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<nettime> Global Falsehoods

>Date: Sun, 10 Jan 1999 19:55:49 -0500
>From: Michel  Chossudovsky <>
>Subject: Global Falsehoods
>Mime-Version: 1.0
>		by
>	Michel Chossudovsky
>Professor of Economics, University of Ottawa, author of The Globalisation
>of Poverty, Impacts of IMF and World Bank Reforms, Zed Books, London, 1997.
>C copyright by Michel Chossudovsky, Ottawa, 1999. To publish this text
>contact the author at
>Until the 1998 financial meltdown ("black September" 1998), the World
>economy was said to be booming under the impetus of the "free market" reforms.
>Without debate or discussion, so-called "sound macro-economic policies"
>(meaning the gamut of budgetary austerity, deregulation, downsizing and
>privatisation) continue to be heralded as the key to economic success and
>poverty alleviation.  In turn, both the World Bank and the United Nations
>Development Programme (UNDP) have asserted authoritatively that economic
>growth in the late 20th Century has contributed to a reduction in the
>levels of World poverty.
>According to the UNDP, "the progress in reducing poverty over the 20th
>century is remarkable and unprecedented... The key indicators of human
>development have advanced strongly. "1
>The Devastating Impacts of Macro-economic Reform are casually denied
>The increasing levels of global poverty resulting from macro-economic
>reform are casually denied by G7 governments and international institutions
>(including the World Bank and the IMF); social realities are concealed,
>official statistics are manipulated, economic concepts are turned upside down.
>The World Bank Methodology: Defining Poverty at a "Dollar a Day"
>The World Bank framework deliberately departs from all established concepts
>and procedures (eg. by the US Bureau of Census or the United Nations) for
>measuring poverty.2 It consists in arbitrarily setting a "poverty
>threshold" at one dollar a day per capita. It then proceeds (without even
>measuring) to deciding that population groups with a per capita income
>"above one dollar a day" are "non-poor".
>The World Bank "methodology" conveniently reduces recorded poverty without
>the need for collecting country-level data. This "subjective" and biased
>assessment is carried out irrespective of actual conditions at the country
>level.3 The one dollar a day procedure is absurd: the evidence amply
>confirms that population groups with per capita incomes of 2, 3 or even 5
>dollars a day remain poverty stricken (ie. unable to meet basic
>expenditures of food, clothing, shelter, health and education).
>Arithmetic Manipulation
>Once the one dollar a day poverty threshold has been set (and "plugged into
>the computer"), the estimation of national and global poverty levels
>becomes an arithmetical exercise. Poverty indicators are computed in a
>mechanical fashion from the initial one dollar a day assumption.
>"Authoritative" World Bank Numbers
>These authoritative World Bank numbers are those which everybody quotes,
>--ie. 1.3 billion people below the poverty line. But nobody seems to have
>bothered to examine how the World Bank arrives at these figures.
>The data is then tabulated in glossy tables with "forecasts" of declining
>levels of global poverty into the 21st Century. These World Bank
>"forecasts" of poverty are based on an assumed rate of growth of per capita
>income, --ie. growth of the latter implies pari passu a corresponding
>lowering of the levels of poverty. Its a numerical game!
>World Bank "Forecasts": Poverty in China will decline to 2.9 percent by the
>Year 2000
>According to the World Bank's "simulations", the incidence of poverty in
>China is to decline from 20 percent in 1985 to 2.9 percent by the year
>2000.4  Similarly, poverty levels in India (where according to official
>data more than 80 percent of the population (1996) have per capita incomes
>below one dollar a day), the World Bank's "simulation" (which contradicts
>its own "one dollar a day" methodology) indicates a lowering of poverty
>levels from 55 percent in 1985 to 25 percent in the year 2000.5
>The whole framework (stemming from the one dollar a day assumption) is
>tautological; it is totally removed from an examination of real life
>situations. No need to analyse household expenditures on food, shelter and
>social services; no need to observe concrete conditions in impoverished
>villages or urban slums. In the World Bank framework, the "estimation" of
>poverty indicators has become numerical exercise.
