Freeman, Alan (2008): The Poverty of Statistics. Forthcoming in: Third World Quarterly , Vol. 30, No. 8 (1. December 2009)
Download (312kB) | Preview
This paper is a prepublication version of a paper accepted for publication by Third World Quarterly. It offers a critique of the picture of world growth and world inequality generally disseminated by international agencies. The positive view commonly presented depends, it shows, on the widespread consensus that economic performance should be measured using ‘Purchasing Power Parity’ (PPP) statistics, instead of market exchange rates. Although originally conceived narrowly as a basis for comparing living standards, PPP indicators are now promoted, with scant pause for critical thought, as a unique and unexceptionable standard for comparing and aggregating national income statistics.
To get to the heart of the flaws in the PPP concept, this article adopts a unique approach: it accepts the claims made on their behalf at face value. It shows that, even on the basis of these claims, the wrong conclusions have been drawn, which in turn shows that they are not fit for purpose. By comparing PPP and Market Exchange Rate measures of inequality it shows that what really took place, in the closing decades of the last century, was a systematic reduction in the prices of consumption goods in the third world. PPP statistics have concealed this underlying and unsustainable trend, allowing it to be packaged as a stable reduction in poverty.
Neither genuine growth, nor lasting and sustainable poverty reduction, were achieved over this period. The fall in the price of consumer goods masked a systematic failure, for much of the third world, to overcome the central problem of development – the high price of capital goods, which PPP statistics understate and, intermediate goods, which PPP statistics completely omit.
|Item Type:||MPRA Paper|
|Original Title:||The Poverty of Statistics|
|Keywords:||Inequality; Development; Value Theory; Temporalism, World Systems Theory, Dependency Theory, Globalization, TSSI, General Equilibrium|
|Subjects:||O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O10 - General
C - Mathematical and Quantitative Methods > C0 - General
B - History of Economic Thought, Methodology, and Heterodox Approaches > B4 - Economic Methodology
|Depositing User:||Alan Freeman|
|Date Deposited:||18. Aug 2009 00:15|
|Last Modified:||14. Feb 2013 02:15|
Benham F (1940). The Terms of Trade. Economica, N.S.7: 360.367.
Blades, Derek (2002) “GDP and the main expenditure aggregates” (draft of chapter 3 of ICP handbook)
Chander, Datuk R. (2002) ‘The International Comparison Program and the System of National Accounts’
Clark, C. (1940) Conditions of Economic Progress, London:McMillan.
Desai, R. (2008) ‘Theories of Development’ in Pierre Beaudet, Paul Haslam and Jessica Schulz (eds.) Introduction to International Development, Oxford University Press, 2008
Dey-Chowdury, S.(2007). “International comparisons of productivity: the current and constant PPP approach.” Economic and Labour Market Review 1, no. 8 (August 2007). London: ONS. www.statistics.gov.uk/elmr/08_07/downloads/ELMR08_07Dey-Chowdhury.pdf.
Dikhanov.Y (1997) Sensitivity of PPP-based Income Estimates to choice of aggregation procedures. World Bank. Available at: www.siteresources.worldbank.org/ICPINT/Resources/icppapertotal.pdf [Accessed June 14, 2008].
Firebaugh, G. and B. Gosling (2004). "Accounting for the Recent Decline in Global Income Inequality." American Journal of Sociology, Volume 110 (Number 2 (September 2004)): 283-312.
Freeman, A. (2008) ‘Culture, Creativity, and Innovation in the Internet Age’, DIME conference on IPR, May 22-23 2008. London: Birkbeck College.
Freeman, A. and B. Kagarlitsky (2004) (eds) The Politics of Empire and the Crisis of Globalisation, London: Pluto
Freeman, A’ (2007) Time, Money and the Quantification of Value http://mpra.ub.uni-muenchen.de/2217/1/MPRA_paper_2217.pdf [accessed October 4, 2008]
Gulde, Anne Marie and Marianne Schulze-Ghattas, 1992. Purchasing Parity Based Weights for the World Economic Outlook. International Monetary Fund. Available at: http://www.imf.org/external/pubs/ft/wefs/1993/eng/studies/pdf/93WEOss3.pdf [Accessed April 11, 2008].
Heston, A. 2008. “The 2005 global report on purchasing power parity estimates: a preliminary review.” Economic and Political Weekly. Available at: www.epw.org.in/uploads/articles/12055.pdf [Accessed April 4, 2008].
Heston. A. “The 2005 global report on purchasing power parity estimates: a preliminary review.” Economic and Political Weekly (March 15, 2008). www.epw.org.in/uploads/articles/12055.pdf.
