USD 2.15 a day: can poverty be reduced to a number?

The International Poverty Line: anyone engaged in the field of global poverty reduction and international development cooperation is unlikely not have come across this threshold for extreme poverty defined by the World Bank. Its major advantage over national poverty lines is that the IPL is applicable to all countries in the world irrespective of differences in currency and purchasing power.

The World Bank uses a common, fictitious currency – the international dollar – to calculate purchasing power parities (PPPs) on which the IPL is based. One international dollar buys the same basket of goods anywhere in the world at a given point of time. The nominal value is anchored to the national poverty lines of 15 – now 28 – countries with the lowest income worldwide. These mainly include countries in sub-Saharan Africa, for example Chad and Burundi.

In September 2022, the IPL was raised from USD 1.90 to USD 2.15 and adjusted for the rise in prices. The calculated global poverty then "fell" from 9.3% to 9.1% (purchasing power parity based on 2017 prices), which amounts to 15 million fewer persons living in absolute poverty in purely statistical terms.

The figures USD 1.90 and USD 2.15 abound in UN and media reports. The IPL is also a key indicator for the 2030 Agenda and the UN Sustainable Development Goals (SDGs). Success or failure relating to SDG 1 – eradicating extreme poverty by 2030 – is tracked using the USD 2.15 metric.

"The World Bank definition continues to be important because it allows us to measure how far we are from achieving the internationally accepted goal of eradicating extreme poverty," says Isabel Günther, professor of development economics at the ETH Zurich's NADEL centre. She emphasises that the IPL only maps extreme poverty, while other dimensions of poverty such as security, access to health or opportunities for social participation are ignored. It is nevertheless useful to have a poverty indicator based on income or consumption because, "Income correlates very strongly with a number of poverty indicators including nutrition, education and access to infrastructure."

Not everyone is convinced that a purely quantitative, universal poverty standard should be used as a benchmark and for claiming success. Philip Alston, Australian professor of international law and former UN special rapporteur on extreme poverty, stridently criticised the World Bank's poverty yardstick in his final report in July 2020. The international community was touting progress in poverty eradication that did not exist in real terms. "The line is set so low and arbitrarily as to guarantee a positive result and to enable the United Nations, the World Bank and many commentators to proclaim a Pyrrhic victory," wrote Alston. By comparison, in Switzerland anyone earning less than CHF 76 a day is considered poor.

Alston criticised that the World Bank figure was used to proclaim major successes in reducing extreme poverty in previous years. Thus the World Bank has stated that extreme poverty fell by almost 36% in 1990 (1.9 billion people) to 10% (736 million) in 2015. Alston argues that a person who 'escapes' poverty with an income marginally above USD 1.90, is nowhere near what is required to lead a life in dignity. Such a standard of living is worlds apart from the human rights that are embodied in the UN charter.

The World Bank itself admits that the IPL is set extremely low and is insufficient to cover the cost of healthy nutrition. If this were to be used as an indicator of absolute poverty, three billion people would be living in extreme poverty instead of 700 million. Alston also criticises that the general reception of World Bank data obscures socioeconomic realities. For instance, the big decline in poverty between 1990 and 2015 was mainly due to China (from 750 million to 10 million), while the number of poor in sub-Saharan Africa and the Middle East actually increased by 140 million.

Kristina Lanz, policy analyst at Allianz Sud, an alliance of Swiss NGOs, shares Alston's misgivings and highlights another problem: "Many countries that the World Bank uses as a reference for setting the IPL do not have adequate resources for statistical reporting. The poorest who live in remote rural areas and informal settlements or slums and work in the informal sector are often only inadequately captured by such statistics." Governments thus often have an incomplete picture of actual poverty in the population. In addition, millions of people are not reflected in statistics anyway. "Migrants, domestic workers, homeless people and even women in patriarchal societies are often invisible in data that is collected through household surveys."

Recently, the World Bank has also been criticised for focusing disproportionately on poverty over inequality. Development economist Andy Summer has critiqued that particularly in emerging economies such as India and Brazil, the World Bank figures gloss over extreme inequality in income distribution.

Isabel Günther counters: "Both values – poverty and inequality – are significant for research. But we have other indicators to measure inequality." At a political level it is also difficult to achieve global consensus on the extent to which inequality should be reduced as opposed to extreme poverty. For multidimensional development indices, such as the Human Development Index, which is based on two social indicators, inevitably there is a question about how these should be weighted.

Günther is therefore of the view that the IPL remains a good metric for global income poverty. She also contradicts Alston's fundamental criticism of the World Bank's yardstick because the trend is unambiguous. "Poverty has declined over the last 30 years even when higher poverty lines or social indicators were included." Of course, it is open to debate whether the line has been set high enough. "If we increase it to 10 international dollars a day then 60% of the world's population would be living in absolute poverty."

Lanz considers poverty to be too complex to be expressed as a simple number. "At a political level there tends to be a preference for using figures that are easily understood – in arguments both for and against the efficacy of development cooperation." She admits that Alliance Sud also refers to the World Bank's figures. "But in our communications we always attempt to place these figures in context and inject a level of complexity into political debates on poverty reduction."