The Causes of Wealth Inequality (25): Globalization, Ctd.

Globalization is the usual suspect when people discuss the causes of contemporary increases in income inequality in many Western nations. As a result of easier transportation, trade and communication, low skilled workers in those nations now face ever tougher competition from cheap workers in developing countries, and this competition drives down wages at the poor end of Western income distributions: workers have to swallow wage reductions under the threat of outsourcing. Increased immigration – another facet of globalization – has the same effect.

At the top end of the income distribution, the reverse is happening: the job of a CEO is now more complicated in our globalized world, and hence his pay is higher. The threat of relocation also has an effect on income inequality through the channel of the welfare state: companies threaten to relocate, not just because of labor costs, but also because of tax rates. Taxes in Western countries tend to be relatively high because social security tends to be relatively generous. The threat of relocation convinces governments to reduce tax rates, but the price to pay is often a less generous welfare state. This as well puts pressure on the income distribution.

All this sounds convincing, but I’m afraid it’s too simple. The effects of globalization on inequality starts to look more complicated when we take consumption into account. Globalization tends to lower the consumption prizes of a lot of goods, and cheaper consumption can counteract downward pressures on wages and social security. If you can buy more and better stuff with your paycheck, your unemployment benefit or your disability check, then perhaps you’re not worse off.

There’s an interesting paper here by Broda and Romalis in which they look at

the compositional differences in the basket of goods consumed by the poor and the rich in America. Using household data on non-durable consumption between 1994 and 2005 we document that much of the rise of income inequality has been offset by a relative decline in the price index of the poor. By relaxing the standard assumptions underlying the representative agent framework we find that inflation for households in the lowest tenth percentile of income has been 6 percentage points smaller than inflation for the upper tenth percentile over this period. The lower inflation at low income levels can be explained by three factors: 1) The poor consume a higher share of non-durable goods —whose prices have fallen relative to services over this period; 2) the prices of the set of non-durable goods consumed by the poor has fallen relative to that of the rich; and 3) a higher proportion of the new goods are purchased by the poor. We examine the role played by Chinese exports in explaining the lower inflation of the poor. Since Chinese exports are concentrated in low-quality non-durable products that are heavily purchased by poorer Americans, we find that about one third of the relative price drops faced by the poor are associated with rising Chinese imports.

When measuring income inequality, we should correct for the different prices of goods and services consumed by people in different income groups. This doesn’t mean that we should be happy about the fact that poor people live on cheap stuff; it simply means that some of the rising income inequality is compensated by cheaper stuff. And we have cheaper stuff because of globalization. Turning globalization into some sort of bogey man is therefore rather too simple. Income inequality has many causes, and it’s not clear that globalization is, everything considered, an important one.

Finally, a word about the supposed wage pressures of increased immigration: they are indeed no more than supposed.

More posts in this series.

Racism (14): Race and Consumer Behavior

There’s strong evidence of racist sorting by people looking for a job (white job seekers often avoid working for black managers, and white workers quit their jobs more rapidly when a white manager is replaced with a black manager). A similar phenomenon is race discrimination by buyers.

Do buyers discriminate based on race? This column describes an experiment in the US that advertised iPods online from black and white sellers. Black sellers received fewer offers at lower prices, doing better in markets with competition amongst buyers and worse in high-crime markets. The authors find evidence of both statistical and taste-based discrimination. … [I]t appears that discrimination may not “survive” in the presence of significant competition among buyers. Furthermore, black sellers do worst in the most racially isolated markets and markets with high property crime rates, suggesting a role for statistical discrimination in explaining the disparity. (source)

The important question is indeed to what extent this “sorting” on the part of buyers is motivated by statistical discrimination or by taste-based discrimination:

  • Statistical discrimination means that race is used as a proxy for unobservable negative characteristics, maybe in this case a judgment about the probability that black sellers will be happy with a marginally lower sales price, given their statistically higher rates of poverty. Or perhaps there’s distrust based on unclear statistical judgments about the risk of buying fake or stolen goods, meeting sellers in an inconvenient or dangerous neighborhoods, or dealing with unreliable sellers who might not complete the transaction.
  • Taste-based discrimination occurs when people just don’t like dealing with black people for no particular reason apart from the difference in race.

