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Targets and Measures, Poverty and Sharing

Kaushik Basu's picture

In his latest Annual Letter, Bill Gates points to the power of measurement. Change, he reminds us, is often incremental; and so, unless we have a good yardstick, it is difficult to know if the small move we made was in the right direction. Not surprisingly, in the world of technology, new ways to measure energy creation and a micrometer able to gauge miniscule distances, played a vital role in promoting progress. Gates is right in stressing this and that is the reason why even in social and economic ventures, it is important to develop measures that track how we are doing.

Interestingly, the publication of Gates’ letter coincides with the ongoing initiative within the World Bank Group to define targets and measures of well-being that the Bank as a multilateral agency will promote and pursue. We hope to soon be in a position to place our measures and targets in public space. This blog is meant to give readers a flavor of the issues involved and to welcome their suggestions.

Let me begin by advising readers that, when reading Bill Gates, it is important to keep in mind that there is more to learn from successful people’s lives than lines. Gates’ Annual Letter on measurement is an important take away, but we must not forget what his life amply demonstrates--that to focus solely on measurement is to risk missing out on some essential features of life which may be nebulous and not quite measureable but nonetheless important.

With this in mind, we took an early decision that, alongside the targets and measures we develop, we will also have a ‘narrative’ account of what we seek to achieve, for ourselves and for nations that engage with the Bank (and maybe even ones that do not). In the area of climate change and environment, for instance, if we focus solely on what we can attribute to a nation and write up as formal target, we will miss out on a lot that is in our collective interest. And while we should strive to move towards a measure and a target, to zero in on one in a hurry could be counter-productive. 

Given the importance of targets and narrative aspirations, the task of articulating and codifying these is not one that can be taken lightly. Fortunately, we do not have to start from scratch. The World Bank’s own record of research, along with the long-standing tradition in welfare economics of developing formal measures for tracking poverty, inequality, literacy and other dimensions of societal well-being, with major contributions from Amartya Sen, Tony Atkinson, Serge-Christophe Kolm and others, give us a head start.

In our deliberations we were clear that the central aim of the Bank must continue to be the eradication of absolute poverty. It is a shameful fact that even with the poverty line drawn as low as an income of $1.25 per person per day, we find that  around 20% of the world’s population lives in poverty. This translates into  nearly 1.3 billion people living below the poverty line.

Target setting is not an easy task. Make it too ambitious and it will languish, with no impact. Make it too easy, it will be like the guru, in Satyajit Ray’s comic film, Mahapurush, who takes his gullible disciples every morning to stare at the eastern horizon while he “commands” the sun to rise.

The pursuit of major global targets and of the Millennium Development Goals entails a large effort in terms of statistical data collection and analysis. I am heartened by the Bank’s Open Data policy and its partnerships with the Bill & Melinda Gates Foundation and other organizations to keep improving statistical capacity in the realm of human, economic and social development. We are currently engaged in organizing statistical information and setting a reasonable target date by when the percentage of people below the poverty line will be brought down to close to zero. We hope to announce the target soon. The task thereafter will be to work alongside the UN and national governments to develop operational policies to reach that target.

The fight against absolute poverty finds fairly universal support (even though we may dispute its precise measure). What can quickly raise hackles is the pursuit of “shared prosperity,” which the World Bank Group is contemplating adding alongside the poverty eradication target. Poverty eradication has a nice distant ring to it, whereas shared prosperity trespasses into our own backyards. Not surprisingly, there is a tendency in some quarters to equate sharing with discredited political systems. This is the standard ploy of thwarting x by finding a y that is universally discredited and then campaigning to equate x and y. In the case of sharing this is a conspiracy of the selfish, deliberate or unwitting. I am glad that the Bank Group may be poised to add to the earlier goal of poverty eradication the new one of promoting “shared prosperity.” 

In converting this to a formal measure, we want to take both words, “shared” and “prosperity”, seriously. The promotion of prosperity is suggestive of growth, an expanding pie. I believe this is a worthwhile aim that has a natural resonance with rich, poor and middle income countries and it would be foolish to ignore this universal aspiration. “Shared” suggests that this growth ought to be inclusive, one that draws in the weak and the disadvantaged, instead of abandoning them to the margins. A natural way to formalize this is to promote rapid growth of the per capita income of the disadvantaged segment of each nation, such as the poorest 40%. This is a natural way to give shape to the idea of inclusive growth.

Gandhi had advised those facing a dilemma: “Recall the face of the poorest and the weakest man whom you have seen and ask yourself if the step you contemplate is going to be of any use to him.” In developing a yardstick for measuring shared prosperity, we want to capture the idea of the weak and the disadvantaged being drawn into the mainstream. This will entail some sharing with those who are less fortunate and also with those who are not yet born. Unless there is some magical technological breakthrough, it is not clear that the environment can sustain large populations like those of China, India, Indonesia and Brazil, rising to levels of consumption that we find in industrial nations. Hence, to achieve this will entail growth, technological innovation, environmental conservation but also—and there is no getting away from it—sharing. 

We cannot consume, spend conspicuously and use up global resources, unmindful of the fact that there are people on earth who are barely surviving and that there will be others who will come to inhabit the earth long after we are gone. That concern is summed up in the idea of shared inter-temporal prosperity. This takes us headlong into the subject of climate change, environmental protection and bio-diversity. This places on us a responsibility for future generations that are not here to voice their concerns.

