[Marxism] Capitalism's new working class consumers

Louis Proyect lnp3 at panix.com
Mon Jul 21 10:56:24 MDT 2008

Marvin Gandall wrote:
> It is also evident that poverty is dropping dramatically around the world.
> According to our calculations, the number of people living on incomes of
> less than $1,000 dollars a year ($2.75 a day) has already dropped
> significantly from about 50 per cent of the world’s population in the 1970s
> to 17 per cent by 2000. According to our numbers, it could be as low as 6
> per cent by 2015. On the more familiar World Bank defin­ition of one dollar
> a day, the same dramatic shift is evident. Probably no more than 5 per cent
> of the world’s population now suffers this indignity. Of course, this is too
> much, but as long as the forces of globalisation continue we expect it to
> drop further.

World Bank Global Poverty Calculations Taken to Task
An Interview with Sanjay Reddy, Co-author of “How NOT to Count the Poor”
by Nathan Harrington
50 Years Is Enough Network

"How many poor people are there in the world? This simple question is 
surprisingly difficult to answer." So begins "How Not to Count the 
Poor," a new study published at www.socialanalysis.org by two Colombia 
University scholars. In it, economist Sanjay Reddy and philosopher 
Thomas Pogge mathematically dissect the process by which the World 
Bank’s staff economists arrive at an estimate of the scope of global 
poverty each year and reach the stunning conclusion that their 
methodology is fundamentally flawed so as to yield results that could 
not possibly be accurate. The extent, distribution and trend of global 
poverty remains unknown, they conclude, but there is reason to believe 
that the World Bank has been undercounting the poor, and that it has 
come without sufficient justification, to the conclusion that poverty is 
on the decline.

The significance of these revelations begins with the fact that the 
World Bank is the only public institution in the world that claims to 
know – down to the nearest 10,000 – how many people suffer from extreme 
poverty. The estimates, Reddy and Pogge write, “are widely cited in 
official publications of governments and international organizations and 
in popular media, often to support the view that liberalization and 
globalization have helped reduce poverty worldwide.” The discovery that 
these estimates are virtually meaningless, then, is highly inconvenient 
for the World Bank because if it is widely accepted and publicized, the 
World Bank would be deprived of a trump card with which to defend its 
neo-liberal policies – and the configuration of the global economy 
itself – against a growing chorus of protest and dissent. The World Bank 
has attempted to rebut Reddy and Pogge’s research with an article (also 
available at www.socialanalysis.org) by Martin Ravallion, who manages 
the Bank’s poverty estimation, but it has proven unpersuasive.

The many defects which Reddy and Pogge find in the World Bank’s 
methodology range from straightforward to obscure. For one, the World 
Bank starts by arbitrarily designating ‘one dollar per day’ as the 
universal poverty line to be applied to all nations. But because a 
dollar can buy more in some countries than others, World Bank economists 
attempt to convert its worth using a method called “purchasing power 
parity” adjustment. Existing purchasing power parity adjustments 
identify the extent of purchasing power of the world’s people according 
to their capacity to buy all goods and services consumed in the world 
economy. This is not limited to the things they need to survive, such as 
food, housing, clothing, and healthcare, but also includes limousine 
service, luxury hotels, and pedicures, which will presumably not be 
purchased by those without disposable income. Because services are 
typically cheaper in poor countries than in rich countries as a result 
of lower wages, purchasing power parity adjustments typically overstate 
the ability of the poor to purchase basic necessities that are not 
especially cheaper in poor countries. Furthermore, the growth of the 
service sector worldwide may translate over time into the appearance 
that the poor have increased purchasing power. In fact, the increased 
consumption of these services by the non-poor does nothing to reduce 


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