When is the person with more money poorer than the person with less money? This isn't an ancient Greek riddle or the beginning of an African folk tale. It's a question the United Nations Development Program has tried to answer in this year's Human Development Report, released Thursday.
In trying to understand what being poor really means, the report uses a new index that Canada helped create - the Multidimensional Poverty Index - to gather data on 10 indicators, ranging from child mortality and nutrition levels to years of schooling and access to electricity, clean water and proper flooring. The 10 factors are combined, and the resulting score for each country is compared to the standard monetary measure of poverty, life on less than $1.25 a day.
The differences are revealing. In many cases, there are indeed countries where people who have some cash in their pockets are actually poorer than people in other countries who have less money. China and India, the giants of the developing world, can help us to understand why.
In India, despite strong social cohesion and a tradition of some publicly funded services, the poverty rate based solely on how much money people have is less than the multidimensional rate. And the difference is not trivial: India's poor population grows by 135 million people when you count it the multidimensional way.
In China, a strong state has ensured rising incomes and social services to the masses. That means that monetary poverty and poverty measured using the multidimensional criteria are about the same (although the difference still amounts to about 50 million people).
At the extremes, the Central Asian country of Uzbekistan contains many income-poor people who, nonetheless, are at least decently literate and healthy. In Ethiopia and Mali, on the other hand, the poor may have more cash in hand, but that money doesn't buy them much access to health and education.
Why are such distinctions important? Precisely because different approaches produce different results. The multidimensional index tells us which countries are better than others in getting clean water and good schooling. In a significant number of countries, even having money in hand doesn't translate into better access to such services.
Breaking down the new index into its components also reveals the concrete sources of poverty. In India, the poor tend to have relatively higher levels of education than they do good health. In China, it's the lack of education that dominates this measure. This new index helps us to understand that confronting the challenge of poverty lies in creative thinking rather than just throwing more money at it.
When introduced 20 years ago, the UN Development Program's Human Development Index was considered revolutionary. It added life expectancy and literacy to the income measure, and the result has been that countries with lower per capita income are often ranked much higher than others with higher incomes. This year, for example, Singapore, which has one of the world's highest per capita incomes ($48,893) is ranked 27th, while New Zealand ($25,438) is third. (Canada, with a per capita income of $38,668, is eighth.) Historically, a relatively poor country such as Cuba would place well above its per capita income ranking, because of its impressive schooling and health systems.
Ultimately, no single index can provide a complete guide to well-being across countries. In this respect, the authors of this year's Human Development Report are spot on in suggesting that what's needed is not a single "meter reading" but a human development "dashboard." Future work should address innovation strategies (or, more broadly, future productive capacity), environmental degradation, and - perhaps foremost - the role that freedom and democracy play in determining the quality of life.
Rohinton Medhora is vice-president, programs, at the Ottawa-based International Development Research Centre.