Add another 400 Million People to the Global Poverty Numbers

The World Bank has just upped its estimate for global poverty (go here). The Bank now estimates that 1.4 billion people in developing countries — one in four of the developing world’s population — were living on less than US$1.25 a day in 2005. The previous estimate was 985 million — the “bottom billion” (this was based on an international poverty line of $1 a day). The full paper by Shaohua Chen and Martin Ravallion is here.

What all this means is that poverty has been higher from 1981 to 2005 (the period covered by the Bank’s research). Poverty in 1981 is now estimated to have been 1.9 billion people (one in two of the developing world’s population at the time).

So why has the Bank changed its numbers? Mainly because the cost-of-living in the developing world is higher than previously estimated. The International Comparison Project (ICP) has been collecting price data for years, and has released new estimates. This led the Bank to recalculate its poverty numbers. Previously 1993 cost-of-living data was the latest available and was used to generate the 985 million number.

Comparing the prices of goods and services across countries is tricky. Using current exchange rates is unsatisfactory — because currencies move relative to each other for all kinds of reasons. Hence the ICP calculates ‘purchasing power parities’ (PPPs). So the release of new PPPs led to the revised poverty estimates. However, Sanjay Reddy reckons the Bank’s poverty estimates are still too low (go here for his critique). As Duncan Green says: “Pity the Poor Number Crunchers”.

All this is before the recent run-up in food prices which is driving many into chronic poverty. The Bank is taking urgent action in Bangladesh. But expect many more people to join the world’s poor by the end of the year.

Average cop has more integrity than the average professor

At least that’s what Harvard-trained sociologist Peter Moskos reckons. And he might know. He joined the Baltimore police force in the high crime Eastern district, after basing himself there for his PhD research into the methods and culture of an American Police department (go here for an interview). It has certainly given him a new view of academic research:

“I think in the Ivory Tower there’s a problem with researching a group without ever talking to them. In academia, it’s all about measuring in quantitative stats. Culture matters. Cops live and work there, so they can see it. It cannot all be explained by money. [Academics] think it’s all about racism and economics”.

His book Cop In the Hood: My Year Policing Baltimore’s Eastern District is out now. One to read before watching the next episode of the The Wire.

Making New Medicines Accessible to All

The diseases of the poor constitute an immense amount of human suffering (see our recent post on George Bush meets the Guinea worm). And they are an immense economic burden as well — both for the poor and for poor economies (which will grow faster with a healthier workforce).

Privately funded pharmaceutical research responds to incentives: and the diseases of the wealthy world supply the biggest bucks. Not enough R&D is put into the diseases of poverty. So it is to the wealthy world that the drugs are supplied. Market failure has a deadly effect. Ill-health drives people into chronic poverty and traps them there — too often until a premature and painful death.

So we are impressed by the hard thinking that has gone into The Health Impact Fund: Making New Medicines Accessible to All a new report from Incentives for Global Health. Go here to download the entire report or listen to one of the report’s lead authors, philosopher Thomas Pogge, talk about the proposal at Public Ethics Radio.

So, what’s the new idea? In brief, the proposed Health Impact Fund (HIF) seeks to correct market failure by rewarding any new medicine, if priced at cost, on the basis of its impact on global health. Any pharmaceutical company can opt to register its product with the HIF. The firm must then sell its drug at an administered price near the average cost of its production and distribution. This price applies worldwide. What does the company get compared with exercising its usual patent rights and selling at a higher price? It gets a stream of payments from the HIF based on the assessed global health impact of its drug.

Lead author, University of Calgary economist Aidan Hollis says:

“We’re not asking for corporations to give their products away … If it is used correctly, the fund would reward those drugs that have the most impact on the world and companies should earn the same amount of money as they would if they didn’t take part.”

The advantage of the scheme is that it uses the market to work for poor people and those who help them — the drugs get developed and distributed at a low cost.

The report certainly resonates with us at Manchester. Last month Manchester’s new Institute for Science, Ethics and Innovation (iSEI) together with BWPI brought together BWPI’s chair, Joe Stiglitz, and iSEI’s chair, John Sulston to debate ‘Who Owns Science?’. You can download the interview with the two Nobel Laureates on the BBC Today programme here. And don’t forget to take a look at Incentives for Global Health.

What next for George Bush? De-worming, that’s the future!

George Bush is no doubt contemplating what to do in his well-deserved retirement. He might clear some more brush on his family ranch in Texas — an occupation which he is fanatical about apparently (at least according to Laura Bush and Jay Leno). And no doubt the presidential memoirs will need some hard work.

But he might want to take a leaf out of Jimmy Carter’s book, and get to grips with the Guinea worm, a nasty piece of nature’s work (pictures here). The thin white parasitic worm bores holes through you, before emerging — very painfully — to go on to infect others.  It is a major blight on the lives of poor people in West Africa. The disability caused by the disease is seasonal, often returning around harvest time, making it the “the disease of the empty granary.” Ex-President Carter, now in his 84th year, has been working to eradicate the Guinea worm for over two decades (see FT story).

