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In lieu of inequality

  • Published at 12:01 am June 18th, 2017
In lieu of inequality
You may have seen the reports in the Bangladeshi newspapers that Unicef’s Innocenti project has declared that 20% of children in developed countries are poor. Sadly, this report from this part of the UN is so monstrously misleading, as to being tantamount to a lie. We know what we mean by poverty, those tens of millions out there living upon almost nothing, having almost nothing. What Unicef means is some children having less than others. These are not the same thing of course, not having anything is poverty, having less than other children in the same country is inequality. Or, as it is today referred to, relative poverty which is, again we must insist, an entirely different concept to absolute poverty. Just to give you an example of how misleading this is, using our definition of absolute, or extreme, poverty, the sort of thing we use when talking about poverty in Bangladesh, we mean someone living on a pound a day or so, perhaps Tk30 when we account for price differences in the two countries. The Innocenti report is using less than 15 pounds per person per day as a useful definition of poverty. That’s certainly less than some other British people live upon but it’s an entirely different thing from that one and only “one pound a day” type. The truth is that the rich world simply doesn’t have any poverty.
There is simply not one single person in North America or Europe whose living standard is what we in Dhaka would consider poverty
Absent serious addiction or mental health problems there is simply no one, not one single person, in North America or Europe whose living standard is what we in Dhaka would consider poverty. Truth be told, there’s no one at all whose living standard is as low as the minimum wage in the garment factories, that Tk5,300 a month. This of course poses a problem for those who would rail at the iniquities of free markets and capitalism, those very things which did abolish absolute poverty there and which will abolish it here. Thus, they have changed the concept to that relative poverty. Living in a household with less than 60% of the median income for that country, suitably adjusted for the number of people in the household and housing costs themselves. What is being measured, as you can see, is inequality, not poverty. This leads to some truly idiotic results. The United States is more than three times richer than Slovakia, yet the second is recorded as having a lower poverty among children than the first. This isn’t true, not in the slightest -- a poor American child lives a richer life than an average Slovakian one. But the disparity in outcomes in the US is greater, meaning that relative poverty is higher. Certainly, children not being able to eat is terrible, but Unicef has decided to measure this through obesity. Yes, that’s right, too many fat children is an indicator of poverty to them, which will be news out in the villages, won’t it? I wouldn’t say that children getting drunk is entirely desirable -- I did it myself as did everyone I know but still -- but they’re measuring children being able to afford alcohol as a measure of poverty. In a slightly more technical manner they use the Palma Ratio. This is the ratio of income share held by the top 10% of households with children, as compared to the bottom 40% of households with children. By this measure, if the income of everyone in the country doubles, in real terms, everyone really is living twice the life, but inequality also increases by 1%, then Unicef is counting this as an increase in child poverty. I think my favourite of their measures is one about preparing a sustainable economy. Their actual measurement here is the percentage of 15 year-old students familiar with five or more environmental issues. No, really, more teenagers knowing about recycling means child poverty is lower. As opposed to how we might think about it, which is that more children with three square meals a day, a change of clothes, and a roof over their heads would be a useful reduction in child poverty. It is always true that we’ve got to understand how an economic statistic is calculated before we can understand what it is trying to tell us. Claims about poverty in the currently rich world countries are never claims about poverty itself. My native Britain defeated absolute poverty back in the 1930s, for example. All of which leaves a problem for those who would whine about the world, which is why they have switched to complaining about inequality instead. They’ve also changed the name, from inequality to relative poverty and increasingly, they drop the “relative” qualifier. For how can you go about shouting that the rich must have everything taken from them to give to the poor, if there are actually no poor? You see the political problem here. The truth is, whatever Unicef and its Innocenti project says, there is no such thing as poverty in the rich world nations, not even among children. For economic growth has wiped it out, as it will everywhere else, given enough time. We are left with inequality, but that’s an entirely different problem, again despite whatever Unicef tells us.   Tim Worstall is a Senior Fellow at the Adam Smith Institute in London.