The study cited above uses a number of clever ways to disentangle these two effects. For instance, the inclusion of white tattooed sellers, who also received fewer and lower purchase offers, suggesting that part of the differences are due to statistical discrimination. Another part, however, is just plain racism. Black sellers are at a significant disadvantage on average, and that’s due to both statistical and taste-based discrimination.

More on statistical discrimination here.

Measuring Poverty (11): The Subjective Approach

Usually, we measure poverty on the basis of objective numbers about income or consumption. Income or consumption levels are put on a continuum from lowest to highest and somewhere along the continuum we put a threshold that indicates the difference between poor and non-poor. For example, the Indian government uses a consumption threshold of 2,400 calories a day in rural areas and 2,100 in urban areas. The World Bank uses an income threshold of one dollar a day (corrected for purchasing power).

There are numerous disadvantages to these objective approaches. One is the inevitably arbitrary positioning of the threshold. One dollar a day, even after correction for purchasing power, means different things to different people in different areas, circumstances, groups etc. Calorie intake also means different things to different people, depending on people’s way of life etc. Moreover, income levels are notoriously difficult to measure (poor people in particular have a lot of informal income, e.g. “income” coming from all sorts of assistance from relatives etc.). Consumption as well is a difficult measure: it doesn’t necessarily have to mean just calorie intake for example. Poverty can mean a lack of non-food consumption. And if you focus on calorie levels after all, you’ll miss the issue of the quality of the food.

Also the third most common approach to poverty measurement suffers from some disadvantages. This approach, also called the multidimensional approach, tries to assess to what extent people suffer from a series of different types of deprivation: do they have access to water, to electricity, are they literate, malnourished etc. Rather than purely quantitative these measurements can be qualitative: a binary yes/no is often enough. Unfortunately, also this measurement system has some drawbacks: it fails to distinguish between deprivation and choice; there’s necessarily a level of arbitrariness in the determination of the “basic needs” or forms of deprivation that are measured; and these needs are often overly general, obscuring some very specific needs for some people in some areas or groups.

That’s why people have been searching for alternative measures of poverty. One such alternative is the use of surveys that ask people about poverty. You could ask people what they believe is “the smallest amount of money a family needs each week to get along in this community”, “what is the level of income below which families can’t make ends meet” etc. That would remove some of the arbitrariness of the cutoff line between poor and non-poor, and putting that decision in the hands of the people rather than the scientists.

Or you could also present people with evocative descriptions of different family situations, of types of families according to their level of income or consumption or according to the type of deprivation. People would then have to decide for every family situation what they believe the standard of living is and which situation can be described as “poverty”. That would specify what poverty means to people. And what it means to people is much more important than what it means to researchers and statisticians.

A disadvantage of this subjective approach is the wellknown effect that people’s income levels affect their judgments about income adequacy. In short, relatively rich people overestimate the level of income inadequacy. A solution to this problem could be to ask only poor respondents about poverty, on the reasonable assumption that poor people are the best experts on poverty. But that’s a circular reasoning: you already think you know what poverty is before you start asking about it. Since you focus only on the poor, you’ve already decided what poverty is.

An advantage of the subjective approach is that researchers don’t have to list basic needs or types of deprivation in order to assess what poverty is; people tell you what poverty is. There’s also no need for researchers to specify regionally or socially undifferentiated and general cutoff levels of income or consumption below which people are considered to be poor.

What is Poverty? (5): A Psychological Thing

Poverty is not just the absence of sufficient income or a level of consumption that is below a minimum threshold. Poverty is multidimensional: it also means bad health, high mortality rates, illiteracy etc. And these different elements of poverty tend to have a negative effect on each other (the so-called poverty trap). Being deprived of literacy or education is usually seen as an obstacle to material wellbeing.

The absence of material wellbeing – whether expressed in terms of income, consumption, health, mortality etc. – is often viewed as an isolated evil. However, it’s possible to make the case that it can also have psychological effects that harm people’s mental wellbeing. If this is true, and I think it is, then poverty does more harm than we usually think it does.

