Opinion
A comprehensive assessment of deprivation must consider non-monetary metrics too
Summary
- Informed policy decision-making requires a grasp of how the hard-up are faring on multiple counts. Economists need reliable measures of multidimensional poverty for global comparisons.
The International Economic Association (IEA) conclave of 2023, a mecca for economists from all over the globe who meet once in three years, acknowledged last year as a difficult one, given how many mainstream assessments of a global recession and inflation went wrong. A need was emphasized for new intellectual ideas and methodological applications from beyond traditional economic thought, particularly in the context of scenarios in developing nations.
Another intriguing discussion at the IEA summit pivoted around measuring poverty to combat it. Economists argued for revising the global extreme-poverty line for better policy discourse by going beyond monetary markers to integrate these with other focal points of the world’s development agenda (like sustainable development goals). This would help low-income countries get a clearer picture of what they need to do for addressing extreme deprivation so that global standards are met.
A re-plugged conversation, citing recommendations offered as part of the Atkinson Commission’s report, How to Better Measure and Monitor Global Poverty, shaped this dialogue. The commission was created with the aim of advising the World Bank to move away from using a single monetary measure of poverty as a benchmark to monitor it. Paul Romer, chief economist of the Bank at the time, said that the Bank agreed with the commission’s call for the extreme poverty line to be called “the International Poverty Line (IPL)" at $2.15 per day (and expressed in local currencies). The commission’s report, however, emphasized the need to track non-monetary deprivations in three domains: educational outcomes, access to healthcare, and access to basic services such as water, sanitation and electricity.
This is consistent with what our Centre for New Economics Studies did a couple of years ago by creating an Access (In)Equality Index to measure and track relative access to basic entitlements and social or economic goods and opportunities. This Index was developed for India. The Atkinson Commission wants the broad idea applied to a global ‘access’ measurement exercise. Apart from broadening the conception of poverty to include non-monetary measures of deprivation, the report suggests a societal headcount measure of poverty that combines absolute and relative elements of it, and the publication of a global profile of the poor, among various other recommendations.
Luis Felipe at the IEA summit mentioned how the World Bank’s measurement and poverty monitoring work drew upon some of these recommendations. This is indeed a welcome change. However, as fellow panel member Charles Kenny pointed out, the absence of a single key benchmark for identifying extreme poverty in and across low- or middle-income nations makes policy assessment and evaluation extremely difficult. The World Bank has done less in this regard.
Another key issue that got deliberative attention at the summit was the absence of good-quality data from developing nations, which made it hard to assess deprivation levels. Economists across panels regretted how countries are losing interest in sharing “good quality data" with the World Bank that can enable the use of various metrics and proxies to arrive at relative poverty numbers within these countries across years.
Multi-dimensional poverty measurement processes at the World Bank are also using applications of ‘economic complexity’ literature to understand complex dimensions of what the poor experience in a given country, with the Bank having expanded its analytical focus to ascertain degrees of vulnerability among the poor.
Vulnerability is a vital dimension from a global poverty measurement viewpoint and will help take the study of non-monetary aspects of poverty and equity forward.
There is also interesting research emerging now on the social-psychological profile of the poor, contextually driven by the socio-economic conditions in which communities reside across countries. The IEA was created with that very goal, as it is important to understand how even communities with financial means could in some cases find themselves vulnerable on account of access inequality while examining issues of approachability, affordability and appropriateness, given the difference made by uneven access to healthcare, education, employment, social security, legal recourse, technological literacy, etc.
Notwithstanding the intellectual progress made in ideas incubated as part of the World Bank’s ‘knowledge bank’ role, which has got a renewed impetus over the past couple of decades, what remains an issue with this Bretton Woods institution is an institutional culture of bureaucratic inertia which delays the execution of its focal vision.
Without a rounded way to track poverty worldwide, and with the purely monetary approach proving too obtuse to capture actual levels of deprivation, we are left with a big void in the global poverty-policy discourse. Non-monetary dimensions used to monitor absolute or relative poverty will complement interpretative understandings drawn from monetary metrics. These can be globally benchmarked and then contextualized as per the developmental landscapes of low-income-countries. To meet its mandate, the World Bank needs a new movement to ensure this—and thereby help enable its member nations to collect, interpret and publicly share good-quality data.
