Earning $20 a day makes you lucky

Bloomberg

The people in the Philippines who can afford a cup of Starbucks coffee, are counted as the more wealthy among its population. Photo: Bloomberg.

Buying overpriced coffee at foreign-owned cafes in developing nations always gets me thinking: How many hours must the average local work to afford a cup?

For almost half of Asia’s citizens, or about 1.8 billion people, living on less than $2 (R15.99) a day, the answer is sobering.

Take Manila, where the Asian Development Bank (ADB) last week held its annual meeting. There, a tall Starbucks latte goes for about $2.60. That’s too steep for many Filipinos; one in four of the nation’s roughly 102 million people lives on $1.25 a day.

Yet anyone who can afford the above-mentioned beverage is considered by many to be doing pretty well. Organisations charged with eradicating poverty tend to view those making $1.25 a day as “extremely poor” and those earning $2 merely “poor”. Those feeding families on $5, $10 or $20 a day are the lucky ones, financially.

It’s worth defining poverty in a way that doesn’t inspire eye rolling or passivity. Definitions matter when it comes to economics and data. When the goalposts are so laughably low, we mask the true magnitude of the problem and engage in a collective and dangerous denial.

More than data are being muddied. So are the optics. Asian cities routinely undergo some serious airbrushing when the financial intelligentsia come to town: slums, hawker stalls, children selling water and gum in traffic, prostitutes, beggars, counterfeit designer-goods booths, stray dogs and other supposed eyesores are covered up. These window-dressing campaigns are meant to protect a nation’s image.

Manila city officials, for example, erected makeshift walls to keep the ADB’s visitors from seeing the shanty towns and garbage-strewn creeks that line the roads from the airport to five-star hotels downtown. Such efforts feed the wide-eyed view that bankers and Western policy makers tend to have about Asia’s success in igniting growth and reducing poverty.

In reality, the region is struggling to lift living standards at a time when costs of food, energy and health care are rising faster than Europe’s debt yields. This latter crisis is getting all the headlines as investors consider the implications of socialist François Hollande running France and the post-election doubts surrounding Greece’s ability to govern itself. It is the former that poses the bigger threat.

Higher costs and fresh turmoil in markets will exacerbate income inequality. The Bo Xilai scandal in China is partly a symptom of the ailment. News that the former Chongqing party secretary might have run afoul of the law was one thing. It was quite another when the riches allegedly amassed by Bo’s family came to light.

Inequality is a global theme these days, even in the US, where the Occupy Wall Street movement put a spotlight on the growing income gap. Asia’s poverty challenge is far greater because of the sheer scale and the absence of social safety nets, household savings and living wages.

There’s much we can do to attack inequality: improve public and private-sector governance; end the corruption that squanders gross domestic product; improve roads, bridges, ports and power grids; offer greater access to education and training; increase agricultural productivity; provide more affordable health care; strengthen the micro-finance industry; pull more of the poor into the banking system; and support the aspirations of girls who, after all, will be raising the men and women of tomorrow.

Succeeding on these fronts is vital to global stability and prosperity. Multinational companies are depending on Asia’s growing cities, expanding populations and middle-class consumers to pump up profits. Investors are making similar assumptions.

Inequality could breed social unrest instead. Many economists worry that hunger and poverty will rise.

Increasingly, the trends we thought would make Asians richer – market-oriented policies, new technologies, urbanisation and globalisation – are doing the opposite for a vast swath of the populace.

Why have we been so slow to notice? Perhaps our metrics mask the magnitude and immediacy of the problem.

India is a case in point. It recently claimed the number of people living in poverty declined by 20 percent in the five years to March 2010.

Economists cried foul; India had lowered its poverty line to 28 rupees (R4.15) a day, allowing more people to get over the bar. China, to its credit, did the opposite late last year. With the stroke of a pen, it raised its threshold and knocked almost 100 million people below it.

Granted, few would say someone making $3 or $5 is thriving.

Poverty is a very technical assessment based on a broad spectrum of indicators, including education, health, nutrition and purchasing power.

The Economist magazine’s Big Mac index or the above-mentioned Starbucks measure help fill in some blanks, but the reality is a complicated one. Such figures are meant to provide a quantitative measure and a frame of reference.

Yet I wonder if it has all gotten too simplistic and too vulnerable to manipulation and misinterpretation.

How we define poverty colours the economic and political solutions to a quandary that’s far bigger than many think. When we are failing a test as basic as measurement, you know we’ve got trouble.

William Pesek is a Bloomberg columnist.