I believe it’s widely accepted that poverty does some psychological damage, such as stress, depression, loss of self-esteem and of the feeling of control, loss of ambition and aspirations etc. Although usually people assume – correctly or not – that this type of damage is less severe or less urgent than the physical damage that results from poverty (such as bad health, mortality, hunger etc.). Some even argue that there’s a tendency to overemphasize the link between material deprivation and (the perception of) subjective wellbeing, and that psychological problems which may seem to be caused by material deprivation have in fact other causes (genetics, upbringing, personality etc.).

However, I think the tendency is rather to underestimate the effects on mental wellbeing. A recognition of the psychological effects of poverty would also open the possibility of a more positive evaluation of notions such as poverty as vulnerability and relative poverty. Vulnerability, or a high level of risk of poverty, can perhaps produce the same amount of stress as actual poverty. And one’s self-esteem can suffer as much from actual deprivation (including illiteracy) as from comparative (or relative) deprivation (e.g. comparatively low levels of education or income).

Measuring Poverty (10): Multidimensional Poverty

Poverty can be many different things. It can be different things to different people in different countries or circumstances. It can mean one thing for people in Africa and another for people in the favelas in Rio, and still another for those in the inner-cities in the U.S. It’s probably different for men, women and children. It can be absolute deprivation or relative poverty (i.e. inequality). It can be insufficient income or insufficient consumption. It can be a lack of one thing or another. For some people it means inadequate healthcare, for others it means insufficient water. It can be physical suffering or the stress inherent in insecurity. It can be malnutrition or a lack of self-esteem. It can be illiteracy or child mortality. Etc.

Most poverty measurement systems try to keep it simple. The most common systems just measure income. Poverty is then insufficient income (typically below $1-a-day, corrected for purchasing power; this measures the number of people incapable of buying a basic basket of commodities). That makes sense, because without sufficient income, you’re likely to experience child mortality, illiteracy, malnutrition, inequality, water shortages, stress, insecurity and all the other nasty things that come with poverty.

However, it is important to know those details of poverty. Two people who both have an income of less than one dollar a day, may experience very different consequences: one may be deprived in lots of areas, the other one maybe in just a few. One may lack good health, may be starving and may be illiterate. The other one may just be illiterate. If we want to help people, it’s important to know what the exact nature of their problem is. Which we don’t if we just focus on how much their income is.

That is why some researchers at the Oxford Poverty and Human Development Initiative at the University of Oxford have tried to come up with a so-called Multidimensional Poverty Index (MPI).

The index seeks to build up a picture of the prevalence of poverty based on the fraction of households who lack certain basic things. Some of these are material. Does a family home have a dirt or dung floor? Does it lack a decent toilet? Must members of the household travel more than 30 minutes on foot to get clean water to drink? Do they live without electricity? Others relate to education, such as whether any school-age children are not enrolled or whether nobody in the family has finished primary school. Still others concern health, such as whether any member of a household is malnourished. A household is counted as poor if it is deprived on over 30% of the ten indicators used. Researchers can then calculate the percentage of people in each country who are “multidimensionally poor”. (source)

Such a multidimensional approach has the advantage of identifying which specific aspect(s) of poverty is/are most common in certain areas or among certain groups of people. It shows how people are poor, and what contributes most to poverty in a specific place and among a specific group. This will obviously greatly enhance response capacity. Rather than just trying to generally increase income, we can target our efforts more specifically: in one area or among one group of people we know that we should focus on nutrition; elsewhere we know that we should focus on literacy for instance. The MPI also shows us how different aspects of poverty overlap: for example, how many people who are illiterate also have health problems?

If 30% of people are malnourished and 30% of children are out of school, it would be useful to know if these deprivations affect the same families or different ones. (source)

The approach also helps us to distinguish between deprivation and choice. People may actually prefer mud floors to concrete floors in some places, and don’t consider having a mud floor as a form of deprivation. It also helps to identify the depth of poverty: deprivation along a wide spectrum of indicators means that poverty is deeper.

Unsurprisingly, the results of the MPI are substantially different from traditional poverty measurements:

Also the totals are different:

About 1.7 billion people in the countries covered – a third of their entire population – live in multidimensional poverty, according to the MPI. This exceeds the 1.3 billion people, in those same countries, estimated to live on $1.25 a day or less, the more commonly accepted measure of ‘extreme’ poverty. (source)

One of the disadvantages of this new approach is the weighting of the different measures: there’s inevitably some arbitrariness involved. Is the death of a child equivalent to having a dirt floor? Worse? How much worse? More criticism of the MPI is here.

