June 22, 2023

Judging development: how do we think beyond basic poverty measures?

The World Bank keeps track of the world population that falls below the International Poverty Line – a line based on the value of goods needed to sustain one adult, which currently sits at $2.15 per person per day.  

While the simplicity of one measure has its uses and is tempting to keep as a north star, in recent years there’s been movement towards more sophisticated and varied indicators of poverty (including at last week’s Pacific Update). How we choose to measure poverty directly impacts what action is taken to reduce it, so it’s worth taking a deeper look.

So how do we know what to judge, where to look, and why it’s critical to think beyond basic poverty measures? This week we asked the experts for their take – and they pointed us to some cracking examples.

Dr Kushneel Prakash
Postdoctoral Fellow, Melbourne Institute of Applied Economics and Social Research

The notion that formulation of public policy and judging development should aim for something beyond the traditional measures of GDP is far from new. GDP in the first place was never designed to assess welfare or the wellbeing of its citizens. It is often this economic growth that comes at the expense of exploitation of its people, burden of debt, damage to the environment and income inequality. Consequently, measuring poverty levels and formulating policies based on only using income indicators is flawed to begin with. We need measures that look beyond traditional indicators because what we measure affects what we do and if our measurements are flawed, so will be our policy directions.

So, what do we do?

Well, the answer lies in asking the people whom the government is supposed to serve. We need to ask people and gain an understanding on what they personally believe to be important in their own life. We need to focus on the quality of life over quantity. Putting a lens on subjective wellbeing of people is the place to start: including subjective perceptions of individuals of their income, employment, health, living environments, social relationships, personal virtues, freedom and governance. 

The World Happiness Report over the last decade has run surveys in over 150 countries and has found that it is these differences in perceptions to life that explains the differences in wellbeing around the world, both within and among countries. Another example is the Multiple Indicator Cluster Survey, a wellbeing survey carried out across 118 countries by UNICEF.

Yet despite the growing popularity of wellbeing measures, significant gaps remain - including in the context of Pacific Island countries. For development policymakers, moving beyond traditional and narrow measurements of poverty and towards an array of wellbeing indicators specific to countries we work in will ultimately result in greater development impact – if we collect the right data and action accordingly.

Kushneel is an award-winning economist and academic, and currently a Postdoctoral Fellow at the Melbourne Institute of Applied Economics and Social Research. He has a keen interest in exploring the use of non-traditional wellbeing measures to complement traditional economic indicators in development. Prior to his role at University of Melbourne, Kushneel was conducting research and teaching at University of the South Pacific in Suva, then getting his PhD in economics at Monash University. At the Lab we are seriously inspired by Kushneel’s keenness to shift the dial on how development is measured in the Pacific.

Shannon McKeown
MIA Candidate, Columbia School of International and Public Affairs

Traditional monetary measures of poverty are insufficient at capturing the overlapping deprivations that people experience.  

Last year I took a close look at the UN-led multidimensional vulnerability index (MVI), which could help to provide a more holistic assessment of a country’s situation beyond GNI per capita or household consumption levels. By integrating different dimensions of development and data on social, economic, or environmental vulnerabilities, the MVI could further support evidence-based policymaking and concessional financing for countries that need it the most.

One bloc of countries who would benefit from the implementation of the MVI are the small island developing states (SIDS) who face a unique set of vulnerabilities given their proximity and reliance to the ocean and climate change. SIDS are only responsible for less than 1% of global carbon emissions yet are disproportionately liable to climate-induced natural disasters. The cycle of disaster and recovery leaves SIDS unable to build resilience, while their relatively upper income status leaves them unable to access necessary concessional finance. The MVI could be a game changer for SIDS, potentially increasing their eligibility for receive greater financing for climate-related long-term national planning, debt relief, or insurance and compensation schemes.  

As the likelihood for climate-induced disasters increases, adopting the MVI can help steer development financing to the necessary climate adaptation and mitigation programs that SIDs need to prevent against catastrophic climate events.  

For a universal MVI to be effective, however, it needs to be first adopted by the United Nations and then implemented across the Banks and finance institutions. The MVI could take the form of a country ranking or regional groupings that show different vulnerability ranges, while also supporting both new and existing funds.

Shannon is the ultimate multitasker - currently at Columbia School of International and Public Affairs, researching African states’ leadership in climate change, and working in the International Telecommunications Union at the United Nations. Prior to this, Shannon spent a number of years at the Centre for International Strategic Studies in Washington DC with their Project on Prosperity and Development. At the Lab, we love her sharp insights on global politics, meticulous eye for complex detail, and her ability to share what she knows and learn from all those she meets.

Matt Morris
Development Economist

Understanding poverty is a formidable task – and I’m not sure that DFAT grapples with the complexity of poverty measures as well as it could.  

It's a maze of socio-economic and political factors that extend beyond the typical measure of income. It encompasses wealth distribution, economic mobility, labour market dynamics, education, health, societal norms, as well as policies, laws, and governance. Poverty isn't merely an economic state—it's multidimensional.

This is why the United Nations' Sustainable Development Goals were designed as a comprehensive framework, spanning complex and interconnected economic, social, and environmental systems. For example:

  • Goal 1 targets poverty directly, but it's inextricably linked to education, gender equality, decent work, economic growth, and reduced inequalities (each reflected in separate goals).
  • Goal 13 reminds us that climate change disproportionately affects the world's poorest people. When their resources are impacted by climate extremes, these individuals face an immediate threat to their income and food security.
  • Goal 16 underscores the idea that socio-economic development cannot be fully achieved without peace, justice, and strong institutions. Indeed, according to the World Bank, by 2030, up to two-thirds of the world's extreme poor will be living in countries affected by fragility, conflict, and violence.

Analysing and understanding the complexity of poverty and development is a daunting challenge. High-quality data and evidence are fundamental to understanding the world. Diagnostic tools and frameworks are indispensable instruments for a systematic and structured approach to understanding complex realities, making informed decisions, and implementing effective solutions. For example, the State Effectiveness Framework can provide valuable insights by analysing the relationship between state capabilities and outcomes, highlighting how effective governance influences public services, job opportunities, and security.

The challenge for DFAT (and indeed all of us) in poverty reduction is cutting through multidimensional complexity without losing focus. So how do we think beyond basic measures? We need disciplined thinking about the multitude of poverty determinants, and well-targeted programs to deliver impact.

Matt is an economist and sustainable development professional with over 25 years of experience in the sector. Exemplifying his sharp, multi-disciplinary skillset, he is currently Special Advisor for the Global Fund to Fight AIDS, Tuberculosis, and Malaria. At the Lab, we love Matt’s graph-laden twitter feed, thought-provoking contributions to the Development Policy’s Centre’s blog and ability to ask the challenging, and often-much needed, questions.

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