Andy Sumner and Charles Kenny (disclosure – Andy and Charles are friends of mine, and I need to write up my review of Charles’ book Getting Better . . . in a nutshell, you should buy it) have a post on the Guardian’s Poverty Matters Blog addressing the two most recent challenges to the idea of the “poverty trap”: Ghana and Zambia’s recent elevations to middle-income status (per capita GNIs of between $1,006 and $3,975) by the World Bank.
Quick background for those less versed in development terminology: GNI (Gross National Income) is the value of all goods and services produced in a country, as well as all overseas investments and remittances (money sent home from abroad). Per capita GNI divides this huge number by the population to get a sense of the per-person income of the country (there is a loose assumption that the value of goods and services will be paid in the form of wages). So, loosely speaking, a per capita GNI of $1006 is roughly equivalent to $2.75/day. Obviously $2.75 buys a lot more in rural Africa than it does basically anywhere inside the US, but this is still a pretty low bar at which to start “Middle Income.”
I do not want to engage an argument about where Middle Income should start in this post – Andy and Charles take this up near the end of their post, and nicely lay out the issues. The important point that they are making, though, is that the idea that there are a lot of countries out there mired in situations that make an escape from food insecurity, material deprivation, absence of basic healthcare, and lack of opportunity (situations often called “poverty traps”) is being challenged by the ever-expanding pool of countries that seem to be increasing economic productivity rapidly and significantly. The whole point of a “poverty trap”, as popularized by Paul Collier’s book on The Bottom Billion and Jeffrey Sach’s various writings, is that it cannot be escaped without substantial outside aid interventions (a la Sachs) or may not be escapable at all. Well, Ghana certainly has received a lot of aid, but its massive growth is not the product of a new “big push”, a massive infusion of aid across sectors to get the country up into this new income category. Turns out the poorest people in the world might not need us to come riding to their rescue, at least not in the manner that Sachs envisions in his Millennium Villages Project.
That said, I’ve told Andy that I am deeply concerned about fragility – that is, I am thrilled to see things changing in places like Ghana, but how robust are those changes? At least in Ghana, a lot of the shift has been driven by the service sector, as opposed to recent oil finds (though these will undoubtedly swell the GNI figure in years to come) – this suggests a broader base to change in Ghana than, say, Equatorial Guinea . . . where GNI growth is all about oil, which is controlled by the country’s . . . problematic . . . leader (just read the Wikipedia post). But even in Ghana, things like climate change could present significant future challenges. The loss of the minor rainy season, for example, could have huge impacts on staple crop production and food security in the country, which in turn could hurt the workforce, exacerbate class/ethnic/rural-urban tensions, and generally hurt social cohesion in what is today a rather robust democracy. Yes, things have gotten better in Ghana . . . but this is no time to assume, a la Rostow, that a largely irreversible takeoff to economic growth has occurred. Aid and development are important and still needed in an increasingly middle-income world, but a different aid and development that supports existing indigenous efforts and consolidates development gains.
It’s all in the medium of measure = CURRENCY. The developed world operates via the trade of symbolic pieces of paper (or coin) in payment for goods or services. (The movement of currency is tracked/measured.) In Africa and much of the developing world, many goods & services are exchanged without benefit of currency. In the developed world one would pay a barber for a haircut or lawncare firm to cut the grass… services that would go unmeasured in developing world – yet they happen. …and then there is the reality that the labor of women and children is often unpaid — there output consumed by family or bartered for other goods and services.
Ironically, the adoption of mobile money may finally capture many of these unreported/underreported transactions. Will countries reporting large growth GDP actually be expanding at reported rate or simply measuring more of the informal economy? (We may find out first in Kenya.)