Shared prosperity must be a guiding principle for the Bank to do research on and promote activism in areas of inclusive growth, environmental protection and sustainability. Shared prosperity is nothing but an organizing principle but it can, through refinement, debate and discussion, become a compelling idea that guides policy to create a world that is not only more prosperous but also fair and equitable—a better world.
 

Comments

Submitted by Janmejoy Patnaik on
Brilliant idea yet needs to be institutionalised .The idea of formalizing shared prosperity by promoting rapid growth of per capita income of say poorest 40% is loudable but to attempt this there could be number of ways. Gandhi promoted 'Trusteeship' yet Vinoba's Social reform movement 'Bhoodan ' couldnot be sustained .JRD Tata did adopt the same and institutionalised in the TATA Philosophy and result is last pay drawn as lifelong pension for family members of employees who died during attack on Taj on 26/11.Role of Private Sector is therefore extremely important because of its sustainability .Bill and Melinda Gates only prove the point. There could be number of ways to develop new tools of measurements contemplated by the Bank Janmejoy Patnaik Assistant General Manager HRD,Central Bank of India ,Mumbai,India

Submitted by Anonymous on
Dear Kaushik, Very much like your blog and really good to have you at the Bank. Even for those alive now are we satisfied that "rapid growth in per capita GDP of the poorest 40%" covers it all? Would we not want to consider notions of voice and empowerment as a key element of shared prosperity? Hope you will generate a lively discussion around the new goals. Take care, Elisabeth (@Dushanbe).

Submitted by S. Akhtar Mahmood on
Just back from a mission to Bangladesh where IFC has initiated a project to improve water use efficiency and reduce pollutant discharge in the textile industry. The success of the garment industry in Bangladesh is well know and it can be argued that, by providing jobs to many poor women, the industry has contributed to shared growth. At the same time, its inefficient use of water and poor environmental practices (esp. by the part of the industry producing the textiles)is having an adverse impact on agricultural productivity and people's health in the surrounding areas. Thus,what it gives with one hand, it takes away with the other. We do not know yet what the net impact on shared prosperity is; more comprehensive data on resource use and pollutant discharge, and its impact, are needed to make that judgement. However, the sporadic evidence appears powerful enough to warrant some action - some of which will be supported by the IFC project. S. Akhtar Mahmood Investment Climate Department, WBG

Submitted by Sanjeev Ahluwalia on
"Shared prosperiety" seems to imply simply that growth in wealth is equitably available to all. Adding "sustainable" to the concept could include future generations, which are currently excluded. Further adding "wealth creation" could include the manner in which prosperiety is to be achieved. The result "shared and sustainable wealth creation and prosperiety", whilst resonating better with what we want to do, renders a catchy phrase incomprehensible. A shorter and more pithy form could be "shared growth opportunties". The introduction of the term "growth opportunties" suggests open access but with results however dependent on effort. "shared prosperiety" on the other hand smacks of transfers and hand outs.Of course measring "oportunties" is more difficult that measuring "results" but indicators do exist for universality in access to education, clean water and heath facilities, finance and for the efficiency of government functioning. These measures may provide a more granular story than the dry per capita income number. But are we on the same page wrt the concept?

Submitted by Anthony Leegwater on
I appreciate your stimulating post, Dr. Basu. In his annual letter, Mr. Gates makes the key point that in order to lead to meaningful progress, goals set at a global level must be linked to careful measurement (supported by tools and technology) at the project or program level. In your post, you discuss the broader goals that the World Bank is pursuing and some of the possible targets to be set for them. The key example here is reducing extreme poverty. I wonder if you would also make the same connection as Mr. Gates. Does the Bank emphasize measurement at the level of specific projects or programs on global goals such as reducing poverty? I ask this in part because of ongoing work at my company on simple and rigorous tools for measuring and tracking poverty at the project level. By providing more precise measurement of this important outcome, such tools could provide feedback to projects and policy-makers and play at least some small part in driving progress along the lines envisioned by Mr. Gates. Anthony Leegwater Abt Associates

Submitted by muireann on
While I like the idea of 'shared inter-temporal prosperity', linking to 'the subject of climate change, environmental protection and bio-diversity' - could the concept not be simplifed to tracking inequality, income inequality in particular, and linking this to environmental sustainability? The growth paradigm is problematic from an environmental sustainabilty perspective, yet measures to reduce income inequality (through taxation, provision of accessible, affordable public services etc) can actually contribute to env sust. We already have indicators like the gini coefficient ... can these be augmented and added to to include consideration of env sust?

Submitted by Harimao on

I wonder if the Bank has considered a possible negative spiral of poverty alleviation efforts (improved health - less mortality of children - more population - more poverty - more investment for the poor - improved health). To reverse this negative spiral of poverty alleviation efforts, I think it critical to focus on family planning together with investments for health of the poor. In this regard, maternal education and vocational training are important measures to stem the negative spiral. I hope that Bank will consider this in its future investments to reduce poverty less than 3% by 2030.

Very well written, Sir. Shared prosperity to derive inclusive growth and not as a result of equitable growth strategies is an interesting perspective.

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