Our poor excuse for an understanding of poverty

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In Britain a poor household is officially defined as one with an income less than 60 per cent of the median. A law passed by the last government declares an unattainable target of reducing the proportion of children who live in poor households to below 10 per cent by 2020.

No surprise, therefore, that in today’s austere circumstances Iain Duncan Smith, the UK’s work and pensions secretary, has attempted to start a debate about the definition of poverty. But his motives are not entirely cynical: Mr Duncan Smith has a record of real social concern.

People who struggle to find enough food to eat are poor. The World Bank’s poverty line is an income of less than $1.25 a day. Financial Times readers, who spend more than that amount on their morning newspaper, are in no position to dispute that judgment. In the past two decades, economic growth in China and India has reduced global poverty by an unprecedented amount. That achievement is not diminished because some individuals in both these countries have become very rich. Fundamentally, poverty is about absolute deprivation.

That is clearly not the end of the story, however. On the World Bank standard no one in North America or western Europe is poor. And very few people in these continents do not have enough to eat. We might observe that obesity is a disease not of the rich but of the poor. In making such a statement, we endorse the notion that poverty is relative not absolute. That principle is enshrined in the UK definition, which rises with the general standard of living.

The median income is the level that equal numbers of people are above and below, so that a rise in Sir Martin Sorrell’s bonus does not lead anyone into poverty – that would confuse poverty and inequality. But the choice of median income as a reference level has a wider significance. It encapsulates the idea that in a rich society, poverty is an enforced inability to participate in the everyday activities of that society. You might therefore be poor if you lack access to antibiotics or Facebook, even though in this respect you are no worse off than the Sun King or John D. Rockefeller, and in other respects considerably better off than most people in the world.

However, to define poverty as social exclusion takes the definition far away from the assessment of income. It is not hard to imagine places in which few, if any, people experience a sense of exclusion. These might include both sophisticated societies with high incomes per head – towns in Scandinavia – and simple cultures without access to modern essentials – rural villages in the developing world. Poverty becomes a cultural and political phenomenon rather than an economic one.

Mr Duncan Smith and the Centre for Social Justice, the think-tank he founded, wish to encourage this perspective. The poverty of a household trapped by drug addiction will probably not be eliminated by extra income. Poverty as exclusion from ordinary life may be caused by weak parenting skills, debt from financial incompetence or mental health problems. On the positive side, employment and family life are the most powerful forces of social inclusion.

These arguments lead too quickly to the view of poverty traditionally espoused by the well-to-do: poverty is the result of the moral failings of the poor and to assist them will only aggravate their plight. Sadly, policies to alleviate poverty cost money, but understanding the multiple facets of poverty is a necessary guide to how that money is best spent.

The statutory adoption of a particular statistical definition of poverty is the product of Gordon Brown’s era of target setting. The emphasis on supposedly objective measures led to expenditures on schemes – notably the child tax credit – designed to be closely related to the target itself. That kind of distortion arises whenever a single metric is used to describe a multifaceted complex phenomenon such as the incidence of poverty.

You need advisers who understand the numbers, but also advisers who understand the poor.

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