What We Always Believed, World Bank Finally Confirms

But even their revised figures don’t tell the full story!

The World Bank has warned that world poverty is much worse than they previously thought. WB said number of poor people in Africa doubled  to 380 million between 1981 and 2005. With the depth of poverty deteriorating even further the average poor person is now living on just 70 cents per day or $255 per year—the cost of a meal for two in the average [London, Tokyo, NY, LA … ] restaurant.

There were 1.4 billion people living below the new poverty line of $1.25 per day in 2005, many more than the previous estimate of 985 million in 2004.

It makes you wonder whether those living in abject poverty were included in the “household surveys.“

The Press Release:

Press Release No:2009/065/DEC

WASHINGTON, DC, August 26, 2008 – The World Bank said improved economic estimates showed there were more poor people around the world than previously thought while also revealing big successes in the fight to overcome extreme poverty.

The new estimates, which reflect improvements in internationally comparable price data, offer a much more accurate picture of the cost of living in developing countries and set a new poverty line of US$1.25 a day. They are based on the results of the 2005 International Comparison Program (ICP), released earlier this year.

In a new paper, “The developing world is poorer than we thought but no less successful in the fight against poverty,” Martin Ravallion and Shaohua Chen revise estimates of poverty since 1981, finding that 1.4 billion people (one in four) in the developing world were living below US$1.25 a day in 2005, down from 1.9 billion (one in two) in 1981.

An earlier estimate—of 985 million people living below the former international US$1 a day poverty line in 2004 —was based on the (then) best available cost of living data from 1993. The old data also indicated about 1.5 billion in poverty in 1981. However, the new and far better ICP data on prices in developing countries reveal that these estimates were too low.

The new estimates continue to assess world poverty by the standards of the poorest countries. The new line of US$1.25 for 2005 is the average national poverty line for the poorest 10-20 countries.

“The new estimates are a major advance in poverty measurement because they are based on far better price data for assuring that the poverty lines are comparable across countries,” said Martin Ravallion, Director of the Development Research Group at the World Bank, “Data from household surveys have also improved in terms of country coverage, data access, and timeliness.”

“The new data confirm that the world will likely reach the first Millennium Development Goal of halving the 1990 level of poverty by 2015 and that poverty has fallen by about one percentage point a year since 1981, ” said Justin Lin, Chief Economist and Senior Vice President, Development Economics at the World Bank. “However, the sobering news that poverty is more pervasive than we thought means we must redouble our efforts, especially in Sub-Saharan Africa.”

The new data show that marked regional differences in progress against poverty persist. Poverty in East Asia has fallen from nearly 80 percent of the population living below US$1.25 a day in 1981 to 18 percent in 2005. However, the poverty rate in Sub-Saharan Africa remains at 50 percent in 2005—no lower than in 1981, although with more encouraging recent signs of progress.

MORE KEY FACTS & ANALYSIS

• This is the first major effort to update poverty data based on 2005 measures of purchasing power parity. The new poverty estimates are also based on data from 675 household surveys across 116 developing countries. Over 1.2 million randomly sampled households were interviewed for the 2005 estimate, representing 96% of the developing world. But lags in survey data availability mean that the new estimates do not yet reflect the potentially large adverse effects on poor people of rising food and fuel prices since 2005.

• The number of poor has fallen by 500 million since 1981 (from 52 percent of the developing world’s population in 1981 to 26 percent in 2005) and the world is still on track to halve the 1990 poverty rate by 2015. But at this rate of progress, about a billion people will still live below $1.25 a day in 2015. Also, most people who escaped $1.25 a day poverty over 1981-2005 would still be poor by middle-income country standards.

• East Asia’s progress has been dramatic since 1981, when it was the poorest region in the world. In China, the number of people living on less than $1.25 a day in 2005 prices has dropped from 835 million in 1981 to 207 million in 2005. The Bank’s earlier 2004 estimate had 130 million people living in China below $1 a day based on 1993 PPP.  Thus, the new calculations reveal more poor people than assumed earlier, but China’s remarkable success in reducing poverty still stands.

• In the developing world outside China, the $1.25 poverty rate has fallen from 40 percent to 29 percent over 1981-2005. However, given population growth, this progress was not enough to bring down the total number of poor outside China, which has stayed at about 1.2 billion.

In South Asia, the $1.25 poverty rate has fallen from 60 percent to 40 percent over 1981-2005, but again, not enough to bring down the total number of poor people in the region, which stood at about 600 million in 2005. In India, poverty at $1.25 a day in 2005 prices increased from 420 million people in 1981 to 455 million in 2005, while the poverty rate as a share of the total population went from 60% in 1981 to 42% in 2005.

In Sub-Saharan Africa, the $1.25 a day rate was 50 percent in 2005—the same as it was in 1981, after rising, then falling during the period. The number of poor has almost doubled, from 200 million in 1981 to about 380 million in 2005. If the trend persists, a third of the world’s poor will live in Africa by 2015. Average consumption among poor people in Sub-Saharan Africa stood at a meager 70 cents a day in 2005. Given that poverty is so deep in Africa, even higher growth will be needed than for other regions to have the same impact on poverty.

