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Economy Lab

Rural poverty: easy to spot, tough to measure Add to ...

Is the rural world getting richer or poorer? If you look at the headlines out of sub-Saharan Africa, where hunger, climate change, violence and corruption are apparently rife, you would assume poverty rates are intensifying. On the other hand, it’s common knowledge that big chunks of Asia are seeing minor economic miracles. On balance, you might guess the world’s poverty rates are stuck at horrifically high levels, with the usual regional ups and downs.







Not so, according to the 2011 Rural Poverty Report, published this month by the United Nations’ International Fund for Agricultural Development, or IFAD, based in Rome (disclosure: my wife works at IFAD). The report comes out once every decade and this time the news is more encouraging than not: World poverty rates have fallen quite steeply.







Sadly, there are about one billion “extremely poor” people in rural areas. They are living on the equivalent of less than $1.25 (U.S.) a day. But the number was 1.4 billion in the late 1980s. In the past decade, the overall rate of extreme poverty in rural areas, where poverty rates generally exceed those in urban areas, has dropped from 48 per cent to 34 per cent.







East Asia has been the poverty-reduction star and there is no doubt that China’s progress has skewed the figures for the entire planet. In East Asia, the number of extremely poor fell by about two-thirds in the last decade, from 365 million people to 117 million. That meant the poverty rate improved from 44 per cent to 15 per cent.







Sub-Saharan Africa should be so lucky. There, the number of people in rural areas living in extreme poverty has climbed from 268 million to 306 million in the last decade, though the rate of extreme poverty has actually declined slightly from 65 per cent to 62 per cent. Not all African countries are mired in grinding poverty, however. The food crisis of 2007-08, which drove prices to record highs and sparked food riots in dozens of countries, has helped farmers in some regions. For example, high prices for cocoa and cassava in Ghana, in West Africa, have sent rural poverty rates plummeting.







How to explain the great improvement in East Asia over Africa? The answers are varied and complex, but it appears that governments and private investors in Asia are spending a lot more money on agricultural development than the Africans. Fairly simple technological improvements, such as installing irrigation systems, can boost crop yields dramatically, taking farm incomes up with them. Irrigation is more common in Asia than Africa. Africa also suffers from generally low fertility and electricity is rare. Only one in five people in sub-Saharan Africa has access to a national electricity grid.







Asia has to be careful. IFAD notes that almost 40 per cent of the irrigated dry areas in Asia is being contaminated with salinization. And while China has led the world in reducing rural poverty, India, Pakistan and Iran have had far less success in raising rural incomes.







Now the big question: Is the IFAD report accurate?







John Sender isn't sure. He's an economics professor at the School of Oriental and African Studies in London and a rural poverty and economic development consultant for the United Nations. Speaking at Friday’s IFAD panel on rural poverty, he questioned the reliability of the data used by IFAD, noting that much of it comes from a sister agency, the Food and Agriculture Organization (FAO). “FAO data really needs a health warning,” he said.







FAO, in turn, gets much of its data from the individual countries, which often have poor data-collection abilities. The upshot is that rural poverty rates, he said, could be a fair amount higher or lower than set out in the IFAD report. Another problem is determining purchasing power parity (the US$1.25 a day figure is adjusted for purchasing power). Change your assumptions here and hundreds of millions of people can be added or subtracted from the global poverty ranks, Mr. Sender noted.







Still another flaw, he said, is that the IFAD report in his opinion didn’t pay enough attention to wage earners. In rural areas, some workers are farmers in one season and construction workers somewhere else in the next season. Of course, tracking their incomes is difficult.







Mr. Sender raised valid points. Still, the IFAD report is valuable in pointing out general trends, highlighting the danger spots and eloquently discussing the risks faced by poor rural farmers. If you’re living on a couple of bucks a day, managing risk is crucial and intimidating. Getting it wrong can mean the difference between nourishing your family or hunger, even starvation.

Follow on Twitter: @ereguly

 

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