Less than a dollar a day

Summary

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More or Less – “Less than a dollar a day”

BBC Radio 4, March 2, 2012
Host: Tim Harford
Main Theme:
This episode explores the origins, methodology, impact, and controversies of the “less than a dollar a day” extreme poverty line—one of the best-known benchmarks in global development statistics. Tim Harford and guests discuss how the metric was derived, its real-world meaning, its role in driving international policy and perception, and some of its shortcomings.

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Episode Breakdown

The Power and Simplicity of the “Dollar a Day” (00:12–01:21)

• Introduction:
  • The “less than a dollar a day” poverty line has become a widely recognized standard for “extreme poverty.”
  • Tim Harford highlights the simplicity and global influence of the figure.
  • Quote:
    “In its shocking simplicity, the dollar a day measure has probably done more to raise awareness of world poverty than any other effort.” (Tim Harford, 00:51)
• Origin Story:
  • The measure emerged in the late 1980s from World Bank economists.

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How the Metric Was Born (01:21–02:21)

• Ruth Alexander explains:
  • World Bank economists noticed that national poverty lines in developing countries clustered around $370/year.
  • Economist Martin Ravallion, inspired during a dinner conversation, divided $370 by 365 days, creating the “dollar a day” concept.
  • Quote:
    “If you divide that yearly income, $370 by 365 days, you get just over a dollar. And so the dollar a day catchy concept was born.” (Ruth Alexander, 01:58)

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What “A Dollar a Day” Actually Means (02:21–03:30)

• Tim Harford:
  • A dollar seems trivial from a Western perspective, but local prices differ.
• Ruth Alexander:
  • The calculation uses “purchasing power parity” (PPP), not simple exchange rates.
  • It’s based on the cost of a basket of essential goods equivalent to what $1 buys in the US.
• Global Stats:
  • Just over 10% of people in China, just under 50% in Sub-Saharan Africa, and about a third in South Asia live below this line (03:30).

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How the Poor Spend Their Money (03:30–04:31)

• Abhijit Banerjee (economist, MIT):
  • Despite being able to afford enough calories, many poor people opt to buy some entertainment/pleasure instead of maximizing calorie intake.
  • Quote:
    “It's a balance between kind of survivalist behavior and pleasure seeking behavior. I think as human beings, we need both.” (Abhijit Banerjee, 04:16)
  • Most spend about half their income on food.

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Adjusting for Inflation and Methodological Changes (04:31–05:31)

• Ruth Alexander:
  • Questions whether the “basket” has grown more expensive due to inflation.
• Tim Harford:
  • The poverty line adjusts for both international price differences and inflation over time.
  • In 2008, the World Bank recalculated the line based on more robust data, moving it to $1.25/day (in 2005 prices).
  • Quote:
    “The new dollar a day line is actually $1.25 pegged to 2005 prices.” (Tim Harford, 05:17)

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The Millennium Development Goals and Recent Progress (05:31–06:44)

• The “dollar a day” line became central to the United Nations Millennium Development Goals (MDGs).
• Goal:
  • Halve the proportion of people living under this threshold between 1990 and 2015.
• Recent Data:
  • In 1993: 31% of developing world (~1.4 billion) lived on <$1/day.
  • By 2008: 14% (~800 million).
  • Martin Ravallion:
    “We think that we've now achieved the first Millennium Development Goal a good few years ahead of 2015.” (06:25)
• Crucial Caveat:
  • Most global progress is thanks to China’s economic boom; without China, the goal isn't met.

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Criticism: Is “Dollar a Day” the Wrong Focus? (06:44–08:51)

• Lant Pritchett (Harvard University, former Ravallion colleague):
  • Calls it a “successful failure”—great PR but ultimately diverting the focus from broader development.
  • Quote:
    “It's a wildly successful PR device that I think has actually been a failure in terms of achieving the objectives of improving human well being in the world.” (Lant Pritchett, 07:25)
  • Argues it shifts poverty debate from economic development to philanthropy and handouts.
  • Quote:
    “It's made the discourse of poverty less developmental and more philanthropic...which just isn't the way historically anybody has ever eliminated poverty.” (Lant Pritchett, 07:39)
• Martin Ravallion:
  • Pushes back, saying progress against the dollar a day line is “mainly been by economic growth, it has not been by handouts.” (08:07)
  • Notes slower progress for the $2/day line and advocates for multiple poverty lines.
  • Quote:
    “What I'm also saying is that our highest priority must be the poorest first.” (Martin Ravallion, 08:39)

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The Bottom Line and Ongoing Questions (08:51–09:40)

• Host summary:
  • The “dollar a day” line is a useful catchphrase but not a definitive measure of poverty.
  • Real improvement for the poorest remains contested, especially for those just over the threshold.
  • Encourages listeners to send in their own statistical queries.
  • Quote:
    “A dollar a day is a great catchphrase and it's certainly drawn attention to the lives of the world's poorest. But nobody who's looked closely at the topic thinks it's definitive.” (Tim Harford, 08:51)