>The UNDP Framework
>While the UNDP Human Development Group has in previous years provided the
>international community with a critical assessment of key issues of global
>development, the 1997 Human Development Report devoted to the eradication
>of poverty broadly conveys a similar viewpoint to that heralded by the
>Bretton Woods institutions.  The UNDP's "human poverty index" (HPI) is
>based on "the most basic dimensions of deprivation: a short life span, lack
>of basic education and lack of access to public and private resources".6
>Based on the above criteria, the UNDP Human Development Group comes up with
> estimates of human poverty which are totally inconsistent with
>country-level realties. The HPI for Colombia, Mexico or Thailand, for
>instance, is of order of 10-11 percent (see Table 1). The UNDP measurements
>point to "achievements" in poverty reduction in Sub-Saharan Africa, the
>Middle East and India which are totally at odds with country-level data.
>The human poverty estimates put forth by the UNDP portray an even more
>distorted and misleading pattern than those of the World Bank). For
>instance, only 10.9 percent of Mexico's population are categorised by the
>UNDP as "poor". Yet this estimate contradicts the situation observed in
>Mexico since the mid-1980s: collapse in social services, impoverishment of
>small farmers and the massive decline in real earnings triggered by
>successive currency devaluations. A recent OECD study confirms
>unequivocally the mounting tide of poverty in Mexico since the signing of
>the North American Free Trade Agreement (NAFTA).7
>Double Standards in the "Scientific" Measurement of Poverty
>"Double standards" prevail in the measurement of poverty: the World Bank's
>one dollar a day criterion applies only to the "developing countries". Both
>the Bank and the UNDP fail to acknowledge the existence of poverty in
>Western Europe and North America. Moreover, the one dollar a day criterion
>is in overt contradiction with established methodologies used by Western
>governments and intergovernmental organisations to define and measure
>poverty in the "developed countries".
>In the West, the methods for measuring poverty have been based on minimum
>levels of household spending required to meet essential expenditures on
>food, clothing, shelter, health and education. In the United States, for
>instance, the Social Security Administration (SSA) in the 1960s had set a
>"poverty threshold"which consisted of "the cost of a minimum adequate diet
>multiplied by three to allow for other expenses". This measurement was
>based on a broad consensus within the US Administration.8
>The US Poverty Threshold
>The US "poverty threshold" for a family of four (two adults and two
>children) in 1996 was of the order of $16,036. This figure translates into
>a per capita income of eleven dollars a day (compared to the one dollar a
>day criterion of the World Bank used for developing countries). In 1996,
>13.1 percent of the US population and 19.6 percent of the population in
>central cities of metropolitan areas were below the poverty threshold.9
>According to the UNDP Poverty in Mexico is lower than in the United States
>Neither the UNDP nor the World Bank undertake comparisons in poverty levels
>between "developed" and "developing" countries. Comparisons of this nature
>would no doubt be the source of "scientific embarrassment" --ie. the
>poverty indicators presented by both organisations for Third World
>countries are in some cases of the same order of magnitude as (or even
>below) the official poverty levels in the US, Canada and the European
>Union. In Canada, heralded by the World community as "a promised land",
>occupying the first rank among all nations according to the same 1997 Human
>Development Report, 17.4 percent of the population are below the (official)
>poverty threshold compared to 10.9 percent for Mexico and 4.1 percent for
>Trinidad and Tobago.10
>Conversely, if the US Bureau of Census methodology (based on the cost of
>meeting a minimum diet) were applied to the developing countries, the
>overwhelming majority of the population would be categorised as "poor".
>While this exercise of using "Western standards" and definitions has not
>been applied in a systematic fashion, it should be noted that with the
>deregulation of commodity markets, retail prices of essential consumer
>goods are not appreciably lower than in the US or Western Europe. The cost
>of living in many Third World cities is higher than in the United States.
>Moreover, household budget surveys for several Latin American countries
>suggest that at least sixty percent of the population the region does not
>meet minimum calorie and protein requirements. In Peru, for instance,
>following the 1990 IMF sponsored "Fujishock", 83 percent of the Peruvian
>population according to household census data were unable to meet minimum
>daily calorie and protein requirements.11 The prevailing situation in
>Sub-Saharan Africa and South Asia is more serious where a majority of the
>population suffer from chronic undernourishment.
