CAPITALISM'S ACHILLES HEEL Dirty Money and How to

228 CAPITALISM’S ACHILLES HEEL
large reductions in poverty head counts in the 1970s but rising counts in the
1980s and 1990s. Sub-Saharan Africa simply fell through the floor, quadrupling
the number living on $1 a day across the period of the study.
On the other side of the question, Thomas Pogge, a philosopher we will
meet again in Chapter 12, and Sanjay Reddy, an economist colleague at Columbia
University, have teamed up to offer a serious challenge to the World
Bank’s poverty calculations. Taking the Bank’s 1998 number of 1.2 billion
people living on $1 a day, they attack the methodology used to arrive at this
figure on several fronts. First, the purchasing power parity measure is based
on an unpublished general consumption PPP. Second, the Bank plays fast
and loose with assumptions about countries not reporting or not recently reporting
survey data. And third, the Bank adjusts the $1.00 a day PPP base
measure set in 1985 to $1.08 in 1993, without adequate justification. 25
Pogge and Reddy argue that the $1.00/$1.08 international poverty line
is badly measured, wrongly calculated, far too low, and unreliable in determining
trends. A better derived and barely more adequate line at $2.15 a
day focused on food alone would raise the global poverty head count to 2.5
billion. Translating the $2.15 a day back to the United States on purchasing
power parity terms would mean that an American family of four would have
less than $70 a week for all expenditures. At such a level, this American family
will be homeless, cold, hungry, weak, and ill.
Estimates of global poverty rising or falling are largely dependent on
where lines are set, on what prices of products and services are tallied, on
how you divide the world into comparison groups, on the choice of purchasing
power parity conversion formulas, and on much more. In my judgment,
the jury deciding which way poverty is moving is still out. Angus
Deaton at Princeton University concluded that, “The plethora of new data
has not resolved the controversy because the new sources are mutually contradictory.”
26
Third question: Okay, if the trend in poverty is unclear, what about inequality;
is it widening or narrowing? Well, once again, let’s sample the experts
(see box, page 229). You can find support for whatever bias you choose.
Surjit Bhalla, ex-World Banker and think-tank denizen, constructed
an analysis of inequality that he refers to as a simple accounting system,
utilizing data made available in 1996 by Klaus Deininger and Lyn Squire
at the World Bank. His procedure “corrects” for a slight upward bias in