Photo: CADTM.

On October 15, 2024, The World Bank said in a press release: “The global goal of ending extreme poverty – less than $2.15 per person per day – by 2030 is not being met: it would take three decades or more to eliminate poverty set at this threshold, which is most relevant in low-income countries.’ (2) This is a terrible admission of powerlessness for an institution that is supposed to help reduce world poverty.

The truth is that, instead of contributing to poverty reduction, the policies financed by the World Bank and its twin, IMFreproduce it and exacerbate it.

The leaders of the World Bank and the IMF never recognize the eminently negative role of the prescriptions and model they recommend or even impose on countries that resort to loans.

This article aims to show that the World Bank has tended for decades to underestimate the number of people affected by poverty. It’s worth revisiting an event that happened more than fifteen years ago, when the World Bank admitted it was wrong about the number of people living in extreme poverty. Indeed, in 2008 the World Bank admitted that it had made major errors in its calculations of global poverty. While at the same time claiming that its poverty estimates are becoming more accurate thanks to “new and better data”, the Bank found in a working paper that “400 million more people (are) living in poverty” . (3) An “extra” 400 million people? That’s more than half of the entire population of Sub-Saharan Africa at the time!

Such an error, even if admitted, reflects the fact that the statistics published by the World Bank are far from reliable – which is not surprising, since those statistics serve primarily to support the neoliberal policies that the bank’s experts impose on countries around the world . .

According to the working paper, “For 2005 we estimate that 1.4 billion people, or a quarter of the developing world’s population, lived below our international limit of $1.25 a day,” while previous estimates gave a figure of about one billion people.

However, the Bank still congratulates itself on what it sees as a positive trend, because what is important in its view is not the number of poor people, but the proportion of people who are poor. Why? Because with the growth of the world population, a proportional figure hides the truth. If, for example, the number of people living in poverty stagnates, the proportion of poor people will automatically decrease over the years, in line with the growth of the world’s population. Which explains why the declared “millennium” goal for the period 1990-2015 was to reduce the proportion of the population whose income is below $1.25 a day.

But with the World Bank’s enormous miscalculations on poverty, the entire edifice of international poverty reduction policies is collapsing. The structural adjustment the policies imposed by the IMF and the World Bank since the early 1980s – the reduction of social programs, cost recovery in the health and education sectors, an export-oriented agriculture and the reduction food cropsabandoning food sovereignty, etc. – have actually worsened the living conditions of hundreds of millions of people around the world.
And there was no lack of criticism of the Bank in this regard. Thomas Pogge of Columbia University, for example, wrote in 2008:

The World Bank’s approach to estimating the extent, distribution and trend of global income poverty is neither meaningful nor reliable. (…) there is reason to believe that the Bank’s approach may have led it to underestimate the extent of global income poverty and to infer, without adequate justification, that global income poverty has fallen sharply in the recent period. A new global poverty assessment methodology, focused squarely on what is needed to meet basic human needs, is feasible and necessary. (4)

The lack of reliability inherent in the World Bank’s methodology is evident in a 2010 statement by Martin Ravallion, one of the Bank’s leading experts on poverty: “The latest poverty estimates are based on 675 household surveys for 116 countries in progress of development, representing 96 percent. of the developing world”. (5) How can we claim to publish reliable figures on the situation of several billion people based on a survey limited to 675 household surveys? How can such “experts” expect to be taken seriously! The same author also admits that in the early 1990s, the Bank’s poverty sources were limited to studies conducted in only 22 countries.

Adopting a diplomatic tone, the same Martin Ravallion writes: “The latest revision of poverty figures is the biggest yet, due to important new data revealing that the cost of living in the developing world is higher than we thought “. (6)

At the time of writing, in 2024, the World Bank considers a person not living in extreme poverty if they live in a developing country and have more than $2.15 a day to live on. Such a figure is obviously highly debatable. It sets an extremely low threshold for extreme poverty. The $2.15 per day figure is not a reliable indicator, and the methods used to extrapolate the number of poor people on the planet cannot be taken seriously.

As the British economist Michael Roberts wrote, if instead of taking $2.15 a day, we set the extreme poverty line “at $5 a day, 40% of the world’s population would still be in poverty; at $10 a day it was 62% and at $30 it was 85%.” (7)

Note that in its recent publications, the World Bank announces that as a result of the Coronavirus crisis, more than 100 million human beings will be added to the ranks of those living in extreme poverty in 2020-2021. Referring to a Bank report published in 2020, worldbank.org states: “Now, for the first time in a generation, the quest to end poverty has suffered a setback. Global extreme poverty rose in 2020 for the first time in over 20 years as the disruption of the Covid-19 pandemic exacerbated the forces of conflict and climate change.” The authors add: “New research estimates that climate change will drive between 68 and 132 million into poverty by 2030.” (8)

Although these estimates should be taken with a grain of salt, given the methods the Bank uses to make its calculations, they nevertheless indicate dramatic developments that urgently call for radical solutions to ensure the protection of human rights.

The press release issued by the World Bank on October 15, 2024 was titled: “Ending poverty for half the world could take more than a century.” In the 2008 World Bank article cited above, one of the subheadings read: “The developing world is still on track to halve poverty from 1990 levels by 2015 compared to 1990 levels.” (9)

It is time to get rid of the World Bank-IMF duo and replace it with other institutions in the service of humanity.

Footnotes

“(1) Source: https://www.worldbank.org/en/topic/poverty/overview#1 (accessed 22.10.2024).

(2) World Bank, “Ending poverty for half the world could take more than a century”, 15/10/2024, https://www.worldbank.org/en/news/press-release/2024/10/15/ending-poverty-for-half-the-world-could-take-more-than-a-century(accessed 22.10.2024).

(3) Shaohua Chen and Martin Ravallion, The developing world is poorer than we thought, but no less successful in fighting poverty (World Bank: Policy Research Working Paper 4703, August 2008) https://documents1.worldbank.org/curated/en/526541468262138892/pdf/WPS4703.pdf (accessed 22.10.2024).

(4) Sanjay G. Reddy and Thomas W. Pogge, “How not to count the poor,” October 29, 2005 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=893159 (accessed 22.10.2024). For an overview of the question, see Thomas Pogge, Politics as Usual: What Lies behind the Pro-Poor Rhetoric (Cambridge: Polity Press, 2010).

(5) World Bank, “World Bank Updates Poverty Estimates for Developing World”, World Bank News Report, 26 August 2008, updated 17 February 2010 https://www.worldbank.org/en/news/feature/2008/08/26/world-bank-updates-poverty-estimates-for-the-developing-world (accessed 22.10.2024). (pas vu de mise à jour)

(6) Ibid.

(7) Michael Roberts, “Measuring global poverty”, Michael Roberts Blog, 8 October 2024, https://thenextrecession.wordpress.com/2024/10/08/measuring-global-poverty/ (accessed 22.10.2024).

(8) World Bank, “Global Action Urgently Needed to Halt Historic Threats to Poverty Reduction”, 7 October 2020, https://www.worldbank.org/en/news/feature/2020/10/07/global-action-urgently-needed-to-halt-historic-threats-to-poverty-reduction(accessed 22.10.2024).

(9) “World Bank Updates Poverty Estimates for Developing World”, 26 August 2008, https://www.worldbank.org/en/news/feature/2008/08/26/world-bank-updates-poverty-estimates-for-the-developing-world(accessed 22.10.2024).