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Friday, 8 June, 2001, 07:11 GMT 08:11 UK
World sinks into deeper poverty
Malian child
A Malian child - one of the poorest nations in the world
The world's poor may be sinking deeper into poverty, according to a new report by a top economics professor that turns traditional insights into poverty reduction upside down.

The Indian sub-continent and sub-Saharan Africa - two of the poorest regions of the world which make up around a third of the world's population - have really become poorer over the past decades, according to the research.

The implications of these results should be heart-breaking

Professor Partha Dasgupta
This is in stark contrast to the much more widely used - and potentially misleading - data based on Gross National Product (GNP) and the Human Development Index.

And the belief that the economies of the poorest countries are growing may, in some cases, have led to less aid, development loans or grants.

"The implications of these results should be heart-breaking," concluded Partha Dasgupta, a Professor of economics at Cambridge University and the former president of the Royal Economic Society.

Deteriorating natural resources

Governments, development organisations and the World Bank use GNP to gauge the rate of growth of a certain country's economy.

But the measure of GNP - the monetary value of all goods and services provided by the economy - could be fatally flawed as it disregards vitally important factors such as the deterioration of natural resources.

Average change in GNP per head, 1965-1996
Bangladesh 1%
India 2.3%
Nepal 1%
Pakistan 2.7%
China 6.7%
Sub-Sahara Africa
Average change in wealth per head, 1970-1993
Bangladesh -2.6%
India -0.1%
Nepal -3%
Pakistan -1.9%
Sub-Sahara Africa
China 0.8%

GNP may, for example, be rising healthily due to a booming diamond trade. But if those diamond mines are going to run out in a couple of years time, then the prospects of poverty reduction are falling rather than growing.

The depletion of natural assets such as forests, water, oil, fisheries, soil and minerals will have a dramatic impact on the survival ability of the future generations.

"GNP is by definition insensitive to the depreciation of capital assets, including natural capital, and can mislead hopelessly," said the report.

"It is totally insensitive to the future," Professor Dasgupta told BBC News Online.

Nations in decline

If the decline of natural capital is included under a new measure - which the report dubs wealth per head - traditional insights into poverty reduction are turned upside down.

It reveals that Sub-Sahara Africa, Bangladesh, Nepal, India and Pakistan are all heading into deeper gloom and poverty.

While this is not surprising in the case of sub-Saharan Africa which is widely known to have regressed in terms of many socio-economic indicators, the figures for the Indian subcontinent are shocking.

Pakistan's GNP, for example, grew at a healthy 2.7% per year, implying a more than doubling of living standards between 1965 and 1996.

But the alternative measure of wealth shows that living standards have actually almost halved over this period.

Blowing natural resources

Of course, misleading data tends to lead to the introduction of misleading policies.

GNP is totally insensitive to the future

Professor Partha Dasgupta
The assumption that a steady growth in GNP automatically leads to a reduction in poverty could have led to a decrease in the amount of development aid allocated to any one country.

In addition, some welfare economists claim that structural reforms required by the World Bank and the International Monetary Fund have sometimes led to a speeding up of the decline in natural resources.

The temptation to blow natural resources is high for some countries when they struggle to increase GNP after taxes and subsidies have been removed.

The emphasis on trying to increase any one nation's GNP could be increasing the pressure to destroy future resources.

Some countries for example, have boosted timber exports in order to raise export quotas without taking into account the future implications of deforestation.

The measure of GNP has already come under attack for a number of different reasons.

While some say that it is soulless, others point out that it gives no indication of the rich-poor divides within a country.

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See also:

20 Sep 00 | Business
World Bank warns of poverty crisis
29 Apr 01 | Business
World Bank's plea for poorest
26 Jan 01 | Business
Debating globalisation
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