Reducing the impact of the Guinea worm is one of development’s success stories (George: read this, it’s quite short). There were 50 million cases in the 1950s according to WHO. In 1986 some 3.5 million in 20 countries were still infected. That’s down to fewer than 13,000 today in the remaining five countries where the disease is still prevalent: Sudan (where Carter convinced belligerents to agree to a six-month “Guinea worm ceasefire” in 1995 to get eradication started) as well as Ghana, Mali, Nigeria and Niger.

So, George, it could be so much more interesting than clearing brush wood. Or editing those memoirs.

Property Refuses to Dance

Talking of politics trying to cope with capitalism’s erratic moves (see our last post), UK Chancellor Alistair Darling has come up with another wheeze to try and save Britain’s collapsing property market — now on the floor after a speculative frenzy to the tune of easy credit. Repossessions are dramatically up, not least in Manchester, a city often labeled as the ‘UK’s debt capital’.

First, the Chancellor tried to encourage the banks to clear up their own mess — with a bit of public money. Interesting isn’t it how (private) banking crises always try and turn themselves into (public) fiscal crises? And in both rich and poor countries, too (see Jay Rosengard on East Asia here,  Willem Buiter’s blog, and Managing a Bank-Specific crisis: A UK perspective from the Bank of England, no less).

Now, the Chancellor is going to help local authorities and housing associations buy up unsold properties and help people facing repossession with mortgage rescue schemes. We leave it to our readers to figure out whether this is good or bad social policy (it’s good for the banks since the schemes reduce their bad debts: that fiscal connection again). It certainly reflects the political battering the government is taking. Today’s Times — with a nice photo of the ‘Chimney Pot’ regeneration in Salford — sums it all up:

“This latest strategy highlights the increasing influence of Vince Cable, the Liberal Democrats’ Treasury spokesman, a man as deft at articulating the concerns of Middle Britain as he is at the paso doble in the ballroom”.

Meanwhile, the UK property market seems unable to get to its feet. Dance on.

Far from Correcting the Distortions of Unbridled Capitalism, the Political Process Makes Them Worse

So says Sam Brittan in today’s FT, reviewing Robert Reich’s Supercapitalism: the Battle for Democracy in an Age of Big Business. You’ll remember Reich as Bill Clinton’s secretary for labor.

In a nutshell, Reich argues that the golden age of capitalism — the rebuilding of the post-war years up to the 1970s — delivered enough prosperity to win the allegiance of most ordinary folk. That got replaced by ‘supercapitalism’ which has delivered our present mess.

For Brittan the novelty in Reich’s book lies in his rejection of a central role for corporate social responsibility. Instead, Reich gets into the intellectual bed of Milton Friedman — who famously argued that it’s the job of businessmen to make lots of dosh, and that’s their sole responsibility. For Reich we need to strengthen states to ensure that dosh-making is compatible with society’s goals — as set out by democracy.

Brittan likes this (unexpected) approach. But he’s less optimistic about democracy pushing business in the right direction. US energy policy is Brittan’s example (presumably excessive subsidies for biofuels driving up world food prices). And Brittan cautions that this might also let business off its (moral) hook:

“… there is a danger that the Friedman-Reich position could inadvertently give sustenance to the “I was only doing my job” defence for evil actions”.

We continue to think this one over while awaiting our copy of Reich’s book. In the meantime, you can read his excellent blog here.

Pack yer bags luv wer off down t’South: A right wing solution to poverty in the North

Had i really been asleep for that long? Was it April 1st 2009 already? As i woke up this morning bleary eyed and switched on the news i could have been forgiven for thinking it was April Fool’s Day. The BBC had me momentarily fooled on April 1st 2008 with their footage of flying penguins (‘Wow flying penguins thats amazing…wait surely that can’t be right…ah yes its April fools day, good one BBC!’) and this morning i had exactly the same feeling when i heard the Policy Exchange’s proposals for regeneration in the UK. The only difference was this was no joke and it turned out that the only fools were the authors of their report released today entitled ‘Cities Unlimited: Making urban regeneration work’. Let me explain.

I think we can all agree that urban regeneration in UK cities has been a double edged sword and that whilst some areas/communities/residents have benefited others have not which has led to increasing inequality and relative poverty. What we need is a more inclusive regeneration strategy as regeneration attempts over the last few decades have not resulted in the trickle down development contained in the rhetoric. We need to find ways of delivering regeneration strategies that produce good sustainable employment with living wages, provide deprived communities with much needed improvements in service infrastructure and which include local residents at each stage in the consultation process. We are getting there but slowly – these things take time, there is no simple solution or so we thought. Enter the Policy Exchange people.

The Policy Exhange is an independent right wing think tank which has close ties with the Conservative Party. So what is their solution to the complex issue of the regeneration of UK cities, particularly in the North: people in Northern cities which are ‘beyond revival’ like Manchester, Leeds, Liverpool, Sunderland and Bradford should move to ‘the hubs of the twenty-first century’, namely Cambridge, Oxford and London to stop them becoming trapped in poorer areas and because these places have a better prospect of offering them the standards of living to which they aspire. What?