There’s a really cool interactive map of the MPI here.

Measuring Poverty (7): Different Types of Poverty

I already mentioned the obvious but consequential fact that poverty measurement depends on the choice of the type of poverty you want to measure. Definitional issues are always important, but when it comes to poverty the choice of a definition of poverty determines who will benefit from government benefits and who won’t. For example, in the U.S. you’re poor when you’re income is below a certain poverty line. If that’s the case, you’re eligible for certain benefits. So poverty is a function of income.

1. Insufficient income

Usually, and not only in the U.S., poverty is indeed understood as insufficient income (preferably post-tax and post-benefits). Measuring poverty in this case means

  1. determining a sufficient level of income (sufficient for a decent human life); this is usually called a “poverty line” or “poverty rate”
  2. measuring actual income
  3. counting the number of people who have less income than the sufficient level.

There are some problems with this measurement system or this choice of type of poverty. Actual income levels are notoriously difficult to measure. People have a lot of informal income which they will not disclose to people doing a survey. Likewise, there is tax evasion and income in kind (market based or from government benefits, e.g. social housing), and material or immaterial support by local social networks. None of this is included correctly if at all in income measurement, leading to an overestimate of poverty. Another disadvantage of income based measurements: they neglect people’s ability to borrow or to draw from savings in periods of lower income. Again, this overestimates poverty (although one could say that it just estimates it a bit too early, since borrowing and eating up savings can lead to future poverty).

2. Insufficient consumption

Because of these problems, some countries define poverty, not by income levels, but by consumption levels. Measuring poverty in this case means

  1. determining a sufficient level of consumption (sufficient for a decent human life)
  2. measuring actual consumption
  3. counting the number of people who consume less than the sufficient level.

However, this measurement isn’t without problems either. As is the case for income levels, actual consumption levels are difficult to measure. How much do people actually consume? And what does it mean “to consume”? Is it calorie intake? Is it financial expenses? Or something else perhaps? Consumption levels are also deceiving: people tend to smooth their consumption over time, even more so than their income. If they face a financial crisis because of unemployment, bad health, drought etc. they will sell some of their assets (their house for instance) or take a loan. If you determine whether someone is poor on the basis of consumption levels, you won’t consider people dealing with a crisis as being poor because they continue to consume at the same levels. However, because of loans or the sale of assets, they are likely to face poverty in the future. They may also shift their diet away to low quality food, taking in the same amount of calories but risking their health and hence their future income. Similarly, they may be forced by their crisis situation to delay health expenditures in order to smooth consumption, with the same long term results.

And even if you manage somehow to measure consumption, you’re still faced with the problem of the threshold of sufficient consumption: that’s hard to determine as well. Consumption needs differ from person to person, depending on age, gender, occupation, climate etc.

3. Direct physical measures of real consumption

Rather than trying to measure total income or consumption, you can choose to measure consumption of certain specific physical items, and combine that with some easy to measure elements of standard of living, such as child mortality or education levels. It’s possible to argue that poverty isn’t an insufficient level of overall income or consumption, but instead the absence of certain specific consumption articles. People are poor if they don’t have a bicycle or a car, a solid floor, a phone etc. Or when their children die, can’t go to school or are undernourished. These items or indicators are relatively easy to measure (for example, there’s the Demographic and Health Survey). While they may not tell us a lot about relative living standards in developed countries (where few children die from preventable diseases for instance), they do provide poverty indicators in developing countries.

The OECD has done a lot of good work on this. They call it “measuring material deprivation“. It’s the same assumption: there are certain consumer goods and certain elements of living standard that are universally considered important elements of a decent life. The OECD tries to measure ownership of these goods or occurrence of these elements, and when people report several types of deprivation at the same time, they are considered to be poor.

Take note that we’re not talking about monetary measures here, contrary to income and overall levels of consumption. Sometimes, all that has to be measured is a “yes” or a “no”. Which of course makes it easier.