>The investigation on poverty by both organisations take official statistics
>at face value. It is largely an "office based exercise" conducted in
>Washington and New York with few insights or awareness of "what is
>happening in the field". The 1997 UNDP Report points to a decline of one
>third to a half in child mortality in selected countries of Sub-Saharan
>despite the slide in State expenditures and income levels. What it fails to
>mention, however, is that the closing down of health clinics and the
>massive lay-offs of health professionals (often replaced by semi-illiterate
>health volunteers) responsible for compiling mortality data has resulted in
>a de facto decline in recordedmortality. The IMF-World Bank sponsored
>macro-economic reforms have also led to a collapse in the process of data
>Vindicating the "Free" Market System
>These are the realities which are concealed by the World Bank and UNDP
>poverty studies. The poverty indicators blatantly misrepresent country
>level situations as well as the seriousness of global poverty. They serve
>the purpose of portraying the poor as a minority group representing some 20
>percent of World population (1.3 billion people).
>Declining levels of poverty including forecasts of future trends are
>derived with a view to vindicating the "free market" policies and upholding
>the "Washington Consensus" on macro-economic reform. The "free market"
>system is presented as the "solution", namely as an instrument of poverty
>alleviation. The impacts of macro-economic reform are denied. Both
>institutions point to the benefits of the technological revolution and the
>contribution of foreign investment and trade liberalisation to the
>eradication of poverty.
>Country 				Poverty Level
>					(percent of the
>					population below the
>					poverty line)
>Trinidad and Tobago		4.1
>Mexico				10.9
>Thailand				11.7
>Colombia				10.7
>Philippines				17.7
>Jordan				10.9
>Nicaragua 				27.2
>Jamaica				12.1
>Iraq					30.7
>Rwanda				37.9
>Papua New Guinea			32.0
>Nigeria				41.6
>Zimbabwe				17.3
>Source: Human Development Report 1997, table 1.1, p. 21
>Country			Poverty Level
>				(percent of the
>				population below the
>				poverty line)
>United States (1996)*		13.7
>Canada (1995)**			17.8
>United Kingdom (1993)***	20.0
>Italy (1993)***			17.0
>Germany (1993)***		13.0
>France (1993)***			17.0
>Source: 	*US Bureau of Census,
>     		** Centre for International Statistics, Canadian Council on
>Social Development
>     		***European Information Service.
>1. United Nations Development Programme, Human Development
>Report, 1997, New York, 1997, p. 2.)
>2. For a methodological review on the measurement of poverty see
>Jan Drewnowski, The Level of living Index, United Nations
>Institute for Social Research and Development (UNRISD), Geneva,
>1965. See also the extensive research on poverty thresholds
>conducted by the US Bureau of the Census.
>3.  See World Bank, World Development Report, 1990, Washington
>DC, 1990.
>4. See World Development Report, 1997, table 9.2, chapter 9.
>5. Ibid., chapter 9, table 9.2.
>6. Ibid., p. 5.
>7. See Clement Trudel, Le Mexique subit le choc de
>l'internationalisation, Le Devoir, Montreal, 28 March 1998, p.
>8. See US Bureau of the Census, Current Population Reports,
>Series P60-198, Poverty in the United States: 1996, Washington,
>9. US Bureau of the Census, Poverty in the United States: 1996,
>Washington, 1997, p. 7.
>10. According to the official definition of Statistics Canada
>(1995). For country ranks based on the UNDP's Human Development
>index, see Table 6, Human Development Report, 1997, p. 161
>11. See Michel Chossudovsky, El Ajuste Economico: El Peru Bajo el
>Dominio del FMI, Mosca Azul Editores, Lima, 1992, p. 83.
>    Michel Chossudovsky
>    Department of Economics,
>    University of Ottawa,
>    Ottawa, K1N6N5
>    Voice box: 1-613-562-5800, ext. 1415
>    Fax: 1-514-425-6224
>    E-Mail:
>Recent articles by Chossudovsky on the global economic crisis at:
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