The beyond 2015 agenda pledges for the eradication of poverty by 2030, but to plan it and finance it, is crucial to understand what does extreme poverty stands for and how we count and measure the poor. Now more than ever the international community has accumulated a deep and robust understanding of poverty that made global poverty fall fast: 21% of the world’s people are living on less than US$1.25 a day compared with 52% in 1980. This section will provide a literature review to demonstrate how poverty analysis has evolved in terms of concept and measurement contributing to the recent remarkable poverty reduction achievements. It also intends to show that this long progress of technical advances and empirical experiences can be increasingly useful to study poverty specifically in fragile states.
1.1 Understanding Poverty
To study extreme poverty first we have to understand the concept of poverty. Poverty is frequently seen as the defining characteristic of underdevelopment making its elimination the main purpose of economic development. However if that is so, it is less obvious and consensual what poverty means or is in reality. Defining poverty has always been a complex task, mainly because it is above all a multi-dimensional concept. For some, poverty is the state of being without, often associated with need, hardship and lack of resources across a wide range of circumstances. For others, poverty is a subjective and comparative term. For some others it is moral and attached to an evaluative judgement and for a few others, as the economists, it will have to be scientifically established to be analysed. There is a diversity of opinions and approaches that can be used to define poverty which is very far from delivering a unique definition.
Who better to answer what is poverty than poor people themselves. According to the World Bank review of 43 participatory poverty assessment, poor people report their impoverished status mainly in terms of material deprivation e.g. low incomes, lack of or unstable employment, shortage of food, inadequate housing, combined with inadequate access to health services and clean water. However they also give weight to non-material social, psychological factors such as insecurity, social and political conflict, lack of autonomy or exclusion from decision making.
Definitions of Poverty:
Taking Baulch (1996) as reference poverty initially defined as material deprivation, has increasingly been systematised by hierarchal levels, that start in a more narrow and concrete level, focusing mainly on income and consumption patterns and progressively incorporating others factors such as: social spending or public expenditure on education, housing and infrastructures; assets including land livestock and housing or consumer durables such as radios. It ends in a broader and more holistic view of poverty that engulfs more psychological features and general human conditions as self-esteem and self-respect, dignity and vulnerability or as Streeten stated the pure enlargement of people’s choices.
1.2 Measuring Poverty
Measurement and Indicators:
Absolute Poverty Analysis
If finding a consensual and unique definition of poverty has always been a difficult task, it is not surprising that measuring it has been an even more delicate and complex process that involves considerable technical issues and theoretical assumptions.
In economics literature the first effort in studying poverty was based on social welfare functions used to measure the living standards of the population. Its main advantage was the statistical aggregation that summed up the welfare of individuals turning the distribution into a single number that provided a judgment about overall welfare. However, by aggregating the social welfare of all population in one statistic, this approach failed to isolate poor in the overall population.
Instead Amartya Sen and Deaton developed poverty measures that focus on poor specifically identifying poor people through thresholds called poverty lines. This approach has become very popular and remains the most used method in poverty analysis namely in the construction of national poverty profiles.
The study of absolute poverty is based on welfare indicators mainly income or consumption per capita and two main methods are currently used to construct national absolute poverty lines: the Food Energy Intake method (FEI) and the Cost of Basic Needs (CBN).
The FEI method is based in the assumption that as income (or expenditure) rises, food energy intake also rises, and the poverty-line is the level of expenditure, z associated to a given a minimum adequate level of calorie. One of the advantages of this approach is its parsimony as it does not require any information about the prices of goods consumed, however Ravallion and Bidani (1994) alerted that it may be seriously flawed and should not be used unless alternatives are unfeasible.
The CBN method is the favourite although it is slightly more complex in terms of calculation, requiring extra data on prices and detailed consumption data. In this case the poverty line is estimated as the cost of a basic bundle of goods (food and non-food), that corresponds to a low cost adequate diet plus other non-food cheaper requirements.
The use of poverty lines allowed narrowing down the study only to the poor and most of all identifying the poor and aggregate those in meaningful measures, such as the most often quoted poverty indicator the Headcount ratio which provides the number of people below the poverty line considered poor. The most widely used measures of poverty are the Foster-Greer-Thorbecke class ones, because they capture in one measure the so-called “three I’s of poverty”; Incidence (how many), Intensity (how poor), and Inequality (how unequal) as direct generalisations of the poverty gap.