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Val:
I think measurement is a huge part of this problem – Andy and Charles mention this in their post, and they have both thought about this a lot. Andy is even questioning the Atlas method of computing GNI (which should be questioned, but that is a long, long story). Efforts to capture economic activity in the Global South are always partial – we know there is an informal sector and a barter economy, but measurement of those is very difficult and usually subject to huge miscalculations. Take Ghana – in my book, I lay out how a miscalculation of a very small percentage of Ghana’s agricultural productivity would suggest either a much higher or lower per capita GNI. Interestingly, not long after the book came out, Ghana announced that it had totally underestimated its service sector, and when they redid the calculations they jumped from a per capita GNI of around $600 per year to almost $1200 per year.
I had not thought about mobile money as a means of “formalizing” the informal – this is a really interesting observation and carries all kinds of ramifications with it – recalculated estimates of income, certainly, but also questions about whether and how states will try to capture revenue from these flows of money. This then gets directly to issues of state power and legitimacy . . . wow, that is a whole can of worms. I need to think about this more . . .
Can anyone confirm that the ‘dollar a day’ (1,25 $US) really is just the GNI/Pop/365, or is it not measured in purchasing power as implied in Owen Barder’s recent post?
Which, frankly, would just add to your point
Actually, Owen is right . . . sort of. When talking about the poverty line, it is supposed to be PPP. But PPP measures are so suspect in many places (the “basket of overlapping goods” used to compare places gets pretty small, such that to compare Cameroon to France – I believe – they had to include French wine, which obviously most Cameroonians are not drinking) that I think the $1.25 figure isn’t really PPP equivalent – looking at what I have seen on the ground, it seems to me that this level equates more to $3-$5/day in the US . . .
However, in this post I was breaking down GNI per capita, and the assumption that GNI is paid in wages – GNI per capita and the $1.25 poverty line are not the same thing, though, as GNI per capita is not PPP adjusted . . .
Thanks. The question was mostly just an annotation to my take on this whole middle/catalytic class thing that Sumner is pushing at the moment.
As I see it, the debate is fundamentally faulted by the (deliberate or not) outset in a classic class analysis which, frankly, is a great tool for analysing industrialising Europe but not so much the constitution of today’s societies – be that in Ghana and Zambia or elsewhere.
I think James Ferguson is right when he says:
In Africa, we’re witnessing the emergence of these huge poor urban populations that are not employed in wage labor in the usual sense of the term. Increasingly, these people are less and less connected to land as well. Now Marxist approaches tend to valorize the emergence of the proletariat and to see the fundamental relation as based on exploitation by the extraction of surplus value via the labor-capital relation. The story would make sense from a Marxist view as follows: capitalism needs to expand, pushes people off their traditional land as farmers or nomads and pushes them into the cities as cheap labor. My problem is to make sense of these incredible amounts of people who aren’t really exploited in that sense. Their predicament is that they are not even worth exploiting. Nobody wants to come and exploit their labor power by setting up factories and turning them into workers.
Now, a Marxist could say: ‘this is already in Marx, Marx identified the problem of the Lumpen – the ‘Lumpenproletariat’. But for Marx, the Lumpenproletariat was a marginal and really kind of despicable thing and I just don’t think that will do for understanding this situation in contemporary African cities where what Marx might have called the Lumpen constitutes, in some places, the majority of the population. So therefore we need new analytical tools, tools that go beyond what traditional Marxism has to offer.
I think you could make the same sort of argument for big parts of this new illusive catalytic class – regardless of Sumner and Birdsall claiming that this IS a tool that goes beyond what traditional Marxism has to offer.
I predict it’ll end up like Social Capital; intuitively sound but practically tautological.
That is, however, not to say that I don’t think it worthwhile to study class dynamics in ‘developing’ countries, or the genuinely change that is happening on both social and economic terms. It’s merely to say (in agreement with your post) that we need to think harder about the analytical tools than ‘low/middle income’ labels.
Thanks for this. I am very interested in the idea of development as catalyst – indeed, it is a central argument of my book. I too am a bit sketchy on calling any group of people a “class” right now . . . there are social catalysts, no doubt, but I have discomfort with the language of Marx here.
Oh, and I loathe the term social capital – I have a reworking of the livelihoods framework under review that unpacks “the social” in a productive manner, instead of treating it as an asset for livelihoods. So right there with you . . .