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Critique Of The World Banks Method Of Calculating Poverty

1247 words - 5 pages

What are the main criticisms of the 'Dollar a day' method of calculating poverty?Poverty exists throughout the whole world. In all its forms, be it relative or absolute, poverty is a mass epidemic in third-world countries especially. To successfully counter poverty as a whole therefore, it is imperative to compile and calculate the true extent of it. The most respected and most cited compilation of poverty is carried out by the World Bank (bank henceforth).Critics argue that the fundamental premise on which poverty is calculated, is flawed. It is flawed to such an extent that according to Reddy and Pogge the banks estimate of world poverty is underestimated by 30 - 40%. The erroneous premise is the use of the 'Dollar a day method' as a universal judgement of poverty.On an international level majority of the residents of the world do not use the Dollar, apart from the U.S and a select few countries. The currencies of the world are wildly disproportionate to the value of the Dollar, for example, one US Dollar is equivalent to 53 Bangladeshi Takas.To judge poverty on an international level it becomes necessary to use an international standard. The international standard, which was originally set at one Dollar is currently set at $1.08 a day. This can be taken literally to mean that a person anywhere in the world who lives on the equivalent of £1.08 or less a day is absolutely poor.To be able to use the criteria of a 'Dollar a day' for calculating poverty between countries with different currencies and different economies it is important that "instead of using exchange rates to compare cross-national living standards, measures of income in local currencies are converted on an internationally comparable scale, using Purchasing Power Parities" (PPP henceforth) (Townsend, P, 1993).PPP simply "measures the amount of goods or services which the equivalent of a Dollar can buy in different countries" (Monbiot, G, 2003), after taking into account all factors in relation to a countries currency and economy the equivalent of the buying power of a Dollar is used to investigate and compile what can be bought from an economy.Furthermore, what can be bought from all that is on sale in an economy is examined, these include essentials such as food and shelter. A major problem is that it is not only essential good which are examined, and items such as airline tickets and services including physiotherapy and personal fitness training are also taken into account.General services can be purchased a lot cheaper than basic necessities due to cheap labour in third-world countries. The question arises that would a person struggling for basic goods like food and shelter take advantage of cheaper services? It could be argued that there is a first world bias in including such services, because the lack of such services is seen as important in judging poverty by those who are living luxuriously. According to (Townsend, P, 1993) "for many decades poverty in advanced...

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