Although these measurements are the most popular and mostly used to make poverty analysis these techniques have recently been criticised as limited money metrics that focus only on income/consumption and do not tackle the multi-dimensional side of poverty. Nevertheless measurements of absolute poverty have spread use because of its simplicity as it is very difficult to use subjective variables of poverty like self-esteem, dignity or psychological features as defining indicators. Indeed measuring the welfare of an individual/household is not an easy task, but it could be done if one restricted the concept to material or economic welfare, making it feasible. However, by doing that, panoply of non-material factors that influence happiness and satisfaction is subtracted from the analysis for the sake of practical reasons.
Therefore albeit its limitations the absolute poverty approach allowed overcoming constraints in poverty analysis addressing the issue of identification and aggregation of poor which were fundamental to produce national poverty profiles and poverty household statistics that were crucial for targeting the poor and implementing the poverty reduction policies in the last decade.
Relative Poverty Analysis: International Poverty Lines
Although previous techniques allow the construction of robust national poverty lines it is not possible to use them to compare two or more countries. For this effect the international of 1$ a day PPP has been used because it provides a comparable standard of welfare between countries.
The MDGs (up to 2015) set targets that intended to compare poverty levels between countries and thus used this international poverty line defining the poor as those living on $1 a day or less in international dollars adjusted for Purchasing Power Parity (PPP). The PPP adjustment is designed to enable comparison of purchasing power across countries and over time meaning that one dollar (PPP) in Mozambique should, in principle, have the same value as one dollar in Vietnam for example. In the beyond 2015 agenda it has been updated to $1.25 as the average poverty line among the world’s fifteen poorest countries.
The beyond 2015 agenda has burst discussions on the best way to measure poverty. It was far from consensual the best instrument to measure poverty. The ODI debate over how a post-2015 framework should measure poverty had several interesting contributions, particularly whether this frugal line adequately embraces current standards for defining poverty.
“It is widely agreed that eliminating extreme poverty in the world should take priority in thinking about our development goals going forward. The ‘$1 a day’ poverty line is a simple metric for monitoring progress toward that goal. It was chosen in 1990 as a typical line for low-income countries (as explained in Dollar a day revisited). By this measure, poverty in the world as a whole is judged by a common standard anchored to the national lines found in the poorest countries. On updated data, the current value of this international line is $1.25 a day at 2005 purchasing-power parity. Today about 1.2 billion people in the world live in households with consumption per person below this frugal line. Thankfully, the world has made progress in bringing this count down; 1.9 billion people lived below $1.25 a day in 1990.”
Martin Ravallion is the Edmond D. Villani Professor of Economics at Georgetown University, Washington DC. Ex- director of the World Bank’s research department.
Martin Ravallion argued that the $1,25 poverty line is necessary and useful but proposed a new measure of poverty called “weakly relative poverty” that combines absolute and relative poverty to adjust over time or across countries for differences in the costs of avoiding social exclusion and relative deprivation. Other contributions argue for higher international poverty lines as richer countries tend to use higher lines because food bundles are more expensive and the allowances made for non-food needs are more generous (Lant Pritchett). Other advocate internationally coordinated national poverty lines (Stephan Klasen) that include both the headcount and depth of multidimensional deprivation (Sabina Alkire). Others focus on relative poverty that allows the distinction across different types of poor people (Amanda Lenhardt and Andrew Shepherd). Finally, Emmanuel Letouzé reflects on the potential contribution of Big Data to poverty measurement in light of the “data revolution” heralded by the recent High Level Panel report.
2.2 Extreme Poverty, Chronic Poverty and Transitory Poverty
The beyond 2015 aspires to put an end to hunger and extreme poverty as well as addressing poverty in all its other forms. In order to achieve this, the first step is to recognise that there are several types of poverty that need to be addressed differently. Indeed perspectives on poverty have evolved significantly with widespread acceptance not only of the multidimensional nature of poverty but also the importance of considering its depth and severity. Recent poverty reduction have pushed millions of poor to a new middle class status mainly in MICs which has put on the spot line the extreme poor and issues of inclusiveness.
Extreme poverty refers to the depth and severity of poverty corresponding to the so called ultra-poor which suffer from severe material deprivation and several vulnerabilities, are socially excluded and/or belong to a minority, and are commonly, children, elder, sick and mostly women.
Absolute poverty analysis can focus on the ultra-poor by setting the poverty line in the 10% lowest income, identifying the poorest and then allowing empirical inference that analysis these households. But it cannot provide information on issues related with the persistence of poverty or in other words it does not address chronic poverty. In fact extreme poverty is a very serious type of poverty not only because it is more precarious, but normally because it is the most persistent over time, being highly correlated with chronic poverty.
