Bill Gates and 4bn in poverty

by Michael Roberts

Is global poverty falling or rising?  Realistic estimates calculate that there are over 4 billion people in poverty in this world, or two-thirds of the population.  And yet, in their latest ‘public letter’ to us all, Bill and Melinda Gates, the richest family in the world, issued last month, were keen to tell us that the battle against global poverty was being won, as those living on less than $1.25 day had been cut by half since 1990.  How do we reconcile these two estimates?

Back in 2013, the World Bank released a report that there were 1.2bn people living on less than $1.25 a day, one-third of whom were children.  This compares with America’s poverty line of $60 a day for a family of four. But, according to the World Bank, things are getting better, with 720m less people on this very low threshold for poverty compared to 1981.  And Nobel prize winner Angus Deaton has emphasised that life expectancy globally has risen 50% since 1900 and is still rising. The share of people living on less than $1 a day (in inflation-adjusted terms) has dropped to 14 percent from 42 percent as recently as 1981. A typical resident of India is only as rich as a typical Briton in 1860, for example, but has a life expectancy more typical of a European in the mid-20th century. The spread of knowledge, about public health, medicine and diet, explains the difference.

However, when we delve into the data more closely, there is a less optimistic story.

Martin Kirk and Jason Hickel were quick to take the Gates’ to task on the arguments in their letter.  The Gates “use figures based on a $1.25 a day poverty line, but there is a strong scholarly consensus that this line is far too low…..Using a poverty line of $5 per day, which, even the UN Agency for Trade and Development suggests this is the bare minimum necessary for people to get adequate food to eat and to stand a chance of reaching normal life expectancy, global poverty measured at this level hasn’t been falling. In fact, it has been increasing – dramatically – over the past 25 years to over 4bn people, or nearly two-thirds of the world’s population.”

The World Bank has now raised its official poverty line to $1.90 a day.  But this merely adjusts the old $1.25 figure for changes in the purchasing power of the US dollar.  But it meant that global poverty was reduced by 100m people overnight.

And as Jason Hickel points out, this $1.90 is ridiculously low.  A minimum threshold would be $5 a day that the US Department of Agriculture calculated was the very minimum necessary to buy sufficient food. And that’s not taking account of other requirements for survival, such as shelter and clothing.  Hickel shows that in India, children living at $1.90 a day still have a 60% chance of being malnourished. In Niger, infants living at $1.90 have a mortality rate three times higher the global average.

In a 2006 paper, Peter Edward of Newcastle University uses an “ethical poverty line” that calculates that, in order to achieve normal human life expectancy of just over 70 years, people need roughly 2.7 to 3.9 times the existing poverty line.  In the past, that was $5 a day. Using the World Bank’s new calculations, it’s about $7.40 a day. That delivers a figure of about 4.2 billion people live in poverty today. Or up 1 billion over the past 35 years.

Now other experts argue that the reason there are more people in poverty is because there are more people!  The world’s population has risen in the last 25 years.  You need to look at the proportion of the world population in poverty and at a $1.90 cut-off, the proportion under the line has dropped from 35% to 11% between 1990 and 2013. So the Gates’ were right after all, goes the argument.  But this is disingenuous, to say the least.  The number of people in poverty, even at the ridiculously low threshold level of $1.25 a day, has increased, even if not as much as the total population in the last 25 years.  And even then, all this optimistic expert evidence is really based on the dramatic improvement in average incomes in China (and to a lesser extent in India).

In his paper, Peter Edward found that there were 1.139bn people getting less than $1 a day in 1993 and this fell to 1.093bn in 2001, a reduction of 85m.  But China’s reduction over that period was 108m (no change in India), so all the reduction in the poverty numbers was due to China.  Exclude China and total poverty was unchanged in most regions, while rising significantly in sub-Saharan Africa.  And, according to the World Bank, in 2010, the “average” poor person in a low-income country lived on 78 cents a day in 2010, compared to 74 cents a day in 1981, hardly any change.  But this improvement was all in China. In India, the average income of the poor rose to 96 cents in 2010, compared to 84 cents in 1981, while China’s average poor’s income rose to 95 cents, compared to 67 cents.  China’s state-run, still mainly planned, economy saw its poorest people make the greatest progress.

Poverty levels should not be confused with inequality of incomes or wealth.  On the latter, the evidence of rising inequality of wealth globally is well recorded and it’s the same story.  If you take China out of the figures, global inequality, however, you measure it, has been rising in the last 30 years.  The global inequality ‘elephant’ presented by Branco Milanovic found that the 60m or so people who constitute the world’s top 1% of income ‘earners’ have seen their incomes rise by 60% since 1988. About half of these are the richest 12% of Americans. The rest of the top 1% is made up by the top 3-6% of Britons, Japanese, French and German, and the top 1% of several other countries, including Russia, Brazil and South Africa. These people include the world capitalist class – the owners and controllers of the capitalist system and the strategists and policy makers of imperialism.

But Milanovic also found that those who have gained income even more in the last 20 years are the ones in the ‘global middle’.  These people are not capitalists.  These are mainly people in India and China, formerly peasants or rural workers have migrated to the cities to work in the sweat shops and factories of globalisation: their real incomes have jumped from a very low base, even if their conditions and rights have not. The biggest losers are the very poorest (mainly in African rural farmers) who have gained nothing in 20 years.

The empirical evidence supports Marx’s view that, under capitalism, an ‘amiseration of the working class’ (impoverishment) would take place, and refutes the Gates’ Letter that things are getting better.  Any improvement in poverty levels, however measured, is down to rising incomes in state-controlled China and any improvement in the quality and length of life comes from the application of science and knowledge through state spending on education, on sewage, clean water, disease prevention and protection, hospitals and better child development.  These are things that do not come from capitalism but from the common weal.