Methods of Development | A Move Towards Holistic Poverty Evaluations

We all know that nations cannot be defined purely by their GDP. And so we know that poverty, also, cannot solely be defined by income. Rather, there is a move to include a variety of indicators within the discussion of poverty, allowing new ideas and new objectives to influence action and policy. The Hudson Institute hosted an event this week entitled Latin America: Poverty, Radicalism, Market Economy? Moderated by Ambassador Jaime Daremblum, the speakers included Mauricio Rodas, John Hammock, and Andrew Natsios, and the event focused on new poverty indices. The Ethos Poverty Index (which we previously blogged about here) and the Oxford Poverty and Human Development Initiative (OPHI) focus on different poverty indicators than the most commonly used indicator of changes in income levels. They also demonstrate an effort to address Amartya Sen’s idea of capabilities

Ethos Poverty Index 2011 | Source: Ethos Foundation

In his talk, Rodas notes that the data for many countries in Latin America depicts a decrease in poverty. However, this data does not reflect a broad and comprehensive view of poverty, but the one most commonly linked to income. Through the Ethos Poverty Index, Rodas explained that data was compiled into two sections—Household Poverty and Contextual Poverty. (For a complete list of indicators, see the Ethos Poverty Index and our analysis of them.) The countries were selected on the availability of data and include Mexico, Colombia, Venezuela, Ecuador, Peru, Brazil, Bolivia, and Chile. With the final rankings and scores, the Ethos Foundation was able to determine that the countries with the weakest institutions are also the poorest, and while economic factors are significant, targeting them is not an absolute way to reduce poverty.

Next, Hammock discussed his work at OPHI. He notes that one cannot rely exclusively on the market to deal with poverty. The OPHI approach is multidimensional, which according to Hammock, allows governments to find who is multi-dimensionally poor (i.e. affected by various indicators of poverty) and in which areas. OPHI has been adopted by Mexico in 2009, the UNDP in 2010, and El Salvador, Chile, and Venezuela have it under consideration. Hammock also noted that Mexico has its own General Law of Social Development, which outlines how it evaluates multidimensional poverty. The OPHI indicator method is unique in that it allows each country to choose their own indicators, and therefore define poverty as it is relevant to them. Hammock maintains that long-term trends can be analyzed as long as each country continues to use the same indicators year-to-year.

Andrew Natsios, a senior fellow at the Hudson Institute, followed Hammock’s presentation with a discussion of the chronic ethnic and racial tensions in Latin America and how they affect development. He maintains that a focus on institutions—their level, density, and sustainability—is most indicative of development potential.

From left to right: Jaime Daremblum, Mauricio Rodas, and John Hammock | Source: Hudson Institute

The benefit of these three approaches is that they focus on maintaining a holistic approach to development. Targeting individual sectors to promote growth and decrease poverty is inefficient—the consequential uneven development will cause more harm than good. That is not to say that every sector must be targeted equally, as that would not allow each country to adapt poverty reduction programs in the most efficient way. Rather, addressing development and poverty holistically allows for flexibility and adaptability in the development process. Both the Ethos Poverty Index and OPHI address country-specific issues—the former through individual rankings that show performance in specific areas, the latter through the country’s ability to select indicators.  Hopefully both tools can provide greater insight to Latin America’s development process and the causes of its poverty, in addition to encouraging scalable poverty reduction models in other parts of the world.

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