The basic premise of the Policy Exchange’s report is that we need to think about alternative regeneration policies given that billions of pounds has been spent on regeneration in these (and other) places but they show little sign of improvement on a range of inequality and deprivation indicators. The solution, according to the Policy Exchange, is to relax planning laws in the South East and allow these cities to grow outwards to accomodate a migration of people from ‘failing’ Northern towns and cities. For those who are old enough this may sound vaguely familiar. Thats right it takes us back to the days of Norman Tebbit when he told people in the North to ‘get on their bikes’. This Policy Exchange report suggests a similar course of action for people living in Northern towns and cities who ‘have lost their raison d’etre’ because of decline in shipping and manufacturing in these places. 

There are however a couple of sticking points: (i) people are not economic units that can just move around at will; (ii) the South East is already overheated and overpopulated without hundreds of thousands of Northerners descending upon it; (iii) there have been successes on the ground in Northern cities such as Manchester and Liverpool which we can learn from; (iv) there has already been furore about green belt development in the South regarding developments on a much smaller scale than the one proposed; and (v) things are a lot more complex than suggesting that Northerners would be better off moving South and that Northern areas would benefit from a reduced population. In fact just saying it out loud sounds ridiculous or to quote Peter Kilfoyle the MP for Liverpool Walton its ‘bizarre’ and ‘unrealistic’. In sum this idea may work if it wasn’t for the sheer political, economic, social and environmental infeasibility of it all. 

Let’s be clear, moving to the South is no panacea to improving people’s lives – they have poor people in the South too don’t you know. But seriously this report goes to show how fixated those on the right still are with the South East at the expense of Northern towns and cities which this report implicitly suggests we should give up on. Presumably by this logic those that remain poor in the North are to blame for not having the foresight or ambition to move South. Once again this blame the victim approach sounds eerily familiar but maybe, just maybe, rather than it being a case of people, towns and cities in Northern cities having failed maybe politicians on both the political Left and Right have for too long failed the people, towns and cities of the North. Thatcherism is alive and well and for me it sounds a warning about whether the recent emergence of compassionate Conservatism is not simply a wolf in sheeps clothing. Yes Cameron has come out and branded the findings ‘insane’ but it shows that old Tory ideals are still influential to some on the Right and this from a think tank which has close ties to those in the Shadow Cabinet. It will be interesting to hear how other key Conservative figures respond to this report. In the meantime my suitcase is staying firmly in my Northern wardrobe!

Creative Capitalism?

If you feel that capitalism could create something better, or that it’s just fine as it is, then check out the Creative Capitalism discussion here. Contributors include: Nancy Birdsall, Esther Duflo, Bill Easterly, Michael Kremer, and Martin Wolf among many others.

The site expands on Bill Gates’ talk about creative capitalism in his 2007 Harvard commencement speech, and at the last World Economic Forum. In Time, he says:

“Capitalism has improved the lives of billions of people — something that’s easy to forget at a time of great economic uncertainty. But it has left out billions more. They have great needs, but they can’t express those needs in ways that matter to markets. So they are stuck in poverty, suffer from preventable diseases and never have a chance to make the most of their lives”

Many of those are the chronically poor. Read the 2008-2009 Chronic Poverty Report here. We recommend increased social protection: put money into the hands of the poor through measures like contingent cash transfers. Then they have more resources with which to shape the markets and societies in which they make their livelihoods and their lives. But watch out for the counter-attack by some of the world’s wealthy who don’t want the poor to challenge their political power: not everyone is as generous as Bill Gates.

Sharing Poverty Information through IPC

This just in from the folks at the International Poverty Centre.

“IPC is pleased to announce a new section on its website: Poverty Networks. This new resource brings together web-based platforms that share development-related publications and initiatives. You will be able to access IPC’s collaborating networks on this website”.

Tax Food Speculators to Subsidize the Poor

Tax food speculators, and use the money to subsidize the poor. That’s the conclusion of ‘Investors Punish the Poor’ in today’s The Australian. Raghbendra Jha of the Australian National University argues that the huge spike in rice prices over the last year is mostly due to speculation.

A steady upward trend in food prices is driven by the switch of cropland to biofuels and other structural factors (including the rising demand associated with growth in China, India and the other emerging economies). But the huge jump in prices from late 2007 accompanied the credit crunch in financial markets: hedge funds and others shifted from stocks and bonds into commodoties — which have relatively fixed supplies in the short term, and so prices take most of the (upward) adjustment).

The price spike hits the poor hard, and threatens the MDGs. Raghav concludes:

“This eruption of food prices represents the most regressive form of taxation…. This also represents a significant shift in the global distribution of income and calls for the taxation of speculative profits and the subsidisation of the poorest consumers”.

We agree. So how best to organize the tax? And how best to get the poor the help they need? Suggestions please.