For middle income countries the median poverty line for all developing countries—$2 a day—is more suitable. 2.6 billion people lived on less than $2 a day in 2005—a number largely unchanged since 1981. This suggests less progress in crossing the $2 a day hurdle. By this measure, the poverty rate has fallen over 1981-2005 in Latin America and the Middle East and North Africa, but not enough to bring down the total number of poor. The $2 a day poverty rate has risen in Eastern Europe and Central Asia, though with signs of progress since the late 1990s.

— ### —
Contact: mtuckprimdahl@worldbank.org
After the embargo lifts, the new poverty data will be available at http://econ.worldbank.org/research and
ICP data is available now at http://www.worldbank.org/data/icp

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Bolivia’s Morales blames fuels crops for food shortage

Morales: Life first and cars second

Bolivian President Evo Morales criticized “some South American presidents” for supporting the use of biofuels, which he blamed for high food prices and global hunger.

Morales said he disagreed with “some South American presidents who were talking about biofuels but did not understand what they were talking about.”

“This is very serious,” he said. “Cars come first, not human beings. But, for us, how important is life and how important are cars? So I say life first and cars second.”

In his U.N. speech, Morales called on the International Monetary Fund and the World Bank to develop policies to curb the use of biofuels “in order to avoid hunger and misery among our people.”

Less than 48 hours earlier the chief executive of Royal Dutch Shell declared that world will need every form of energy available – from coal to biofuels – to keep pace with a booming population. He added:

“Despite high prices [oil touched $117 a barrel on Friday] , demand is not dropping, there is only slower growth. Easy oil and easy gas cannot supply all that surge in demand …”

“So it is not a matter of choice, do we do coal, or oil, or nuclear? The world will need everything, including biofuels. You name it.”

“The essential point of biofuels is over time they will play a role,” “But there are high expectations what role they will play in the short term.”

“Biofuels are all about how you develop them without unintended consequences. It is not only the competition with food, it is also the competition for sweet water in the world …”

The oil minister for Qatar, a member of the OPEC severely criticized biofuels at the energy forum, where producers and consumers meet.

“Now the world is facing a shortage of food,” he said in his answer to a question on food shortages, but “I don’t think we should blame oil, we should blame biofuels.”

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• Former U.N. boss Annan warns of “hunger disasters”
  
• Growing world needs every form of energy: Shell

• UN food aid agency’s gap grows, ration cuts loom
• Brazil Lula defends biofuels from growing criticism
• Corn eyes new peaks, may add to food woes
• Bolivia Morales: biofuels serious problem to poor

• Biofuels won’t solve world energy problem: Shell
• Food price crisis may hit world growth and security: U.N.
• U.N. food aid agency’s gap grows, ration cuts loom
• Oil World expects states to cut back biofuel plans

Emerging Food Crisis

Since February 2008, riots and protests concerning rising food prices or food shortages have been reported in Bangladesh, Bolivia, Cameroon, Egypt, El Salvador, Haiti, Indonesia, Ivory Coast, Mauritania, Mozambique, Philippines Senegal, Uzbekistan, and Yemen.

According to AFP Report: “Analysts have said economic misery in crushingly-poor Myanmar was a force behind protests which drew up to 100,000 people into the streets of the military-ruled country last year.”

Poorer countries like Bangladesh, Indonesia and in which 60-70 percent of the income is spent on food are particularly hard hit by soaring food prices.

“In the Philippines, one of the world’s biggest importers of rice, the government deployed troops last week to deliver grain to poor areas of the capital Manila amid worries about shortages.”

Grain prizes have risen by 42 percent and dairy products 80 percent since2007. The head of the United Nations’ Food and Agriculture Organization said: “There is a risk that this unrest will spread in countries where 50 to 60 percent of income goes to food . . .”

Elsewhere, soaring food prices are leading to political instability and humanitarian crisis:

In China, the price of pork, their staple diet, has risen by more than 60 percent in the last 12 months.

In Vietnam, consumer prices rose by about 17 percent (YoY) in the first quarter of 2008. Up to 20,000 workers at a Vietnamese shoe factory opted for a a two-day strike last week “because of the increase in prices which has hit people hard recently,” according to union official Nguyen Thi Dung.

In Singapore, one of Asia’s wealthiest countries, ten people were arrested by police last month for holding a rally, without a permit, to protest rising living costs.

Rising food (and fuel) prices have triggered protests also in India, Malaysia and Pakistan causing seismic shifts in political and social policies.

The World Bank anticipated last week “heightening political tensions” throughout Asia should “rising inflation stalls poverty reduction measures.”

Related Links:

• High food prices seen leading to strikes, protests in Asia
• Now, the world’s problem is food: Here come shortages, rising prices and riots
• Food Riots Grip Egypt, Haiti, El Salvador
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