Unfortunately, not easy enough. This type of poverty measurement has its own drawbacks. Measures of material deprivation often fail to distinguish between real deprivation and the results of personal choices and lifestyles. Some people can’t have a decent life without a car or a solid floor; others voluntarily choose not to have those goods. It’s likely that only the former are “poor”. Furthermore, since these measurements are often based on surveys, there are some survey related problems. The really poor may be systematically excluded from the survey because we can’t find them (e.g. the homeless). These surveys measure self-reported poverty, and self-reported poverty can be affected by low aspirations or habit. People may also be ashamed about their poverty and hence not report it correctly.

Conclusion

There isn’t a perfect system for poverty measurement. And that has a lot to do with the fact that poverty is an inherently vague concept. It really shouldn’t be a surprise that people choose different definitions and types, and hence different measurement methods that all provide different data. There’s no “correct” definition of poverty, and hence no correct poverty measure.

More posts in this series on the difficulties of poverty measurement.

Why Do We Need Human Rights? (11): The Economic Case against Human Rights and Democracy

Some authoritarian governments claim that human rights and democracy have to be sacrificed for the sake of economic development and economic progress. Here are some of the reasons given in support of this claim.

Discipline in production and consumption

Discipline in production and consumption is believed to be more important for economic growth than freedom. This discipline requires discipline in general in society, and therefore also a strong state. The exaggerated attention to rights instead of duties is incompatible with discipline. Duties are much more useful in economic development than rights. Instead of wasting scarce resources on consumption, people should moderate themselves and resources should be used for necessary investments. In addition, the free choice of labor is less important than the ability of the state to direct labor towards certain development projects. There may even be a rationale for forced labor.

And finally, if you want economic development, wages need to be low, union activity needs to be minimal, working hours need to be long and perhaps you have to turn a blind eye to child labor. None of this is possible in a democracy that tries to respect human rights.

You need a strong state for all of this, able to force people to be disciplined in both consumption and production.

Discipline in politics

You also need a strong state able to implement and enforce long term plans. Economic development requires consistency, coherence, long term planning and so on, all of which is incompatible with democracy and rotation in office. A democracy doesn’t look further than the next election and is unable to plan economic development. Democracy is the national equivalent of the shortsighted consumer spending everything instead of investing for the future. A democratic government will take measures which guarantee the short term interests of electors and elected, even if these measures are detrimental to the long term economic well-being of the nation.

A strong state doesn’t have to fear election results and can focus on long term planning. It has the power to enforce certain measures which are unpopular in the short run—for example because they imply limits on short term consumption, because they redirect funds towards long term investments or because they entail labor planning—but which yield great dividends in the future.

On top of that, human rights promote individualism and egoism because they are claims of the individual against society. Together with adversarial democracy they hamper national cooperation and harmony which are necessary for economic success.

Radical, not temporary, incompatibility

So according to this narrative, political freedom and human rights have to be rejected because they are by definition incompatible with economic development. And perhaps even with prosperity as such: they may not even be a luxury which poor countries cannot afford yet and which are useless when bellies are empty; they are even less than that. If you choose freedom, then not only will it be impossible to escape from underdevelopment – it will be impossible to maintain prosperity.

Rebuttal

Now, what can we say against this? Let’s take the different arguments in turn. If you assume that discipline in consumption and production is a good thing, then you basically create an export dependent economy. It’s well known that domestic consumption drives economic growth (see also here). If consumption is discouraged (and savings and investments encouraged), and if wages are low and working hours long, then you may get an initial boost in the economy, but this is no strategy for long term success. Not only does it imply dependence on exports and hence vulnerability to shocks occurring in the economies of the trading partners; it also keeps living standards low. And that can hardly be the purpose of economic development. China has clearly understood this and is trying to boost domestic demand (see also here).

The utility of child labor is obviously shortsighted – no economy can prosper without an educated citizenry – and the need for planning and long term consistency in economic policy is also a dubious argument. Centrally planned economies aren’t known for their successes. The state is not necessarily the most appropriate engine for development. Investment and planning decisions are probably best left to the market, and those investments that are best done by the government don’t require an authoritarian form of government. I don’t see how a dictatorship is better placed to plan transport infrastructure or energy provision for example. On the contrary even: the lack of transparency in a dictatorship makes it likely that such investments turn out to be corruption machines.

