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The Poverty of Statistics

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  • Freeman, Alan

Abstract

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.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 16827.

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Date of creation: 01 Dec 2008
Date of revision: 15 Aug 2009
Handle: RePEc:pra:mprapa:16827

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Related research

Keywords: Inequality; Development; Value Theory; Temporalism; World Systems Theory; Dependency Theory; Globalization; TSSI; General Equilibrium;

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References

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  1. Martin Ravallion & Shaohua Chen & Prem Sangraula, 2009. "Dollar a Day Revisited," World Bank Economic Review, World Bank Group, World Bank Group, vol. 23(2), pages 163-184, June.
  2. Wade, Robert Hunter, 2004. "Is Globalization Reducing Poverty and Inequality?," World Development, Elsevier, Elsevier, vol. 32(4), pages 567-589, April.
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Cited by:
  1. Freeman, Alan, 2009. "Marxism without Marx: a note towards a critique," MPRA Paper 48618, University Library of Munich, Germany, revised 17 Nov 2009.
  2. Freeman, Alan, 2000. "Has the empire struck back? ‘new paradigm’ globalisation or return to classical imperialism?," MPRA Paper 2589, University Library of Munich, Germany.

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