According to the CPRC chronicpoverty is described as “those individuals and households who experience poverty for extended periods of time throughout their lives, usually for five years or more; a poverty that is often intergenerational in nature” (Hulme, 2003a:399; Hulme et al., 2001; Sen and Hulme, 2004).
Who are the Chronically Poor?
“Most spend their whole life in poverty, and their children — if they survive the early years of life — are likely to be as poor as themselves. They suffer multiple-deprivations, not only little income but poor health, dying an early (and preventable) death. If they reach old age, their remaining years are often miserable ones marked by chronic illness. They are often trapped in environmentally-stressed regions, remote from infrastructure and markets. Many live in chronically-deprived countries (CDCs) marked by geographical disadvantage, inequality, war and political turmoil, and there is some overlap with the “bottom billion” discussed by Professor Paul Collier. However, many others live in countries experiencing economic growth at a national level, but with great regional or social inequality. For example, we estimate that perhaps one third of the world’s chronically poor people live in India alone. Within huge countries like India and China, there is enormous variation: several populous Indian states are larger than most African countries and suffer widespread persistent poverty and intractable development problems.
A key point to understand is that most chronically poor people are working. They are not ‘unproductive’. Even if they are at a stage in their life-cycle when they might be expected not to be working — whether childhood or old age — many will be forced through hardship to engage in economic activity of some kind. Processes of exploitation and exclusion keep many millions in poverty by limiting access to assets, services and positive social relationships.
Many slide into chronic poverty after a shock or series of shocks (e.g. ill health and injury, natural disasters, violence, economic collapse) that they cannot recover from. These are not very different from what drives poverty in general: but when shocks are severe and/or repeated, when people have few private or collective assets to ‘fall back’ on, and when institutional support (social protection, basic services, conflict resolution) is ineffective, such processes are likely to trap people in chronic poverty.”
Chronically poor represent today nearly half a billion people. The gravity of this kind of poverty does not lie only in the numbers, but mostly on the length of poverty representing usually long periods of their lives or even an entire lifetime but also on its contagious effect to their children. These features make chronic poverty the most complex and more resistant kind of poverty which poses distinct or additional policy responses. Furthermore tackling chronic poor is also to understand poverty as a transitory process over time. Please look at the figure 2 to understand the difference between chronic and transitory poor.
Previous static measurements of absolute poverty analysis focusing in one point in time provide no insights on phenomenon that are associated with extreme poverty such as transitory and chronic poverty neglecting movements of individuals that fall in and out of poverty or households that are chronically trapped in poverty. Poverty Dynamics has been an increasingly alternative empirical tool to study the movements of poor, escaping and falling into poverty providing its transitory path and a tracking system that may show the way in and out of poverty through time. (See Fig. 2) It goes beyond the uni-dimensional approach additionally looking at poverty duration; poverty severity; poverty dynamics and household vulnerability, as discussed in Hulme and Shepherd (2003).
Most of all poverty dynamics is important because it may be useful to analyse specifically the impact of conflict and fragility in poverty. It is widely recognized that conflicts can reverse gains made in poverty reduction, throwing large numbers of vulnerable and marginalised households, previously above the poverty line, into poverty.Conflicts affect the poor and vulnerable disproportionately, especially women, children, the elderly and those recovering from external shocks. Very often, it is those living on the fringe of society without adequate coping mechanisms (savings, insurance, social safety nets or social protection) who are most vulnerable to the impacts of conflict and instability, and are most likely to fall into poverty through the consequences of war. Poverty dynamics may be a tool to monitor these transitions in and out of poverty caused by the conflict.
Furthermore while MDGs have initially set targets focusing mainly on headcount poverty measures, the post-2015 agenda urges for a new approach that address issues of chronic and transitory poverty to tackle extreme poverty. Indeed the recent remarkable achievements in poverty reduction were in fact a considerable reduction in absolute poverty while leaving behind the ultra-poor. Paradoxically, albeit the promotion of international consensus, by setting headcount poverty targets the MDGs unintentionally advocated that it would be enough a development strategy that facilitated fast economic growth dragging a considerable easy to reach amount of population out of poverty while leaving behind the poorest and the marginalized. In the beyond 2015 agenda poverty reduction mostly driven by growth, macro-economic stability and post-conflict catching up effects will no longer be sustainable demanding knowledge-based and assertive policy driven efforts tackling issues such as chronic and transitory poverty within extreme poverty.