The argument that democracies are too fickle and shortsighted for economic planning and investments is also a bit weak. It’s difficult to deny that a democratic government, because of the way it comes to power, has more legitimacy and is therefore better placed to take difficult and unpopular decisions. People are more willing to accept or live with unpopular policies if they have a government that can be forced to justify its actions in public. Besides, the point is moot because most authoritarian leaders aren’t the long term planners and do-gooders they are supposed to be: most think only of the short term, namely their own short term financial profit.

What about the lack of cooperation, harmony and unity of democracies, and the selfishness cultivated by human rights? First of all, it’s not evident that national cooperation and harmony are best for economic development. Maybe individualism, entrepreneurship, inventiveness and doing things different are more important. And secondly, why would we assume that human rights are necessarily individualistic and selfish? There can never be an exaggerated attention to rights at the expense of duties. There are no rights without duties. And many so-called individualistic human rights create strong groups (freedom of religion, tolerance, freedom of association and assembly etc.).

Also, why would we have to think that democracy is more adversarial than autocracy? The democratic procedures for changing governments create social stability because they help to avoid revolt. Authoritarian harmony is often only skin deep – if it exists at all – because it’s based on suppression of differences. Things that are suppressed have a habit of popping up later in a more violent form.

The point is that human rights and democracy are magnificent weapons in the struggle for economic development rather than a luxury which poor people can’t afford or a false blessing which will render every economic achievement impossible or short-lived.

Measuring Poverty (4): The Problem of the Definition of Poverty

Before you can start to measure poverty, you first have to decide what you actually want to measure. What is poverty? That’s not just a philosophical problem because depending on the definition of poverty you use, your measurements will be radically different (even with an identical definition, measurements will be different because of different measurement methods).

Among people who measure poverty, roughly 6 different definitions of poverty are used:

  • insufficient income
  • insufficient consumption spending
  • insufficient calorie intake
  • food consumption spending above a certain share of total spending
  • certain health indicators such as stunting, malnutrition, infant mortality rates or life expectancy
  • certain education indicators such as illiteracy.

None of these definitions is ideal, although the first and second on the list are the most widely used. A few words about the advantages and disadvantages of each.

Income

Advantages:

In developed countries, income is a common definition because it’s easy to measure. Most people in developed countries earn a salary or get their income from sources that are easy to estimate (interest payments, the value of houses, stock market returns etc.). They don’t depend for their income on the climate, crop yields etc. Moreover, developed countries have good tax data which can be used to calculate incomes.

Disadvantages:

In developing countries, however, income data tend to be underestimated because it’s difficult to value the income of farmers and shepherds. Farmers’ incomes fluctuate heavily with climate conditions, crop yields etc. If you ask them one day what their income is, there’s no guarantee that this is a good estimate of their yearly income.

Another disadvantage is that people are generally reluctant to disclose their full income. Some income may have been hidden from the tax administration or may have been earned from illegal activity such as corruption, smuggling, drug trade, prostitution, theft etc. For this reason, using income to estimate poverty means overestimating it.

And, finally, some income may be difficult to calculate (e.g. rising value of livestock).

Consumption

Advantages:

The main advantage of using consumption rather than income to measure poverty is that consumption is much more stable over the year and over a lifetime (see above). Hence, if you ask people about the level of their consumption, they can just tell you about their current situation, without having to go back in time or to predict the future – which they would have to do if you asked them about income. Their current consumption is likely to be representative of their long term consumption, which isn’t the case for income. This is even more true in the case of farmers who depend on the weather for their income and hence have a more volatile income. If you know that farmers are often relatively poor, then this issue is all the more salient for poverty measurement.

Another advantage of using consumption is that people aren’t as reticent to talk about it as they are about certain parts of their income. It’s also appears that people tend to remember their spending better than their income.

Disadvantages:

If you want to measure how much people consume, you have to include durable goods and housing. And consumption of those goods is difficult to measure because it’s difficult to value them. For example, if a household owns a house, you have to estimate what it would cost to rent that particular house and add this to the total consumption of that household, at least if you want to compare their consumption to the consumption of the household next door who has to rent its house. And you can’t make poverty statistics if you don’t make such comparisons. Then you have to do the same for cars etc.

