Chavez Fights Poverty, and Succeeds – Part III

While new poverty metrics are being devised to take into account many of the new social programs such as Mercal and Barrio Adentro, poverty is still being calculated the way it always has been – solely based on monetary income versus the amount of money needed to purchase basic goods.

A couple of weeks ago I did a post showing how according to the Venezuelan National Institute of Statistics (I.N.E.) poverty has now been decreased to below the levels of when Chavez first came to office. This accomplishment is all the more significant due to poverty having been artificially increased by the opposition coup and economic sabotage in 2002 and 2003.

Of course, the opposition types were not at all happy with the new numbers as they make the Chavez administration look, well, good. So they immediately set out to attack them. First they claimed that they were calculated using new metrics and therefore not at all comparable to the old numbers. But then one of them called up the I.N.E. and found out they were indeed calculated using the same metric as before – income. Then we were told they weren’t valid because we were just given them in newspaper interviews and they weren’t published on the I.N.E. web page, so presumably the government was hiding something.

This last, and rather bizarre, accusation prompted me to look at the I.N.E. web site and there they are – in a report under the “Indicadores Sociales” section. The report talks about the new poverty reporting system that is being worked on but also gives the current statistics and how they were calculated. So lets have a look: (click on image for a larger version)

 This report, entitled “Poverty as a multidimensional phenomena”, starts off describing how a true measurement of poverty should include not only direct income but other benefits such as health care, education, housing and other factors.

It then goes on to describe how monetary poverty is defined and calculated. It is calculated based solely on income. According to the chart, income includes gross salary and any job related reimbursement, bonuses, tips, and commissions. It also includes such non-job income as interest, dividends, financial support from your family, scholarships, pensions, and rent from property among other items. All this is added up and it determines how much a persons income is.

This income is then compared against two metrics to determine if the person is considered poor or not. The metrics are the “Canasta Basica” (Basket of Basic Expenses) and the “Canasta Alimentaria” (Basket of Food Expenses). The “Food Basket” includes only the cost of purchasing the amount of foodstuffs that is considered necessary to keep a person healthy. As described in the above table any family that has income below the “Food Basket” is considered to be in Extreme Poverty. The “Basic Basket” includes all the foodstuffs from the “Food Basket” but also includes other necessities such as housing, transportation, and clothing. A family that earns enough to afford the “Food Basket” but not enough to purchase the “Basic Basket” is considered Poor. Those families that earn enough to purchase the “Basic Basket” are considered to not be poor at all.

So as this table shows the computation of poverty is very straightfoward – tabulate a families income and then see how that income compares to the various baskets to determine if a family is Extremely Poor, Poor, or not poor at all. This then leads us to the next page in the report: (click on image for a large version)

In this page we first see a graph showing how Poverty and Extreme Poverty, as previously defined, have evolved since 1998. The gold colored line shows the percent who are extremely poor and the blue line shows those the percent who are poor. Please note it matches the table given in my previous posts and again shows the trend of poverty being reduced during Chavez’s first years in office, it shooting up during 2002 and 2003 as the opposition sabotaged the economy, and now going down again as the economy has been revitalized.

There are two other things to note about the graph. First, note that in the past year the number of people who are extremely poor has been sharply reduced whereas the number of those who are simply poor has actually even gone up a bit. This doesn’t mean that none of those who are poor are moving into the ranks of the non-poor. Rather, it means the number of people moving up from extreme poverty to poverty is greater than the number of poor moving into the ranks of non-poor. This is still good as the most pressing need is to get people out of extreme poverty which is in effect mal-nourishment. Later they will hopefully leave the ranks of the poor entirely.

Secondly, note that the numbers for the first semester of 2005, which come to a combined total of 38.5% are listed as being estimates. This may be a mistake. In both the newspaper accounts and the bullets above the graph the 38.5% for the first semester of 2005 is listed as a actual number while it is the 35% given for the second semester of 2005 which is listed as an estimate. Hopefully, someone will clarify that.

To some up, here is what we have learned over the past few weeks regarding poverty numbers in Venezuela. First, while new poverty metrics are being devised to take into account many of the new social programs such as Mercal and Barrio Adentro poverty is still being calculated the way it always has been – solely based on monetary income versus the amount of money needed to purchase basic goods. Using that measurement poverty trended down during the first several years of Chavez’s tenure as he implemented social programs and boosted oil income. Poverty then shot up sharply as the opposition coup and oil strike sent the economy into a depression. It is those higher numbers from 2003 that the opposition keeps trotting out in their haste to make anti-Chavez propaganda. However, as can now be seen, since the Venezuelan economy began its revitalization in 2004 poverty has dropped sharply and is now below the levels of when Chavez took office in 1999. And given the Venezuelan economy’s continued strong growth and the massive social programs being implemented it is reasonable to assume poverty will continue to decline significantly.

So Chavez has done exactly what he said he was going to do when he campaigned in 1998. He has fought poverty implacably. And it is clear that while poverty is far from being eradicated this war against poverty is one that Chavez and Venezuela are winning.

Source: Oil Wars Blog