Ipod Index www.comsec.com.au/public/news.aspx?id=809
Jomo K. S, and Jacques Baudot. Flat World, Big Gaps: Economic Liberalization, Globalization, Poverty and Inequality. London: Zed
Karahanogullari, Y. (2008) Ulusal hesaplar sisteminden hareketle marksist değer kategorilerinin ampirik tahlili:1988-2007 turkđye ekonomisi icin bir uygulama, PhD Thesis, University of Ankara
Kliman, A (2007. Reclaiming Marx's Capital: a Refutation of the Myth of Inconsistency. Lanham, MD: Lexington Books
Korzeniewicz, R., and Moran, T. (2006), ‘World Inequality in the Twenty-First Century: Patterns and Tendencies’, in G. Ritzer (ed.), The Blackwell Companion to Globalization (Oxford: Blackwell).
Kravis, I.B. (1986), ‘The Three Faces of the International Comparison Project’, The World Bank Research Observer, vol. 1, No. 1. (Jan 1986)pp. 3-26. Oxford: OUP. www.jstor.org/stable/3986306 [accessed 1 July 2008]
Kravis, I.B., Alan Heston, and Robert Summers.(1985) “World Product and Income: International Comparisons of Real Gross Product.” www.siteresources.worldbank.org/ICPINT/Resources/worldproductandincome.pdf [Accessed June 14, 2008].p4
Milanovic, B. (2002) “The Ricardian vice: why Sala-i-Martin’s calculations are wrong”, typescript, Development Economics Research Group, World Bank, 2002, available www.ssrn.com.
Milanovic, B. (2005) Worlds Apart: Measuring International and Global Inequality. Princeton: Princeton University Press.
Milanovic, B.1999. True World Income Distribution: first calculation based on household surveys. World Bank. Available at: http://wbln0018.worldbank.org/research/workpapers.nsf/0/8dea74bc10a97dcf8525683300663553/$FILE/wps%202244.prn.pdf [Accessed April 7, 2008].
Penn World Tables 6 Technical Documentation, October 2002. www.pwt.econ.upenn.edu/Documentation/Doc-tech.pdf.
Povcal website www.iresearch.worldbank.org/PovcalNet/jsp/index.jsp.
Prebisch R (1950). The Economic Development of Latin America and its Principal Problems. Lake Success, NY, United Nations Economic Commission for Latin America.
Prebisch R (1952).
Ravallion, M. (2002) How not to count the poor? Reply to Reddy and Pogge. www.socialanalysis.org [Accessed April 5, 2008].
Ravallion, M., Shaohua Chen, and Prem Sagraula (2008). A dollar a day revisited. Washington, D.C. Available at: www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2008/05/19/000158349_20080519155817/Rendered/PDF/wps4620.pdf [Accessed June 9, 2008].
Ravenhill, J. 2007. Global Political Economy. Oxford: OUP
Reddy, S and Thomas Pogge(2008), “How Not to Count the Poor” (forthcoming in Sudhir Anand, Paul Segal and Joseph Stiglitz, eds.: Debates in the Measurement of Global Poverty (Oxford: Oxford University Press 2008).
Reinert, Erik S., and Jomo K. S. (2005)The Origins of Development Economics: How Schools of Economic Thought Have Addressed Development. London: Zed
Sala-i-Martin, X. (2001). “The Disturbing "Rise" of Global Income Inequality” www.columbia.edu/~xs23/papers/GlobalIncomeInequality.htm.
Singer HW (1950). The distribution of gains between investing and borrowing countries. American Economic Review, 15. (Reprinted in Readings in International Economics. London, George Allen and Unwin, 1968).
The Economist, ‘Economics Focus’, 4 August, 2001
Thirlwall, A (2003) Growth and Development: With Special Reference to Developing Economies, 7th Edition, Palgrave
UNCTAD (2002) World Development Report. Geneva: United Nations
UNCTAD (2005) World Development Report. Geneva: United Nations
UNCTAD. 2008. Addressing the Global Food Crisis: Key trade, investment and commodity policies in ensuring sustainable food security and alleviating poverty. Rome. Available at: http://www.unctad.org/sections/edm_dir/docs/osg_2008_1_en.pdf [Accessed July 13, 2008].
UNSTAT (1994) World comparisons of Real Gross Domestic Product and Purchasing Power , 1985. (Phase V of the International Comparison Programme) Brussels: Eurostat. Available at: www.siteresources.worldbank.org/ICPINT/Resources/worldcomparisongdp1985.pdf [Accessed June 14, 2008].
van Ark, B. (1993) International Comparisons of Output and Productivity: Manufacturing Productivity Performance of Ten Countries from 1950 to 1990, chapter 2
Wade, R. H. (2004b). "Is Globalization Reducing Poverty and Inequality?" World Development 32(4): 567-589.
Wade, R. H. (2007) “Globalisation, Growth, Poverty, Inequality, Resentment and Imperialism”, in Ravenill (2008)
Wade, R.H. (2004a) Debate about Income Inequality. UC Atlas of Global Inequality. www.ucatlas.ucsc.edu/income/debate.html. [Accessed April 7, 2008].