Another difficulty in measuring consumption, is that in developing countries households consume a lot of what they themselves produce on the family farm. This as well is often difficult to value correctly.

And finally, different people have different consumption needs, depending of their age, health, work etc. It’s not clear to me how these different needs are taken into account when consumption is measured and used as an indicator of poverty.

Other definitions

Calorie intake: the problem with this is that different people need different amounts of calories (depending on their type of work, their age, health etc.), and that it isn’t very easy to measure how many calories people actually consume.

Food spending as a fraction of total spending: if you say people who spend more than x % of their total spending on food are considered poor, you still have to factor in relative food prices.

Stunting as an indicator of malnutrition and hence of poverty: stunting (height for age) is a notoriously difficult thing to measure.

Other issues

Some aspects of life tend to be excluded from poverty measurement, even though they have a huge impact on people’s wellbeing. The amount of leisure time people have is perhaps a good indicator of poverty, in certain circumstances (excluding CEOs and US Presidents), but it’s hardly ever counted in poverty measurements.

Another thing: people may have comparable incomes or even consumption patterns, but they may face very different social or environmental conditions: an annual income of $500 may be adequate for people living in a rural environment with a temperate climate where housing is cheap, heating isn’t necessary and subsistence farming is relatively easy. But the same income can mean deep poverty for a family living in a crowded city on the edge of a desert. The presence or absence of public goods such as quality schools, roads, running water and electricity also makes a lot of difference, but poverty measurement usually doesn’t take these goods into account.

Plato, Democracy, and “Human Rights” (1): Appearance and Politics

In this series of 4 posts I will try to give a critical account of Plato’s pessimistic view of democracy and “human rights” or better the guesses one can make about what Plato would have thought about human rights had they existed in his time. (Athenian democracy did have free speech for example, but never extended such rights to humanity; it only respected rights for Athenian citizens. More about Ancient Greek democracy).

Plato had a preference for a very particular form of authoritarian government. Plato looked down upon the democratic polis. The people, according to him, are ruled by their natural desires. Freedom for them is in the first place the freedom to consume as much as they want. They think that they are free in a democracy, but they are the slaves of nature, of passions and lust. They live in the dictatorship of their desires.

According to Plato, the solution to this problem is not the development of technology. That would have been an anachronism and would perhaps not be a solution anyway, because technology only makes it easier to consume and does not offer a life beyond consumption, as was required by Plato. It offers merely the possibility of such a life. Plato’s solution is solitary asceticism, a radical turning away from sense perception and a dedication to an intellectual life of philosophy and theory which he called the “theoretical life“.

A philosopher has to shun the world of sense perception, sense perception in the meaning of the use of senses to fulfill desires, but also in the more general meaning of empirical knowledge production and of listening and speaking to others. In other words, he has to avoid democratic politics. According to Plato’s philosophy, sense perception, and therefore also political deliberation and the use of human rights (explicitly or implicitly), is an illusion, deception and mere appearance instead of reality. The philosopher must turn away from all this and try to take the lonely road towards the light of the eternal truths visible only to the eye of the mind.

These truths are the general ideas, also called “forms”. For example, the concrete chair, a particular appearance of the abstract idea of the chair, is only a poor imitation of the general idea, an ephemeral specimen of the eternal form, a mere approximation of the ideal. The general idea, the truth rather than the approximation, can only be seen by the eye of the solitary mind. Hence the devaluation of perception.

It is not the differences between things, the plurality, that count, but the resemblances. Plato’s ideal is a minimum of difference. Differences must be transcended in order to achieve knowledge of eternal truth. Knowledge is aimed at the unchanging and general ideas, not at the differences between concrete manifestations of these ideas. That is one of the reasons for his hostility towards democracy. Democracy is after all plurality, reaction and change, and resembles the world of appearances, of concrete things, rather than the platonic world of reality and of the eternal and unchanging forms. The people, according to Plato, constantly go from one concrete object to another, without ever seeing the general idea. For example, they go from one consumer product to another, from one policy or politician to another, from one changing opinion to another etc. The unchanging truth, which is beyond the level of the changes caused by persuasion and human rights, is unattainable for most of them.

Read also parts 2, 3 and 4