By Iris Boutros
Between 1990 and 2010, nearly 1 billion people were pulled out of extreme poverty globally. The Millennium Development Goal (MDG) of halving global poverty between 2000 and 2015 has been achieved five years early, surpassing the progress seen in achieving any of the other MDGs. This week, key politicians and officials from governments and international agencies will meet to set new targets for the global fight against poverty. In this time of great progress, Egypt has failed where other nations have succeeded.
When the MDGs were set in 2000, 16.7% of Egyptians were living below the national poverty line. By 2010, amid ongoing global success in poverty reduction, the percentage of poor Egyptians actually increased to 25% of the population according to Central Agency for Public Mobilisation and Statistics. As new poverty reduction commitments are being made for the next 15 years, it is not only worth examining Egypt’s increasing trend in poverty rates and how well these statistics reflect poverty; but it is also important to reflect on what it means to be poor to Egyptians.
Inherent in these poverty statistics is a statement about what it means to live in poverty and how to measure it. These percentages, the poverty headcount, indicate the percentage of people in a population living with less than a certain amount of money a day. In 2010 in Egypt, poverty meant having access to less than EGP 8.5 a day or EGP 265 per month. This statistic defines poverty simply based on money.
But money isn’t everything. Any economist with the task of measuring poverty would easily admit as much. Poverty is not simply the absence of money but rather a state of living with lower levels of well-being. The state of health, level of education, and availability of jobs are all also valid concepts to assess a person’s well-being. For instance, a person with abundant financial resources but who suffers daily from a debilitating and painful disease cannot easily be considered to be in a state of well-being. Nor is it clear this would be preferable to having considerably less money but living a life with perfect health.
The concept of poverty is reduced to the idea of money available quite simply because it is easiest to measure. The process typically involves using a nationally representative household survey that tracks how much all household members earn in income and how much is spent on basic needs like food, education, health care and the like. Egypt’s most recent poverty statistics are calculated using the 2010/2011 Household Income, Expenditure and Consumption Survey.
Measuring poverty is full of challenges. For instance, two households of five with access to the same amount of money, one with five adults and one with two are not likely experiencing the same level of well-being. It costs less money to feed children but with perhaps more money needed for education. Which household is deemed better off and how this is ultimately measured is only one of the many issues in measuring poverty through the simplest approach: the poverty headcount.
The poverty headcount is also a poor indication of severity, depth, and vulnerability to poverty. EGP 8 per day means poverty and EGP 9 per day does not, although the additional Egyptian pound per day probably does not make an appreciable difference to meeting basic needs or to overall well-being. Having EGP 8 per day to meet basic needs could be very different than having EGP 5 per day, although both are considered poor with this basic yes/no indicator of poverty. The latter might be the typical resources available to a person surviving on a government pension in Egypt without dependents. There are ways to measure poverty that are more sensitive to these issues, but they are not as easily understood as the poverty headcount, and so used much less frequently.
The poverty headcount tends to perform worse in measuring poverty in rural areas, where poverty is highest in Egypt. Rural areas have a little more than half the population, but are home to almost 80% of poor Egyptians. Among rural residents of the Delta, 17% are poor, while among those living in Upper Egypt’s rural areas, the rate is 51%. These rates have been steadily increasing since 2000.
But rural residents do not meet all of their basic needs using money. Although subsistence farming is declining, it is still quite important, and goes a long way to meeting basic needs. Economic transactions in rural areas do not always use money as the unit in which to trade goods and services; bartering and shared labour are often key. Since the poverty headcount largely measures expenditure with money, poverty could actually be lower than these statistics would suggest. But because rural areas are typically marginalised in service delivery, meeting basic needs might actually be worse. Well-being for a rural resident might be much more determined by having access to clean water for crops than by having EGP 8.5 in one’s pocket that day, but the poverty headcount would not make that distinction.
The rise in all poverty rates in the decade between 2000 and 2010 also does not mean that Egypt has entirely failed its population with respect to poverty. In fact, estimates produced by the World Bank suggest that in the absence of such strong growth during this period in the face of high and rising food prices, there would have been at least a 12% increase in poverty.
Growth and poverty have a powerful connection. The world’s reductions in poverty levels have largely been driven by acceleration in economic growth rates. In the time when the MDG of halving poverty was achieved, economic growth in developing countries rose to 6%, considerably higher than 4.3% of the decades before. In this time, when China’s growth exploded, and 680 million citizens were pulled out of poverty; interestingly, this was a result of a larger focus on growth than on poverty reduction or meeting the MDG. China accounted for three-quarters of the world’s accomplishment of meeting the MDG.
Why Egypt had such sustained increases in poverty at a time when it experienced significant acceleration of economic growth is at the heart of what poverty means in Egypt. During this period in question the size of the Egyptian economy grew, yet the number of Egyptians living in poverty grew alongside. Some might say this is a simple explanation for the motivations behind the 25 January Revolution. But the revolution was started by the middle class and benefitted largely in the early days from the support by unions and labourers, people not typically classified as poor by the poverty headcount.
In Egypt, it seems that the people have sent a clear message that poverty and well-being are not simply about having EGP 8.5 a day in your purse or wallet. Well-being for Egyptians is about education, health, opportunity, justice and so much more. As new commitments are being made for fighting poverty at the global level, what do Egyptian citizens see as the goals the government should pursue? The answer is multi-dimensional and not limited to raising the number of Egyptians living with a certain amount of money a day. It is clear that it is about so very much more, and this is ultimately why Egypt has failed when so many other nations are succeeding.
Iris Boutros is an applied economist and strategist. She focuses on balanced growth, investment and decision-making.