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Why Oxfam is misleading (at least about India)

Author: HindolSengupta
Publication: Medium.com
Date: January 23, 2018
URL:   https://medium.com/@hindolsengupta/why-oxfam-is-misleading-at-least-about-india-37616ded8893

World Economic Forum Young Global Leader. Award-winning author of eight books incldg Recasting India, first Indian book to be nominated for the Hayek Prize.

Every year the global charity Oxfam releases reports about the inequality in wealth distribution around the world. Its reports are full of extreme data comparisons that are designed to shock and awe. But while it has a point about developed markets like the US and Europe, there are fundamental errors in its understanding and expectations of emerging markets, especially the largest democratic emerging market, India.

It is the curse of every age, and social media outrage, to live as if history never happened.

Oxfam reports are a perfect example of this. The global heavyweight anti-poverty charity spends most of its time roaring against, not poverty, but wealth inequality. Its latest report about India that has created the usual brouhaha suggests that 1 per cent of the richest Indians mopped up 73 per cent of the wealth created in the country.

There have been much writing about Oxfam’s dodgy methodology, including pointing out that using the net worth formula (assets minus debt) is stupid but who can argue with the power of click-bait headlines that are strategically released right before the World Economic Forum meets in Davos.

This essay is particularly concerned about how Oxfam is wrong about India. To understand this, we have to start with a basic realisation that for most of human history, everyone was essentially poor and led a subsistence or, at best, what I would call a subsistence plus sort of existence. They may have been really a handful of people at the very top of the food chain who had a bit of a better life but even they had nasty, brutish-ly short lives with almost nothing of what we describe as a decent standard of living today. This is a realisation that is impossible to ignore if you can even a moderately long historical curve.

For instance, see the chart below.

It shows that in 1820, more than 90 per cent of the world lived in abject poverty. What is the number in 2015? Less than 10 per cent.

In fact if you look at the actual consumption per head, the world is probably more equal than ever before. This is not hard to understand: vast countries like India and China had a far greater economic gap with wealthy countries in Western Europe even, say, in the 1980s until the Asian giants began to flourish and subsequently close the gap.

In fact, it is because of the misleading hysteria fuelled by organisations like Oxfam that most people don’t even realise that extreme poverty in the world has not only dramatically decreased but it continues to fall.

So the question to ask is not what is the difference in income between the richest and poorest Indian — because it really is not a good thing, as Oxfam soto voce seems to think, if everyone is uniformly poor with nary a gap between them — but to what extent has India been able to reduce extreme poverty? And indeed what is the current situation of extreme poverty in India?

Well, the numbers look something like this.

India still has the maximum number of the poorest people on the planet but, and this is a critical bit that organisations like Oxfam always ignore, those numbers have been going down steadily, and indeed dramatically since the country opened its markets in 1991.

What you see below are two graphs that show this decline using six decades of Indian economic data.

What the graphs above show, in the words of the economists who wrote this report, is this: ‘India’s long-run progress against absolute poverty is evident from our findings using data spanning nearly six decades from 1957 to 2012. Figure 1 provides a summary, giving both national accounts aggregates and the poverty rates for two poverty lines. The trend decline in the national incidence of poverty for our upper line was 0.65% points per annum, accumulating to a sizeable fall in the poverty rate of more than 35% points. In proportionate terms, poverty incidence declined at the rate of 1.3% per annum.’

If poverty reduced dramatically in India, did everyone benefit? Here it is most useful to quote from a definitive research paper by the economists Arvind Panagariya and Vishal More — Poverty by Social, Religious & Economic Groups in India and Its Largest States 1993–94 to 2011–12.

They found: ‘First, the SC (Scheduled Castes or some of the poorest sections of Indian society) have seen a larger percentage points decline in poverty than the general population between 1993–94 and 2004–05 as well as 2004–05 and 2011–12. The result has been a substantial narrowing down of poverty rates between the SC and the general population. The ST (Scheduled Tribes, another similar underprivileged group) have also seen a significantly larger percentage points reduction in poverty than the general population during the second of these periods though not the first. Both SC and ST have, of course, seen a far more rapid decline in poverty during the second period than the first.’

In India per capita income has risen eight times between 1950–51 to present day levels. But the fastest improvement has happened after 1991 when it doubled between 1991 and 2011 and then rose another 30 per cent by 2016.

None of this takes away from the fact that India still has a long way to go before it can entirely eliminate extreme poverty, quite like the fact that in the last quarter of a century 1.25 billion people escaped extreme poverty does not take away that global tech giants and their offshore accounts to evade taxes exacerbate global inequality.

But this fight can only be won with relentless focus on the most pressing issue — how to eliminate the last remaining pockets of persistent extreme poverty?

Not by juicy headlines or by giving awards to Bollywood films and partnering with Coldplay concerts — both of which Oxfam India recently did.
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