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Notable Quotes and Moments

| Timestamp | Speaker | Quote | |-----------|---------|-------| | 00:51 | Tim Harford | “In its shocking simplicity, the dollar a day measure has probably done more to raise awareness of world poverty than any other effort.” | | 01:58 | Ruth Alexander | “And so the dollar a day catchy concept was born.” | | 04:16 | Abhijit Banerjee | “It's a balance between kind of survivalist behavior and pleasure seeking behavior. I think as human beings, we need both.” | | 05:17 | Tim Harford | “The new dollar a day line is actually $1.25 pegged to 2005 prices.” | | 06:25 | Martin Ravallion | “We think that we've now achieved the first Millennium Development Goal a good few years ahead of 2015.” | | 07:25 | Lant Pritchett | “It's a wildly successful PR device that I think has actually been a failure in terms of achieving the objectives of improving human well being in the world.” | | 07:39 | Lant Pritchett | “It's made the discourse of poverty less developmental and more philanthropic...” | | 08:07 | Martin Ravallion | “When we talk about progress against a dollar a day, we've got to remember that that's mainly been by economic growth, it has not been by handouts.” | | 08:39 | Martin Ravallion | “We should look at multiple poverty lines. We should look at the whole distribution...our highest priority must be the poorest first.” | | 08:51 | Tim Harford | “A dollar a day is a great catchphrase and it's certainly drawn attention to the lives of the world's poorest. But nobody who's looked closely at the topic thinks it's definitive.” |

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Key Insights

• The “dollar a day” measure was created to standardize and communicate a global extreme poverty line, but its simplicity hides considerable complexity and has led to misunderstandings.
• Methodological updates have changed the effective threshold to $1.25/day (2005), but the older catchphrase endures.
• Massive reductions in extreme poverty (as measured by this line) are largely due to economic growth in China; progress elsewhere is slower.
• Critics say the figure shapes global attitudes about poverty in unhelpful ways, emphasizing aid over development.
• Consensus among experts: While the dollar a day line has mobilized attention, it’s not a comprehensive indicator—multiple metrics and broader views are needed.

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Suggested Listening Sections

• Origins of the line – 01:21–02:21
• Methodological deep dive – 02:42–04:31
• Impact and criticism – 06:44–08:51

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This episode is a nuanced exploration of a world-changing statistic—ideal for listeners interested in how numbers can both illuminate complexity and sometimes oversimplify the human condition.

Transcript

[A]

Thank you for downloading from the BBC. For details of our complete range of podcasts and our terms of use, go to bbcworldserveys.com podcasts.

[B]

You're listening to a download from the BBC. This is more or less the mathematical icing on the cake of life. We make an edition of the program for BBC Radio 4, but this is a download of a special edition broadcast on the World Service. Hello and welcome to More or Less on the BBC World Service. We're your weekly guide to the numbers in the news and in life. And I'm Tim Harford. It's hard to think of a more important figure than the number of people living in poverty. For many years now, a common standard for extreme poverty has been living on less than a dollar a day. And the estimates of who lives in extreme poverty have just been updated. In its shocking simplicity, the dollar a day measure has probably done more to raise awareness of world poverty than any other effort.

[C]

We certainly intended to have some impact with it, try to make reasonably well heeled people all over the world understand just how poor many people in the world are.

[B]

But how did this simple number, which has acquired such power, come about? We've been following the trail and we've discovered it's much more complicated and controversial a number than most people realize.

[D]

It's a successful failure. It's a wildly successful PR device that I think has actually been a failure in terms of achieving the objectives of improving human well being in the world.

[B]

But first, let's find out where the story starts. Ruth Alexander's here.

[E]

The story starts at the World bank in Washington, D.C. in the late 1980s, economists there noticed that the national poverty lines of a number of developing countries clustered around $370 a year.

[B]

Now, these poverty lines were usually set at the basic amount that a person needs, feed and clothe themselves. So the World bank team proposed that this became a global poverty line.

[E]

And then some time later, one of these economists, Martin Revalian, was having dinner with his wife. And as they chatted, he had a kind of epiphany. If you divide that yearly income, $370 by 365 days, you get just over a dollar. And so the dollar a day catchy concept was born.

[B]

When I first heard the dollar a day standard, I thought to myself, just an incredibly small amount of money. You're doing well to buy a cup of coffee for a dollar in America these days. But then I thought, maybe it's not quite as bad as it seems if you live in rural India or Nigeria Or Vietnam food is probably a lot cheaper. Now here comes the first complication.

[E]

If you took a dollar to a bank and converted it into Indian rupees, say, or Nigerian naira, you might indeed be able to buy more in India or Nigeria than in America. But the World bank figures don't use those exchange rate, specially adjusted exchange rates, which take into account the fact that it's cheaper to live in some countries than others. Economists look at the price of hundreds of goods in developing countries. And then with reference to national accounts, household surveys and census data, they calculate how much money you would need to have in each country to buy a comparable basket of essential goods that would cost you a dollar in America. The idea is that you're under the global dollar a day poverty line if you can't afford that basket.