1.4 Vulnerability and Resilience
Globally conflict and instability has intensified dramatically in recent years exposing mostly poor that are more vulnerable to all hazards. As it is widely recognized that poor are the most vulnerable to the impact of external shocks increasingly poverty literature has taken on board the concept of vulnerabilities and economic resilience into poverty analysis.
Analysing extreme poverty in fragile states is ultimately to identify the specific risks that poor face due to conflict which urges to address poverty in a broader fashion that focus on vulnerability assessments that consider future exposure to shocks, stress or violence a proxy of poverty status.
Technically a household’s observed poverty level is an ex-post measure of a household’s well-being. But poverty is a stochastic phenomenon and the current poverty level of a household, may not necessarily be a good guide to the household’s expected poverty in the future. Forward-looking anti-poverty interventions should go beyond cataloging who is currently poor and who is not and look at the future poverty through households’ vulnerability assessments.
According to Dercon (2005:20) often the conventional poverty analysis fails to take vulnerability and risk into account because poverty measurement chooses a welfare indicator, identifies the poor through a poverty line and aggregates them. This analysis assumes that poor live in the “world of certainty” neglecting the different risks that they face and how vulnerable they are to crises/conflict throwing them into deeper poverty. Dercon (2005:21), therefore, defines vulnerability “as the magnitude of the threat of poverty, measured ex-ante, before the veil of uncertainty is lifted“.
There are many different definitions of vulnerability, but are all consensual about the link between vulnerability and risk. Coudouel and Hentschel (2000:34) argue that vulnerability goes beyond income vulnerability but also incorporates risks related to health, violence and social exclusion. But within the study of vulnerability on the opposite side there is the underlining principle of resilience. Indeed Chambers (1989:1) stated that vulnerability refers not only to the exposure to contingencies and stress, but to a defenselessness status due to a lack of means to cope without damaging loss. Poor coping strategies such as lack of assets, insurance or safety-nets increase vulnerability in the face of repeated disasters natural or political instability that can push someone from relative wealth to poverty and from poverty to extreme poverty or destitution. Wood (2003:455) believes that the poorest cannot apply risk management and strategic preparation for the future to ensure their security.
The study of resilience through coping strategies of poor is not obvious. Literature has shown that the poorest have a short-run view focused on survival and security in the present. In fact coping strategies of poor against risk may seem irrational to an outsider but ensure some type of security to poor people. Borrowing from a moneylender at a high rate of interest rather than from an NGO programme, may be rational due to the urgency and flexibility of the loan terms. In such emergency situations immediate survival takes priority over longer-term welfare (Wood 2003). Furthermore Fafchamps (1999) highlights that coping strategies of poor are also very limited and that desperate people will do anything to buy time, including mortgaging their own future survival.
Also risk sharing mechanisms using relationships of patronage with more wealthy people often lead to exploitative social relations that prevent people from escaping poverty and promote inequality and social exclusion (Fafchamps, 1999). The extended family is often a person’s primary resource for risk sharing, enabling people to cope with adversity. However, this safety net is not a proof against all adverse events, particularly when members are also poor or the burden of repeated shocks may lead to break-up of a family unit. As Fafchamps (1999:96) and Chakma (2005) argue, the dissolution of households and gender issues, such as women who are abandoned or divorced and may not be welcomed back into their natal home, are cases that require further research in terms of vulnerability. In addition, it is also important to note that many poor individuals do not live in families and communities and are dislocated from social institutions and from place, such as “footloose labourer”, that move from placeto place in search of work (Breman, 1996). This is particularly relevant in conflict situations that lead to large displacement of poor people, disaggregation of households and informal protection patronage that expose poor for example to illegal emigration to escape from war. Thus conflict usually transforms poor people into refugees exposing them to several specific vulnerabilities that need further research.
Vulnerability assessments are therefore relevant to study extreme poverty in fragile states because they allow understanding the impact of conflict on poor by creating a profile on the scale and intensity of risks that poor face. This approach allows to account damage to assets such as crops, livestock or infrastructure as well as to identify the coping strategies available such as assets; insurance and safety nets that demonstrate resilience. It may also show the impact of conflict on different groups of poor for e.g. the chronically poor. It allows policy-makers to understand the dynamics of vulnerability in the context of fragile states as a knowledge tool on poverty and insecurity useful to set policy recommendations in areas of provision of insurance, social protection, human rights and legal protection.