A Unified Approach to Measuring Poverty and Inequality
At the United Nations Millennium Forum in 2000, 193 countries agreed on the Millennium Development Goals, which, among other targets, aim to reduce the proportion of people living on $1.25 a day by half within 15 years. Following the Group of 8 (G-8) Summit in Gleneagles, Scotland, in 2005, the World Bank, the International Monetary Fund, and the African Development Bank agreed to a plan of debt relief for the poorest countries. What reasons underlie efforts to alleviate poverty? Individuals often consider alleviating poverty a personal responsibility that arises from religious or philosophical convictions. Many see poverty as the outcome of an unfair system that privileges some and constrains opportunities for others—a fundamental injustice that can also lead to social conflict and violence if not addressed. Others view poverty as a denial of universal rights and human dignity that requires collective action at a global level. Political leaders often portray poverty as the enemy of social stability and good governance. Economists focus on the waste and inefficiency of allowing a portion of the population to fall significantly below potential. Many countries include poverty alleviation as an essential component of their programs for sustainable growth and development. Business leaders are reevaluating the “bottom of the pyramid� as a substantial untapped market that can be bolstered through efforts to address poverty. Measurement is an important tool for the many efforts that are addressing poverty. By identifying who the poor are and where they are located, poverty measurements can help direct resources and focus efforts more effectively. The measurements create a picture of the magnitude of the problem and the way it varies over space and time. Measurements can help identify programs that work well in addressing poverty. Civil society groups can use information on poverty as evidence of unaddressed needs and missing services. Governments can be held accountable for their policies. Analysts can explore the underlying relationships between poverty and other economic and social variables to obtain a deeper understanding of the phenomenon. How can poverty be measured? The process has three main steps: 1. Choose the space in which poverty will be assessed. The traditional space has been income, consumption, or some other welfare indicator measured in monetary units. This book will focus on the traditional space (although attention is turning to other dimensions, such as opportunities and capabilities).
2