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Moving beyond low income countries makes sense for an institution focused on ending extreme poverty. But does the IFC follow through by focusing on the countries that are home to the extreme poor? Not really.
As Lant Pritchett reports, the World Bank has introduced two new poverty lines: $3.20 for lower middle income countries, and $5.50 for upper middle income countries. I’m with Lant that this is broadly a good thing. But the process by which the World Bank came up with its new poverty lines suggests it might be worth revisiting some of the pitfalls of income thresholds at the individual or national level.
We have long advocated for more widespread use of median income or median consumption to compare individuals’ material well-being between countries and its development over time, and we are happy to report that the World Bank team that manages the (impressive) PovcalNet database has come through: as of October 1, the median monthly per capita income or consumption for each country is now part of the standard indicators displayed for any country query on PovcalNet.
PovcalNet, the World Bank’s global poverty database, provides all kinds of country statistics, including mean income, the share (and number) of the population living in absolute poverty ($1.90), the poverty gap and several measures of income inequality, such as the Gini coefficient. But one thing it doesn’t provide is median income or consumption. The median is a better measure of “typical” well-being than the mean, which is always skewed to the right.
We’ve been waiting for the World Bank to add these medians to its PovcalNet database, but we got impatient and did it ourselves. By manually running a few hundred queries in PovcalNet, we now have (and can share with you) the latest median income/consumption data for 144 countries (using 2011 PPPs — more on our methods below).
Over the weekend, Angus Deaton won the Nobel Prize in economics. The previous weekend, the World Bank announced that the global poverty rate dipped below 10 percent in 2015, for the first time in history. These two announcements have an interesting connection.
We are delighted to see that Nora Lustig, a CGD non-resident fellow and head of the Tulane University Commitment to Equity Institute is one of eight distinguished economists appointed to the core group of a new Global Poverty Commission announced this week by World Bank Chief Economist Kaushik Basu.
The World Bank has decided to make this problem – the divergence of the organization’s rhetoric on “extreme poverty” and their clients’ desire for support in their national development agendas – even worse. They have announced that their goal is to “eradicate extreme poverty” (while only “monitoring” the income of the poorest 40 percent in each country—but with no goal).
Over the past few months, quite a bit of high-level rhetoric has surrounded World Bank funding of coal projects in developing countries. On one side, Christiana Figueres, the executive secretary of the UN Framework Convention on Climate Change, stated that “it is no longer necessary [for the World Bank to invest in coal projects] because we have many other technologies that can come forward.” On the other side, World Bank president Jim Kim stated that “we will look for everything we can possibly do to avoid [coal projects] but look, poor people should not pay the price with their lives of mistakes that people have been making in the developed world for a very long time.”