun­tries with low levels of eco­nom­ic free­dom and the rule of law com­pared to coun­tries with high levels of those meas­ures.”

Norton found that the fer­til­ity rate in coun­tries that ranked low on eco­nom­ic free­dom aver­aged 4.27 chil­dren per woman while coun­tries with high eco­nom­ic free­dom rank­ings had an aver­age fer­til­ity rate of 1.82 chil­dren per woman. His res­ults for the rule of law were sim­il­ar; fer­til­ity rates in coun­tries with low respect for the rule of law aver­aged 4.16 where­as coun­tries with high respect for the rule of law had fer­til­ity rates aver­aging 1.55.