[B]

And Ruth, just tell us who's in that situation.

[E]

Well, to give you an idea, just over 10% of the people in China are living below this poverty line. Just under 50% in Sub Saharan Africa and about a third of South Asia. There are others elsewhere. If you're under this line, you might be a farm worker or a cleaner. Now you might think, if I only had a dollar a day, I'd be spending everything on food, every cent on staying alive. You'd probably be spending only just about half your income on food. That's what a professor who researches the economic lives of the poor has found. Abhijit Banerjee studied in Kolkata, India, and is now at MIT in America.

[F]

Even though they could actually physically buy enough calories, the fact is they don't. If you look at the people, especially in South Asia, who live on a dollar a day, huge malnutrition. So they sacrifice calories to buy some entertainment, some pleasure. It's a balance between kind of survivalist behavior and pleasure seeking behavior. I think as human beings we need both.

[E]

Something that puzzled me was thinking that the basket of goods that the economists price up must surely, I thought, be more expensive now than it was when a dollar a day was first coined a couple of decades ago because of inflation. And yet we still talk about people living on less than a dollar a day.

[B]

Yes. So this is the second way in which the dollar a day figure needs to be tweaked. We've already heard that it's adjusted to reflect the different prices of goods all over the world, but it's also adjusted for inflation because a dollar buys less and less over time. But in 2008, the World bank made a major change to how they calculated the poverty line. They Took account of more national poverty lines, more household surveys, and they got much more accurate price information.

[E]

So they effectively just started all over again.

[B]

Yes, they junked the old poverty line calculations and they recalculated everything. And the new dollar a day line is actually $1.25 pegged to 2005 prices.

[E]

It's just not as catchy, though.

[B]

It's not, which is why the dollar a day rhetoric lives on. One of the reasons this number really took off and gained a life of its own is because it became the first United Nations Millennium Development Goal to

[G]

half between 1990 and 2015. The proportion of people whose income is less than a dollar a day.

[E]

And we've got some news on that first Millennium Development Goal.

[B]

We do. The World bank has just released its latest estimates about how many people are living under the global poverty line. And its figures tell a success story. Martin Revellion, the man who came up with the dollar a day measure, says that in 1993, 31% of the population of the developing world lived on less than $1 a day, close to 1.4 billion people. In 2008, less than half that proportion did.14%, or about 800 million people.

[C]

We think that we've now achieved the first Millennium Development Goal a good few years ahead of 2015. The proportion of people living under $1.25 a day has been falling at about roughly 1% per year. It's the first time I've seen both the numbers of poor and of course, the poverty rate falling in all regions of the developing world.

[E]

But if you take China out of the equation, we've discovered the goal hasn't been met. Because most of the progress in getting people above the global poverty line has been driven by China, which has had an amazing run of economic growth.

[B]

There we are. The target's been met, even if the poverty line has been redefined as we approach 2015 and the deadline for the Millennium Development Goals. But there's a more fundamental question here whether there's any point at all in having the dollar a day poverty line. A World bank colleague of Martin Revalian's was a big critic from the start. They're not colleagues anymore, I should say. Lance Pritchett is now the professor of the Practice of International Development at the Kennedy School, which is at Harvard University.

[D]

It's a successful failure. It's a wildly successful PR device that I think has actually been a failure in terms of achieving the objectives of improving human well being in the world.

[B]

You think it's actually causing damage oh, yeah, absolutely.

[D]

Going for such an incredibly low line, it's made the discourse of poverty less developmental and more philanthropic. So instead of promoting prosperous economies, it's about how do we identify and target and get transfers to the few people under this penurious line, which just isn't the way historically anybody has ever eliminated poverty.

[B]

Martin Revalian doesn't believe the intense focus on the dollar a day line has been damaging.

[C]

When we talk about progress against a dollar a day, we've got to remember that that's mainly been by economic growth, it has not been by handouts. That has actually been quite powerful at the bottom of the distribution, but we've still got a bunching up that's occurred. We've made much less progress in getting people over $2 a day.

[H]

Three cheers for economic growth, then. But that does re emphasize this concern that some people have that the dollar a day line has achieved disproportionate purchase in people's imaginations. If we measure it by $2 a day, we haven't made as much progress as if we measure it by $1 a day.

[C]

Yes, and I completely emphasise that. We should look at multiple poverty lines. We should look at the whole distribution. That's what I've said from day one. What I'm also saying is that our highest priority must be the poorest first.

[B]

But the question remains, how much better are the lives of those poorest people, if in reality, progress means managing to move just over the dollar a day line? A dollar a day is a great catchphrase and it's certainly drawn attention to the lives of the world's poorest. But nobody who's looked closely at the topic thinks it's definitive. If there's a statistic you want us to investigate, email more or less BBC.co.uk and you can download our podcast via our website, bbcworldservice.commorealls but from me and from Ruth Alexander, until next week, goodbye, More or Less was presented by me, Tim Harford, the Financial Times undercover economist. The producer was Ruth Alexander, the editor was Nicola Merrick.

[A]

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